Large house builder increases delivery to housing associations despite sales rates falling by more than half

Its accounts statement warns that these lower completions will affect its margins. Its operating margin had remained broadly the same at 27.2%. 

It explained that if cost inflation, which is currently running at around 8%, continued all year and there was no mitigating increase in average selling price, margins may reduce by around 500 basis points (bps).

Reduced volumes and increased sales incentives and marketing costs may further affect operating margins by around 800bps.

The house builder’s profit before tax in 2022 was £730.7m, and its operating profit increased 4% year on year, to more than £1bn.

Its profit before tax was impacted by the need to increase its provision for building safety remediation by £275m, to £350m, after the government asked for non-cladding defects to be fixed as well.

Persimmon revealed in February 2021 that it had initially earmarked £75m to pay for the removal of dangerous cladding on dozens of blocks it constructed.

Its latest accounts show that of the 73 developments it has now identified as requiring remediation, work is underway or complete on 42 and the house builder’s aim is to start work on the remainder by the end of 2023.

Dean Finch, group chief executive of Persimmon, said he was pleased with the financial results, despite “one of the most turbulent years anyone can remember”. 

He said: “The market remains uncertain. Our marketing campaign has helped improve the group’s sales rates in the new year from the lows at the end of 2022, but they still remain lower year on year. 

“We responded quickly to stimulate sales, enhance cost controls and preserve cash, promptly slowing new land investment in the fourth quarter of last year.

“Nonetheless, the sales rates seen over the last five months mean completions will be down markedly this year and, as a consequence, so will margin and profits. However, it is too early to provide firm guidance.”

Mr Finch said the house builder planned to “target disciplined growth” in the year ahead and take a “more proactive approach to securing permissions, which is starting to demonstrate success despite ongoing difficulties in the planning system”.