Rising energy prices are increasing pressure on building costs says Persimmon

Rising energy prices, supply constraints on certain materials and increased labour costs are driving upward pressure on total build costs, Persimmon said.

Persimmon said it delivered 6,652 new homes in the half year to 30 June which, as guided, was below the first half of 2021, but also slightly lower than previously expected.

Total revenues for the period were £1.69bn, compared with £1.84bn in the same period the year before, including housing revenues of £1.63bn.

Dean Finch, the chief executive, said: “I am pleased we have further enhanced our build quality in the period while also driving build efficiency to historical highs and increasing housing gross margin. We continued to complement this progress with high quality, disciplined investments in land driving growth in our outlet position.

"We have delivered this despite the significant on-going challenges being faced by the industry. As we rebuild our outlet position, delays in the planning system, disruption in material supply chains and challenges in securing labour have impacted completions in the period. We anticipate, however, profit at the half year to be modestly above our expectations reflecting strong demand and positive pricing conditions. Our forward sales position is robust.

“Our disciplined investment is further enhancing our strong land holdings which alongside our rigorous focus on margins is underpinning our continued financial strength. We are expanding our unique vertical integration capabilities to provide further supply resilience and cost efficiency.

"Our enhanced product range and service quality are strengthening our customer proposition. My ambition firmly remains for Persimmon to become Britain’s best house builder for both customers and shareholders alike, by resolutely focusing on the delivery of high quality homes, improved customer service and strong financial returns.”

The group’s average selling price increased by 4.0% year on year in the first half to around £245,600, which it said reflected strong demand and a reduction in the proportion of homes sold to housing association partners.

The statement added: "Currently, house price inflation is continuing to offset these increases. As a result, we expect to deliver a housing gross margin that is slightly ahead year on year, although, the lower number of completions will result in a slight fall in operating margin reflecting the reduced efficiency of the group’s overhead recovery rates. Despite this, we anticipate the group’s profit at the half year to be modestly above our expectations."

Commenting on outlook, Persimmon said: "Demand across the UK remains strong. During the first six months of the year, the group’s average private weekly sales rate per site was around 1% ahead of that achieved during the same period in 2021.

"Customer enquiry levels are healthy and cancellation rates low."

As at 30 June 2022, the value of the group’s forward sales was robust at around £1.87bn with around. 8,800 homes in its forward order book.

The group is around 75% forward sold for the full year, Persimmon said.

The statement added: " Persimmon is performing strongly within all the areas it directly controls whilst actively managing broader economic and regulatory challenges. The group is investing in high quality land, improving its build rates and through its relentless pursuit of both quality and service, strengthening its product appeal in its core markets. With the longer-term fundamentals of the housing market remaining strong, we are confident that with this progress together with our continued disciplined approach to investment, the group is well positioned for the future."