Persimmon Plc Sees Mixed Results Amid Robust UK Housing Market

Persimmon Plc reports 8% decline in profit to £440m and 8% drop in revenue to £1.69bn for H1 2022 despite 9,400 increase in average selling prices. Private sales rates declined 11% in the first seven weeks of H2 2022, with the company expecting to complete 14,500-15,000 homes for the full year.

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Aqsa Younas Rana
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Persimmon Plc Sees Mixed Results Amid Robust UK Housing Market

Persimmon Plc Sees Mixed Results Amid Robust UK Housing Market

Persimmon Plc, one of the UK's largest homebuilders, has reported a mixed bag of financial results for the first half of 2022. Despite a 9,400 increase in average selling prices for new homes to almost £246,000, the company saw an 8% decline in profit to £440m and an 8% drop in revenue to £1.69bn compared to the same period last year.

The UK housing market has been in high gear since reopening during the pandemic, with prices proving remarkably resilient. "The UK's rampant housing market has been in fifth gear ever since it reopened in the height of the pandemic," said Adam Vettese, analyst at eToro. Pent-up savings and cheap mortgages have buoyed demand, allowing Persimmon to gush cash in this environment and return record amounts to shareholders, according to Charlie Huggins, head of equities at Wealth Club.

Why this matters: The performance of Persimmon Plc and the UK housing market has significant implications for the overall economy, as it affects consumer spending and confidence. A decline in the housing market could have a ripple effect on other sectors, leading to a broader economic slowdown.

However, Persimmon has not been immune to the challenges facing the industry. Private sales rates declined by 11% in the first seven weeks of the second half, and the company expects to complete between 14,500 and 15,000 homes for the full year 2022. While sales price inflation is currently mitigating cost inflation of around 8-10%, the company remains mindful of the potential impact of further interest rate hikes and broader economic headwinds.

"We are mindful of the scope for further interest rate raises as well as the broader economic challenges recently set out by the governor of the Bank of England," said Dean Finch, chief executive of Persimmon. Despite these concerns, the company's performance has been strong in areas it directly controls, such as its land bank and customer service, though it remains heavily reliant on the overall strength of the housing market.

Persimmon's share price tells a story of its own, rising 10% in the last month but declining 55% over three years, with a total shareholder return of -44% due to declining earnings per share and revenue trends. As the UK navigates a shifting economic landscape, Persimmon and other homebuilders will need to remain agile to maintain their footing in the months ahead.

Key Takeaways

  • Persimmon Plc reports 8% decline in profit to £440m and 8% drop in revenue to £1.69bn.
  • Average selling prices for new homes increase by 9,400 to almost £246,000.
  • UK housing market remains strong, but Persimmon's private sales rates decline by 11%.
  • Company expects to complete 14,500-15,000 homes in 2022, citing economic headwinds.
  • Persimmon's share price rises 10% in last month, but declines 55% over three years.