Housebuilder eyes medium-term return to 2006 construction levels

Persimmon homes

Persimmon has detailed expansion plans that could see it upscale its housing completions to an annual 16,000 units over the next three-to-five years.

Following bumper 2014 results that showed completions for 2014 up 17% to 13,509, group finance director Mike Killoran told Building the housebuilder could increase its output by close on 20% in the medium term, given the right market conditions.

Persimmon had previously said it would target 15,000 completions a year.

Killoran said: “We are looking to deliver more new homes in the market. I’d say 15,000-16,000 units per anum would be a possible level that would more or less see us return to the levels we were getting in 2006-7.

“Its more a three-, four-, five-year outlook, and we would need other ingredients to be there, such as mortgage supply. We’re dependent on the lenders.”

The company said it has now amassed enough land to build more than 100,000 homes over the coming years, having increased its bank to 17,000 acres in 2014.

However, Persimmon cautioned that housebuilding growth needed policy certainty on the security of planning reforms and the continuance of the government’s Help to Buy mortgage guarantee scheme, which is of particular importance to its main first-time-buyer customer base.

Its results showed a 39% jump in pre-tax profit in 2014 to £467m, up from £337.1m, while revenue increased 23% to £2.6bn, up from £2.1bn.

Persimmon’s average selling price increased by 5.3% to £190,533 (2013: £180,941) and its underlying operating margin increased to 18.4% (2013: 16.0%); with second half improvement to 19.0%.

Killoran said the firm had seen costs increase 3.5% year-on-year in 2014, and predicted a “3%-ish” inflation figure this year.

Last year, Persimmon launched its ‘Combat to Construction’ programme, aimed at retraining former armed-services personnel for skilled roles in the industry.

Killoran said the scheme would hit the 350 mark this year and was targeting an annual intake of 500 trainees.