Persimmon PLC (LSE:PSN) warned that a drop in expected completions in 2023 would hit margins as it reported a fall in annual pre-tax profits.
The FTSE 100-listed housebuilder announced revenue in the year to 31 December 2022 of £3.82bn, up from £3.61bn, although pre-tax profits fell to £730.7mln from £966.8mln, reflecting a £275mln increase in a provision for building safety remediation to £350mln.
New home completions in 2022 totalled 14,868, which was higher than 2021’s 14,551, but Persimmon warned that should current sales rates continue for the rest of the selling year, this would imply 8,000-9,000 legal completions for 2023.
These lower completion levels will have a margin impact, it said. If cost inflation continues all year and there is no mitigating increase in average selling price, margins may reduce by around 500 basis points (bps). But this would increase to around 800bps to reflect reduced volumes and increased sales incentives and marketing cost.
Sales rates improved to 0.52 in the first eight weeks of the year, in line with industry peers yet still significantly below the equivalent period last year (0.96), with current forward sales standing at £1.52bn. In the fourth quarter of 2022 sales rates were 0.30 per outlet.
“The key current challenges are affordability and mortgage product availability. While there has been some recent easing in mortgage rates from their high at the end of last year, the majority of respected forecasters do not expect them to return quickly to the levels seen during the previous cycle,” Persimmon said.
The firm also slashed its dividend to 60p per share from 235p per share and intends to at least maintain this level in 2023 with a view to growing this over time.