Persimmon on track with build rates up a fifth despite challenges

The Group has also been mitigating cost inflation of between 8-10 per cent with higher selling prices.

However, Persimmon cautions that cancellation rates have jumped to 28 per cent in the last six weeks, from 21 per cent in the 12 weeks prior.

Average weekly sales per outlet were down 23 per cent to 0.6 units between 1 July and 7 November. This has fallen to 0.48 in the last sic weeks, which Persimmon puts down to recent political uncertainty and a deterioration in the economic outlook. Average selling prices are also down 2 per cent in the last 6 weeks compared to the rest of the period.

Persimmon would not give specific guidance for 2023. But given the “recent and rapid change” in market conditions expects both completion levels and average selling prices to deteriorate. Forward orders for the year ahead are down a third to £0.77bn.

Persimmon expects to end 2022 with cash down 10.5 per cent to £700m, following £750m of capital returned to shareholders over the year. The shares were down 7.8% following the announcement.

Derren Nathan, Head of Equity Research at Hargreaves Lansdown, said: “Persimmon looks on track to make good on its promises for 2022, but this could still be at risk if cancellation rates continue to worsen.

“Higher interest rates and economic uncertainty are weighing on both mortgage availability and customer behaviour, and Persimmons forward orders of £0.8bn are only two thirds of the levels seen this time last year. Its been riding the storm of late, managing to increase build rates before the market turned and pass on prices to its customers.

“In 2023 prices are likely to come back, and if inflation keeps on going the way it is, that’s going to be a double hit to margins. Persimmon has more protection than some, with better margins than many of its peers and a strong value offering to its customers. It also has a large land bank, meaning that Persimmon has the flexibility to pull back on investment. “