PSN

UK homebuilder Persimmon warns of subdued market after profit miss

Credit: REUTERS/PHIL NOBLE

By Aby Jose Koilparambil

March 12 (Reuters) - British homebuilder Persimmon PSN.L warned on Tuesday of subdued market conditions through 2024 despite a relatively good start, after reporting a 52% slump in annual profit that missed market expectations.

Shares in the FTSE 100 .FTSE firm slipped more than 3% to 1,328 pence in early trading, the biggest decliner on the blue-chip index in percentage terms.

"The tone on recent trading and the outlook seem a bit more cautious than what peers have recently reported," Investec analysts wrote in a note.

The British housing sector has seen signs of stability at the start of 2024 on easing mortgage rates after battling subdued demand for much of last year, but a delay by the Bank of England in lowering interest rates has tempered hopes of a better-paced recovery.

"Enhanced competition in the mortgage market and wage growth have contributed to improved affordability albeit it continues to be constrained, particularly for first time buyers, and demand for homes remains varied across the country," the company said in a statement.

Persimmon said trading in the southern and eastern counties remained more challenging with weaker pricing, offset by a more robust performance in the northern regions.

The York, North England-based company, said weekly net private sales rate per outlet stood at 0.59 units in the first 10 weeks of 2024, compared with 0.54 homes in the comparable period a year ago.

Reflecting the positive start to the year, Persimmon - which builds studio apartments to five-bedroom houses - said it would likely build between 10,000 units and 10,500 units in 2024, up from the 9,922 homes it constructed the year earlier.

The company said it expected to change from an average net cash to an average net debt position through 2024, as it looked to expand its outlets and invest in projects in anticipation of a housing upturn.

Its 2023 pretax profit came in at 351.8 million pounds ($450.5 million), below the LSEG average analysts' estimate of 359.5 million pounds.

($1 = 0.7809 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Rashmi Aich and Bernadette Baum)

((abyjose.koilparambil@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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