British housebuilder Persimmon urges cost discipline after strong Q3 sales

Persimmon, Britain's second-largest housebuilder, reported a surge in sales for the third quarter (Q3) of 2022, however, the company has urged its customers to maintain cost discipline in the upcoming months.

Key Highlights:

• Persimmon reported a 12.2% increase in average selling prices to £278,063 in the third quarter.
• The company's revenue rose by 12% to £1.57 billion.
• Despite strong sales, Persimmon cautioned on rising costs and urged its customers to exercise caution with their finances.

Dean Finch, Persimmon's chief executive, highlighted the challenges posed by rising costs in the construction industry, emphasizing the need for cost discipline among customers. He stated, "While the current outlook for the UK housing market remains uncertain, we continue to see good levels of customer demand supported by government initiatives such as Help to Buy. However, we are conscious of the rising cost of living for our customers and would encourage them to consider their affordability carefully before committing to a purchase."

Persimmon has been implementing measures to mitigate the impact of rising costs, including optimizing its supply chain, increasing productivity, and exploring alternative building methods. The company has also stressed the importance of collaboration with suppliers and subcontractors to manage costs effectively.

Despite the challenges, Persimmon remains optimistic about the long-term prospects of the UK housing market. The company has a strong order book and is well-positioned to meet the growing demand for new homes. Persimmon has also been investing in initiatives such as apprenticeships and training programs to support the development of a skilled workforce in the construction sector.

Analysts' Views

Analysts have welcomed Persimmon's strong sales performance but have also echoed the company's concerns about rising costs. They believe that while the current market conditions present challenges, Persimmon's financial strength and operational efficiency will help it to navigate the headwinds.

Georgina Johanan, an analyst at Peel Hunt, commented, "Persimmon's strong sales growth is a testament to the resilience of the UK housing market. However, it is important to note the company's caution on costs. Rising inflation and supply chain disruptions will likely continue to be a challenge for the industry. Persimmon's focus on cost discipline and operational efficiency will be crucial in mitigating these headwinds."

Conclusion

Persimmon's strong Q3 sales demonstrate the ongoing strength of the UK housing market. However, the company's caution on costs highlights the challenges posed by rising inflation and supply chain disruptions. Persimmon's focus on cost discipline and operational efficiency will be key in navigating the current market conditions and ensuring its long-term success.