Persimmon profit falls by quarter after £275m building-safety provision
Housebuilding giant Persimmon has revealed a 24 per cent drop in annual pre-tax profit, reflecting the impact of a £275m provision to address the post-Grenfell building-safety crisis.
The FTSE 100-listed firm reported a pre-tax profit of £731m in the year to the end of December 2022, compared with £967m the previous year.
Last November, Persimmon said it expected to increase its overall building-safety provision to £350m after the government asked for non-cladding defects to be fixed – meaning more buildings are in need of remediation. The group said it had also gained more clarity on costs.
In its annual results, published this morning (1 March), Persimmon said it had identified 73 of its high-rise buildings that needed either cladding to be removed or “life-critical” fire-safety work.
In total, work has been completed on 33 of these schemes, while nine are underway. The firm is aiming to start work on the other 31 by the end of 2023, it said.
The remaining work is expected to be completed over the next three years, but Persimmon warned of an “associated cash impact”.
Major housebuilders are being chased by the government to fix problems that have come to light in the wake of the 2017 Grenfell Tower fire, which killed 72 people.
Last month, Persimmon, along with rival Barratt Homes, was among the first companies to promise to sign housing secretary Michael Gove’s ‘Developer Pledge’, which commits firms to fixing buildings developed or refurbished over the past 30 years.
Meanwhile, Persimmon warned today that its completions this year could fall by about 40 per cent to between 8,000 and 9,000. In its latest full year, the group reported 14,868 completions.
The announcement came amid an anticipated slowdown in the housing market. Earlier today, Nationwide reported that house prices have seen their biggest annual fall in 10 years, as higher mortgage costs and the cost-of-living crisis hamper transactions.
Persimmon chief executive Dean Finch said: “The sales rates seen over the last five months mean completions will be down markedly this year and, as a consequence, so will margin and profits. However, it is too early to provide firm guidance.”
On an underlying basis, stripping out the building-safety provision, Persimmon’s pre-tax profits rose by 4 per cent to £1.01bn. The group’s turnover, meanwhile, increased by 5.7 per cent to £3.8bn.
Finch said: “Looking further ahead, the fundamentals underpinning demand for new homes remain strong and we continue to target disciplined growth in the coming years while continuing to enhance our quality and service credentials.”
Shares in Persimmon have dropped by about 9.5 per cent following the announcement of the results.