Shares in housebuilder Persimmon slipped as it announced a sharp fall in sales and profits in 2023.

But the company said that sales momentum had picked up in the fourth quarter and continued into the New Year.

At £13.38 per share, Persimmon’s share price was last trading 2.7% lower in Tuesday business.

Sales at the FTSE 100 firm reversed 27.3% over the course of 2023, to £2.8 billion. This was caused by a sharp fall in completion numbers, which dropped to 9,922 from 14,868 a year earlier.

However, last year’s completions beat the 9,500 that the firm had predicted as recently as November. Autumn’s upgrade was also the second since the start of last year (it had estimated full-year completions of between 8,000 and 9,000 at the beginning of 2023).

Persimmon said that “we saw a sustained pick up in interest in our homes throughout the year,” though its weekly private net sales per outlet averaged 0.58 for the year versus 0.69 in 2022.

Private net sales rates (excluding investor deals) picked up to 0.41 per outlet per week in quarter four, from 0.28 in the same 2022 period.

The builder’s forward sales stood at £1.1 billion as of December 31, it said, a £20 million improvement year on year. Private forward sales were up 4%, at £499 million.

Profits Halve

A rise in average selling prices helped limit Persimmon’s revenues reversal last year. Average values edged up to £255,752 from £248,616 in 2022.

Full year gross margins dropped sharply, to 20.5% from 30.9%, which the company said reflected lower volumes alongside one-off costs.

This sales and margin shrinkage caused pre-tax profits to slump 51.1% year on year, to £351.8 million.

The amount of cash on the balance sheet dropped to £420.1 million at the end of December from £861.6 million the year before. The full-year dividend was locked at 60p per share.

Sales Rates Ticking Up

Chief executive Dean Finch said that “the group successfully navigated the challenging market conditions in 2023,” noting that “completions were ahead of expectations, margins were industry-leading, we maintained our strong balance sheet and we continued to deliver further improvements in our product quality and service.”

He added that “although the near-term outlook remains uncertain, the significant pent-up demand for homes remains unchanged.” Finch said that “we are well placed to manage the ongoing uncertainty and we have good visibility over our land pipeline which, over the medium-term, will support a return to growth in outlets and volumes, alongside improved margins and robust cash generation.”

Persimmon said it had started 2024 “in line with expectations,” with its weekly net private sales rate per outlet rising to 0.59 in the first 10 weeks of 2024 against 0.54 in the comparable 2023 period.

The business said that “enhanced competition in the mortgage market and wage growth have contributed to improved affordability albeit it continues to be constrained, particularly for first time buyers, and demand for homes remains varied across the country.”

Uncertain Outlook

Analyst Aarin Chiekrie of Hargreaves Lansdown noted that “although the near-term outlook for Persimmon remains uncertain, the significant pent-up demand for homes remains unchanged.”

He said that “easing mortgage rates, lower build-cost inflation, real wage growth and some strong responses to marketing efforts mean [the company is] starting the new year out on the right foot.”

Royston Wild owns shares in Persimmon

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