Planning delays and shortages impact delivery at house builder
Persimmon Group delivered 6,652 new homes in the first half of the year (2021: 7,406), which was below the first half of 2021, but also lower than the company previously expected.
The York-headquartered business says this was due to further delays in the planning system and material and labour shortages.
Total revenues for the period were £1.69bn (2021: £1.84bn) including housing revenues of £1.63bn (2021: £1.75bn).
The Group’s average selling price increased by 4% year on year in the first half to about £245,600 (2021: £236,199) reflecting strong demand and a reduction in the proportion of homes sold to our housing association partners.
In its update today, Persimmon warns rising energy prices, supply constraints on certain materials and increased labour costs are driving upward pressure on total build costs.
It adds that currently, house price inflation is continuing to offset these increases.
The company’s update notes: “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.
“The planning system remains slow impacted by a Covid-related backlog and increasing complexity.
“For example, across the industry there are c. 120,000 plots in England currently stalled within the system due to Natural England’s nutrient neutrality guidance.
“In the absence of firm guidance from Government this uncertainty will continue. Persimmon currently has around 1,500 plots affected by this issue which were due for delivery to local communities over the next five years.
Persimmon says it has a robust balance sheet and high levels of liquidity. The Group held £0.78bn of cash at 30 June 2022 (December 2021: £1.25bn) with deferred land commitments of approximately £125m to the end of the current
At 30 June 2022, the Group had work in progress of c. 4,400 equivalent units of new home construction (December 2021: c. 4,100). In addition, the Group has an undrawn £300m Revolving Credit Facility which is in place until 31 March 2026.