Persimmon: Completions Drop by One-Third, 700 Headcount Cut
In the competitive realm of the housing sector, Persimmon has faced a notable decline in completions, down by a staggering 37% in the last three months. The housebuilder attributed this drop to a “slower sales environment,” and it’s evident that they are navigating through challenging times. In this article, we will delve into the intricacies of Persimmon’s performance, its operating profit, and its strategic measures to cope with market uncertainties.
Completions Decline: A Market Reality
The completion of only 1,439 homes in the last quarter, compared to 2,270 in the same period the previous year, reflects the broader challenges within the housing sector. This decline was not entirely unexpected, given the low forward sales position at the beginning of the year. Although forward sales have increased from £1.4bn to £1.6bn quarter-on-quarter, they still fall short of the £2.09bn achieved during the corresponding period last year. This highlights the prolonged and challenging conditions faced by the industry.
Operating Profit Resilience
Despite the dip in completions, Persimmon has maintained an operating profit “in line with” expectations. This is a commendable feat in the current market scenario. Furthermore, their operating margin is expected to be in line with the reduced figure reported in the first half of the year, which was a noteworthy 14% drop from the previous year’s 27%.
A Disciplined Approach to Cost Management
Persimmon has adopted a “highly disciplined” approach to cost management. This approach includes a hiring freeze that will result in a reduction of around 700 staff members in the year. Such measures are indicative of their commitment to weathering the storm and ensuring the company’s financial stability.
Proactive Cost Reduction Measures
To combat the persistently rising build cost inflation, Persimmon has proactively engaged with suppliers and subcontractors to secure price reductions on materials and labour. This strategy demonstrates their resilience in managing cost pressures and safeguarding their profitability.
Sales Rate Improvement
In more recent times, Persimmon’s sales rate has displayed a positive trend. It has improved from 0.45 to 0.59, indicating a stronger performance compared to the same period in the previous year. This upward trajectory could be a sign of their adaptability and responsiveness to changing market dynamics.
Future Growth Prospects
Persimmon remains optimistic about the future, despite the near-term challenges. They continue to position the business for growth, as evidenced by their progress in planning during the recent period. This forward-thinking approach showcases their determination to remain a key player in the housing sector.
Anticipated Home Builds
In the full year, Persimmon expects to construct approximately 9,500 homes. While this figure marks a 36% decrease from the 14,868 homes built in the previous year, it underscores their commitment to maintaining a significant presence in the housing market.
Persimmon’s journey through the turbulent waters of the housing sector has not been without its challenges. However, their ability to maintain a solid operating profit, implement disciplined cost management strategies, secure cost reductions, and improve their sales rate demonstrates their resilience and adaptability. As they navigate through this challenging period, Persimmon is positioning itself for future growth, ensuring it remains a prominent name in the housing sector.