Persimmon: Profit jumps as construction activity rises
Persimmon has reported a double-digit rise in operating profit on increased construction volumes, despite ongoing affordability pressures.
The housebuilder told markets this morning that private completions rose seven per cent to 3,987 homes, while total completions rose four per cent to 4,605.
It is on track for completions of 11,000-11,500 homes for the full year.
Underlying operating profit rose 13 per cent to £172m, while underlying profit before tax rose 11 per cent to £164.9m.
Persimmon’s current private forward order book is up 11 per cent to £1.25bn at a private average sales price of £292,800, up 1.3 per cent on the prior year.
Dean Finch, Group Chief Executive, said: “I am pleased that we have continued to grow in the first half of the year… our average sales price, sales, completions, planning approvals, active sites and forward order book are all up, many against industry trends.”
“We are on course to deliver our previously guided range of 11,000-11,500 completions this year. While mindful of macroeconomic volatility we remain focused on driving further improvements to secure the medium-term growth ambitions we set out in March.”
Persimmon expects build cost inflation to be in the low single digits this year.
Freetrade’s analyst Alex Pugh said the company’s results show a “housebuilder making headway in a market still under pressure”.
“The outlook is steady rather than spectacular: 11,000–11,500 completions this year, modest margin improvement, and the hope that planning reform and lower borrowing costs eventually unlock a more meaningful upswing.”
Affordability ‘still a barrier’ to many customers
Despite its growth, Persimmon warned that housing affordability, which deteriorated markedly in the wake of the pandemic as interest rates spiked, continued to bar many potential buyers from the market.
The price of a typical UK home is around 5.75 times the average income. While high, this is well below the all-time high of 6.9 recorded in 2022 and currently the lowest in over a decade.
“While interest and mortgage rates have reduced, they are at levels that still present a barrier to many potential customers,” the company said.
“There have been some positive developments in the first half of the year, with targeted relaxation of some lending rules and real term pay rises helping to improve affordability for some.
“Nonetheless, this has been balanced with the impact of council tax, national insurance, stamp duty and energy bill increases in April, alongside macroeconomic uncertainty weighing on consumer sentiment,” it added.
Earlier this week, housebuilder Bellway warned that the government would need to do more to help first-time buyers onto the housing ladder, alongside its supply-side changes.