Persimmon PLC (LSE:PSN) has taken an extra building safety £350mln provision, reported an increase in cancellation rates and warned of falling house prices and margins in 2023.
As a result, the FTSE 100-listed housebuilder cautioned “it is too early for us to provide specific guidance for 2023 given the recent and rapid change in market conditions; our current expectation is for fewer legal completions than in 2022 and this together with a deterioration in average selling prices will have an impact on 2023 margins”.
The company said “while we have already seen mortgage providers and customers start to adapt to higher interest rates, the full impact of this uncertainty on consumer behaviour is yet to be determined”.
In a trading update covering the period from 1 July 2022 to 7 November 2022, the housebuilder said full-year volume targets are expected between 14,500 and 15,000 units, on target, but it pointed out the last six weeks have seen cancellation rates increase to 28% from 21% in the preceding 12 weeks introducing some uncertainty.
Dean Finch, group chief executive, commented: "Rising interest rates and broader economic uncertainty are clearly impacting mortgage lending and customer behaviour and this is reflected in our recent weekly sales rates and forward sales position.”
Persimmon said the group's average net private weekly sales rate per outlet for the period of 0.60 reflected customers' response to the macro-economic headwinds of increased interest rates and reduced mortgage availability, together with increasing cost-of-living pressures.
It pointed out that during the disruptive political and economic events in September, this measure fell further to 0.48.
The group also announced changes to its capital allocation plans: dividends will be set at a level that is well covered by post-tax profits with any excess capital to be distributed to shareholders through share buy-backs or special dividends although there will be no special pay-out for 2022.