Chief executive John White says costs will rise 4% this year as housebuilder announces record profit.
Persimmon chief executive John White is expecting a jump in labour costs this year as the housebuilding market continues its buoyant run.

Persimmon this week unveiled a record pre-tax profit of £60.5m in the year to 31 December 1998 – 20% up on the year before. Turnover rose £46.9m to £572.4m.

The housebuilder was unaffected by the drop in confidence that hit the sector last autumn and is expecting the strong market to last.

White said he expected costs to rise about 4% this year. "If the demand for new homes continues, there will be a greater pressure on labour prices as the year progresses." He added that this pressure was most likely to affect the cost of bricklayers, electricians, carpenters and plumbers.

"The market seems to be reasonably strong at the moment. Unless there's some sort of major external event that affects confidence, I can see no reason why it shouldn't continue." White said Persimmon managed to avoid the drop-off in the housing market because it operates in the mid-market range, with an average house price of £86 414.

"I think the loss of confidence was felt mostly in the top end of the market, which we are not exposed to so much," said White. "We've noticed a pick-up in the market since October last year." Forward sales were up 10% going into 1999, White added.

Persimmon's turnover and profit rose despite a slight drop-off in house completions from 6521 units in 1997 to 6483 in 1998.

White said a £6190 rise in average selling price helped offset the fall in sales, as did the company's drive to cut costs and overheads.

Persimmon's operating margin rose from 11% to 13.1%. "We've been putting greater emphasis on margin growth, rather than going for volume. We think it's moved in the right direction." White said planning delays continued to be a problem, particularly in the South-east. "I think we've gone through something of a logjam.

It takes a long time to get planning consent but we are learning to live with it." Persimmon's landbank at the end of 1998 stood at 2518 ha, or four years' supply.