Persimmon shares drop on falling Q3 completions, rising costs

Housebuilder Persimmon saw shares fall sharply on Wednesday as housing completions dipped slightly in the third quarter and the company warned of rising building costs heading into 2025.

The company delivered 1,416 homes in the third quarter, slightly down from 1,439 last year, with a 3% increase in private homes to 1,267 outweighed by a 27% drop in partnership homes to 149.

Persimmon also warned that it was seeing some signs of build cost inflation beginning to emerge in price negotiations for 2025, which it is attempting to mitigate through "robust commercial controls and other management actions".

Nevertheless, the current forward sales position stood at £2.02bn across 8,575 homes by 3 November, up from £1.73bn at the same point and 8,182 last year, with demand propped up by improvements in customer sentiment as interest rates begin to reduce and affordability improves.

Private sales account for 4,988 of forward sales or £1.45bn, up 40% year-on-year by value, while the average private selling price in the forward order book is up 5% at £291,400.

Persimmon said affordability constraints, particularly for first-time buyers, have eased due to falling interest rates and a greater availability of over 90% loan-to-value mortgage products on the market than a year ago.

"Positive momentum in the business continued over the summer months and we remain on track to deliver growth in completions to c.10,500 for the full year," said chief executive Dean Finch. "Visitor numbers and enquiries remain strong and sales rates continue to be well ahead of the prior year."

The company said that 85% of the full-year target of 10,500 homes are already exchanged or completed, up from 84% this time last year, with further growth in outlets and volume expected in 2025.

The stock was down 5.5% at 1,389.8p by 0931 GMT.

"While management remain comfortable with consensus operating profit for FY24, they are tempering the pace of margin recovery for FY25 given early indications of build cost inflation. This tempering of margin progress will likely be the key driver of the stock today," said analysts at Jefferies in a note on Wednesday.