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UK builder Persimmon flags volume hit on labour and material shortages

Published 07/07/2022, 07:32
Updated 07/07/2022, 10:42
© Reuters. FILE PHOTO: Builders construct modular Space4 homes on a Persimmon development in Coventry, February 22, 2017. REUTERS/Darren Staples
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By Aby Jose Koilparambil

(Reuters) - Britain's second-biggest homebuilder Persimmon (LON:PSN) warned on Thursday it would build fewer homes this year as it grapples with shortages of material, labour and delays in planning, sending shares down by more than 5%.

Rising materials and labour costs along with issues with supply chain and the planning system have troubled Britain's housing sector, but most of the major homebuilders have said they were able to tackle these pressures due to red-hot house prices.

UK house prices have remained at strong levels, although the pace of growth has cooled in recent months, with some industry analysts warning of a slowdown as surging costs of essentials from fuel to home appliances add pressure to household finances.

Persimmon's update, which has weighed on its shares, also sent stocks of other blue-chip homebuilders Barratt, Taylor Wimpey (LON:TW) and Berkeley between 1%-2% lower.

"Persimmon could be the canary in the coal mine for housebuilders, one of the last sectors holding on to post-pandemic euphoria," Hargreaves Lansdown (LON:HRGV) equity analyst Laura Hoy wrote in a note.

York-based Persimmon, which offers a range of homes from studio apartments to five-bedroom houses, said it completed 6,652 homes in the six months to June, fewer than it expected and about 10% lower than what it built a year earlier.

The company now expects to build around 14,500 to 15,000 homes in 2022, lower than a previous forecast of a 4-7% annual volume growth from 14,551 homes delivered in 2021.

Revenue in the first-half fell 8%, it said, adding that the lower number of completions in the first-half will result in a slight fall in operating margin.

© Reuters. FILE PHOTO: Builders construct modular Space4 homes on a Persimmon development in Coventry, February 22, 2017. REUTERS/Darren Staples

But Persimmon forecast profit at the half year to be modestly above its expectations on robust demand and higher selling prices. Forward sales rose about 2% to 1.87 billion pounds for the period.

($1 = 0.8367 pounds)

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