UK homebuilder Persimmon flags cost concerns driving shares lower
Increased employer national insurance to impact costs
Net private sales rate/outlet since H2 start up 37% y-o-y
Shares fall by as much as 8%
Updates share move in paragraph 2, adds CFO comment in paragraph 5, analysts' comment in paragraph 6
By Aby Jose Koilparambil
Nov 6 (Reuters) -British homebuilder Persimmon PSN.L flagged concerns about higher costs emerging in price negotiations for 2025, sending its shares sharply lower.
The FTSE 100-listed .FTSE builder's stock fell by as much as 8% to a more than four-month low of 1,352 pence, underperforming the wider sector .FTNMX402020, which was down 3% by 1414 GMT.
The prospect of rising costs that could offset an improvement in sales across the British building sector is underscored by expectations rising inflation, spurred by the UK government's October budget, will lead the Bank of England (BoE) to delay interest rate cuts.
The BoE is due to announce its rate decision on Thursday.
CFO Andrew Duxbury told analysts in a call the company expects costs from a hike in national insurance to be about five million pounds, and projected an additional hit of 10 million pounds through the supply chain system for the 12-month period from April next year, when the changes take effect.
Barclays analysts said in a note that the signs of return to cost inflation suggest margin risk.
In her first budget since the Labour government took office, British finance minister Rachel Reeves raised employers' social security contributions by 1.2 percentage points to 15% from April to raise revenue. Some companies have said it could hinder economic growth due to elevated payroll costs.
Persimmon said net private sales rate per outlet rose 37% year-on-year since the start of the second-half period on July 1.
The company, which offers homes from studio apartments to five-bedroom houses, said its private forward sales position since July 1 jumped 40% to 1.45 billion pounds ($1.87 billion).
Last month, another homebuilder Vistry also flagged cost concerns. It cut its annual profit forecast after discovering that one of its divisions had understated the cost of some of its developments.
($1 = 0.7770 pounds)
M&S and Wetherspoons face multi-million pound hit from 'double whammy' budget ID:nL8N3MD2DJ
Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Varun H K and Barbara Lewis
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
