York-based house building giant Persimmon plc on Tuesday withheld guidance for 2023, as a recent deterioration in UK market conditions saw increased cancellations of house purchases, hurting recent sales.
Persimmon shares fell about 7%.
In a trading statement which covers the period from July 1 to November 7, the York company reported forward sales reserved beyond the current year of £770 million, down from £1.15 billion a year prior.
It also saw a drop in average net private weekly sales rate per outlet, down to 0.60 from 0.78 the previous year.
While Persimmon said it was on track to deliver its full-year volume target guidance of 14,500 to 15,000 homes, it noted that in the last six weeks, cancellation rates have increased to 28% from 21% in the preceding 12 weeks from July 1.
The company blamed the “recent deterioration” in market conditions for these cancellations, adding that rising interests rates and broader economic uncertainty were “clearly impacting” customer behaviour.
Persimmon also said it expects its building safety provision to be increased to £350 million, reflecting the broader scope demanded by the UK government in the wake of the fatal Grenfell Tower fire in 2017.
The firm said its previous capital return programme is to be replaced with a new, forward-looking capital allocation policy. Ordinary dividends will be set at a level that is well covered by post-tax profits, thereby balancing capital retained for investment in the business.
Persimmon said that while it has seen “mortgage providers and customers start to adapt to higher interest rates, the full impact of this uncertainty on consumer behaviour is yet to be determined.”
The York company said that although it is too early to provide specific guidance for next year, its current expectation is for a deterioration in average selling prices to impact on 2023 margins, and for fewer legal completions than in 2022.
Persimmon expects a cash position of around £700 million at December 31, after total capital return of £750 million paid in the year to date.
Reporter: Holly Beveridge
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