Persimmon delivers robust first half performance

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Persimmon Plc (LON:PSN) has announced its half year results for the six months ended 30 June 2021.

Dean Finch, Group Chief Executive, said:
“Persimmon’s first half performance has been robust. In particular, I am pleased we have delivered strong growth in legal completions whilst also achieving higher levels of build quality and customer satisfaction.
“We made good progress in the land market in the period, bringing over 10,000 plots of high quality land into the business, achieving good visibility of new outlet openings and providing momentum for our future growth. With c. 85 new outlets opening in the second half of the current year, we are improving availability and choice for our customers.
“We’re managing the balance of inflationary pressures well and currently anticipate that our industry leading returns will remain resilient. Our forward sales position is c. 9% ahead of the same point in 2019, with our cumulative private sales rate over 20% above that of 2019 for the year to date.
“I would like to thank all my colleagues across the business who have achieved these results.
“Persimmon’s high quality land holdings, disciplined land replacement strategy, healthy liquidity, experienced management team and continued resolve to drive improvements in build quality and customer service provide an excellent platform for its future success.
“Our ambition is to be seen by our customers as delivering both outstanding service and outstanding value. I am determined to build on the progress we have made and enhance our capability to consistently provide high quality homes which will help secure sustainable benefits for all of our stakeholders.
“We anticipate successfully delivering c. 10% growth in sales completions this year. The Group has a great platform and good momentum to deliver further disciplined growth into the medium term, creating value for all.”

Highlights

	H1 2021	H1 2020
New home completions	7,406	4,900
New home average selling price	£236,199	£225,066
Total Group revenues¹	£1.84bn	£1.19bn
New housing operating margin²	27.6%	26.6%
Profit before tax	£480.1m	£292.4m
Cash at 30 June	£1.32bn	£0.83bn
Current forward sales position	£2.23bn	£2.48bn
Current customer satisfaction score³	91.9%	89.6%
Dividend (per share)	125p (March 2021)110p (August 2021)	40p (September 2020)70p (December 2020)

Strong platform for high quality growth

• Experienced management team delivering high quality homes across the Group’s 31 housebuilding businesses.

• A diverse UK-wide network, operating on c. 300 active outlets on average during 2021, with a strong pipeline expected to deliver approximately 85 new outlets by the end of this year, with a similar number of new outlets targeted to open in the first half of 2022.

• High quality land holdings, with 85,771 plots owned and under control at 30 June 2021 (December 2020: 84,174), with industry leading embedded returns.

• The Group brought 10,272 plots into the business in the period whilst maintaining the Group’s high quality return requirements, across 48 locations at a replacement rate of c. 140%. Exciting pipeline of deals progressing.

• The Persimmon Way is fully operational across the business focused on delivering consistent high standards of build quality.

• Pre-Covid build rates have been maintained for the last twelve months.

Industry leading financial performance

• Good first half performance against the backdrop of the continuing pandemic and the pandemic’s impact in the first half of the prior year – profit before tax of £480.1m (2020: £292.4m).

• Average private sales rate for the period was over 30% ahead of 2020, the increase reflecting the unprecedented site shutdowns in 2020 due to the pandemic, but was also c. 20% ahead of 2019.

• New housing operating margin of 27.6%² for the six months to 30 June 2021 (2020: 26.6%).

• The business is managing the balance of inflationary pressures being experienced by the industry well.

• £479.8m of net cash generation before capital returns of £398.7m and land spend of £200.4m.

• Underlying return on average capital employed4 of 37.9% (December 2020: 29.4%).

• Over the last 3 years, the Group’s average underlying return on capital employed has been 36.5% reflecting the sustainable performance of the business.

• After tax return on equity of 22.6%5 (2020: 21.5%).

Focusing on our customers – build right, first time, every time

• The Group is delivering increased volumes of legal completions and at higher levels of build quality and customer service; the Group’s HBF customer satisfaction rating³ being ahead of the five star threshold since January 2020.

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• Continuing to improve consistency in build quality and customer service remains a key focus for the business.

• As part of the ongoing implementation of The Persimmon Way, the Group is continuing to invest in improving quality assurance, with a 70% increase in the number of Independent Quality Controllers across the business from 31 December 2020.

• The Group continues to invest in its people with increased training and skills development, with for example, c. 400 of our site management team registered to complete National Vocational Qualifications relevant to their role.

Supporting sustainable communities

• Strong sense of purpose supports the Group’s sustainable business model in delivering long-term sustainable benefits in the best interests of all stakeholders through the cycle.

• The wellbeing of the Group’s workforce, customers and local communities remains a top priority.

• Covid-19 secure operating procedures continue maintaining the stringent two metre social distancing rules.

• The Group’s private average selling price of £258,220 is c.15%6 below the UK national average.

• Approximately 50% of homes sold into the owner occupier market were to first time buyers.

• Invested over £0.5bn in local communities in the last eighteen months, covering the period since the pandemic began, delivering over 3,500 homes to our local housing association partners.

• The Group supports c. 86,0007 jobs across our communities and within our wider supply chain.

• The Group’s challenging science based targets, which align to the Paris Agreement, are now fully accredited by the Science Based Target Initiative.

• Proud sponsor of Team GB and, through the Persimmon Charitable Foundation, the Group supports local charities and community groups across the UK, having donated c. £2.4m to over 1,300 local good causes over the last eighteen months.

Capital return programme

• 235p per share paid in respect of the year ended 31 December 2020.

• As announced in March 2021, the Board intends to revert to the pre-Covid profile of capital return of two payments a year, with the payment of the regular annual distribution of 125p per share being made in early July 2022.

Outlook

• Good forward sales of £2.23bn, including legal completions in the second half so far, up c. 9% on the more normal trading year of 2019.

• Cumulative average private weekly sales rate for the 33 weeks to date is over 20% ahead of 2019.

• As previously announced, we anticipate delivering c. 10% growth in sales completions this year (FY 2020: 13,575 legal completions), with further growth to come.

• The Group is managing the inflationary effects in the market well and we currently anticipate the Group’s industry leading returns will remain resilient supported by its high quality land holdings.

• The Group maintains a strong balance sheet with healthy levels of liquidity.

• Persimmon’s well-established strategy which recognises the cyclical nature of the housing market by maintaining financial flexibility and deploying capital at the appropriate time in the cycle, provides a high quality foundation to secure superior long term sustainable returns for all stakeholders.

Footnotes

The Group’s total revenues include the fair value of consideration received or receivable on the sale of part exchange properties and income from the provision of broadband internet services. Housing revenues are the revenues generated on the sale of newly built residential properties only.
Stated on new housing revenue of £1,749.3m (2020: £1,102.8m) and underlying profit from operations of £483.0m (2020: £293.2m) calculated before goodwill impairment of £3.9m (2020: £1.6m).
The Group participates in a National New Homes Survey, run by the Home Builders Federation. The rating system is based on the number of customers who would recommend their builder to a friend.
12 month rolling average calculated on underlying operating profit and total capital employed (including land creditors). Underlying operating profit is stated before legacy buildings provisions of £75.0m (December 2020: £75.0m) and goodwill impairment of £6.6m (December 2020: £4.3m).
12 month rolling profit after tax generated from the average of the opening and closing total equity for the period.
National average selling price for new build homes sourced from the UK House Price Index as calculated by the Office for National Statistics from data provided by HM Land Registry.
Estimated using an economic toolkit.

A presentation to analysts and investors will be available from 07.00 am on 18 August 2021.

To view the presentation, please use the webcast link below:

Webcast link: https://edge.media-server.com/mmc/p/7xn5x3jf

There will also be a Q&A session with management, hosted by Group Chief Executive, Dean Finch and Group Finance Director, Mike Killoran via conference call at 09.00 am. Analysts may join the call by using the details below: