Persimmon plc (LON:PSN) announced the following trading update covering the period from 1 January 2019 to date, ahead of its Annual General Meeting (“AGM”) which is being held at 12.00 noon today.
Persimmon is focussed on building good quality homes at a range of prices offering customers great choice across the UK. Since the start of the year the new build housing market has proved resilient with high levels of employment and low interest rates continuing to support consumer confidence. With mortgage lenders continuing to offer attractive products, the level of customer activity has been encouraging with visitor levels to site, sales conversion rates and cancellation rates all running in line with our expectations.
As part of our previously communicated plans to improve our service to customers, in particular providing greater accuracy of anticipated moving-in dates, we are continuing to take a more targeted approach to the timing of sales releases on a number of sites and to progress build to a more advanced stage before releasing homes for sale to the market where demand is strong. As expected, these measures have reduced the number of sales reservations made since the start of the year but we remain confident that, with the continuation of current market conditions, these sites will make a good contribution to sales once build has progressed and homes are released for sale. Overall, sales reservations remain in line with our expectations and we currently anticipate achieving a similar level of legal completions in the first half as last year. The Group’s legal completions for the second half of the year will be similarly determined by our continued focus on progressing our build programmes ahead of sales release together with prevailing market conditions.
The Group’s current forward sales position is strong with total forward sales revenue, including legal completions taken to date in 2019, of £2,698 million (2018: £2,798 million). After recognising the actions taken to improve customer service as described earlier the Group had 350 active sales outlets for the year to date (2018: 375) and our weekly private sales rate per site since the start of the year was 5% lower than the previous year. Pricing conditions remain firm across our regional markets, the average selling price of sales to the private market in our forward order book being c. £237,850 (2018: c. £236,500). The Group has also maintained a substantial forward order book of new homes for delivery to our Housing Association partners.
The Group has opened 43 of the c. 90 new outlets planned for the first half of the year and is building new homes on all sites that have an implementable detailed planning consent. Given the increased uncertainties around the future performance of the UK economy we have remained very selective with the acquisition of new land during the period.
Since the start of the year we have announced a broad range of initiatives to improve the Group’s customer satisfaction levels. These include the actions taken to deliver greater accuracy of anticipated moving-in dates discussed above, together with a broad range of improvements and investments in our customer care team, operations and technology. These measures underpin our commitment to delivering a step change in the Group’s customer focussed culture and service performance. The initiatives are already beginning to make an impact and we are confident they will deliver significant improvement once they have had time to take full effect.
In order to assess the effectiveness of these new measures and processes, and to determine whether they appropriately position the business for the future, in April the Group commissioned an independent review. The review will report to the Board and it is anticipated that the initial overall findings will be presented in the final quarter of 2019.
We have continued to develop our off-site manufacturing capability based at our hub in Harworth, Doncaster to support the Group’s construction programmes. Our brick manufacturing factory, Brickworks, is now producing at close to optimal capacity and the construction of a new roof tile manufacturing facility, Tileworks, is well advanced. We anticipate that Tileworks will be commissioned and commence deliveries to site during the second half of this year. We continue to expect our overall build costs to increase by c. 4% for the year. This includes ongoing investment to enhance specification in support of improved levels of customer satisfaction and is after mitigation through progressing our off-site manufacturing activity and reviewing our approach to infrastructure development costs.
The Board is pleased to announce that the Group has recently concluded the renewal of its £300m Revolving Credit Facility with strong support from the Group’s five relationship banks. The facility has a five year term out to 31 March 2024 and remains an important element in providing support to the Group’s working capital flexibility.
Last year the Board announced that three additional payments would be made under the Capital Return Plan (“the Plan”) of 125p per share, paid each year for the three years ending 2020. The second of these additional payments amounting to £398m was made as an interim dividend on 29 March 2019. The Board has also recommended a scheduled return of 110p per share, or c. £350 million, to be paid to shareholders on 2 July 2019 as a final dividend.
The Board remains confident of the future prospects of the Group.
We will provide a further report in our Trading Update on Thursday 4 July 2019.
