Persimmon Plc (LON:PSN) has announced its Final Results for the year ended 31 December 2023.
Dean Finch, Persimmin plc Group Chief Executive, commented:
“The Group successfully navigated the challenging market conditions in 2023. Completions were ahead of expectations, margins were industry-leading, we maintained our strong balance sheet and we continued to deliver further improvements in our product quality and service.
Although the near-term outlook remains uncertain, the significant pent-up demand for homes remains unchanged. Customers want quality homes in the places where they want to live and work, and affordability is crucial. During the year we have continued to take further steps to strengthen the business and we are well placed to meet this demand through our three excellent brands offering different price ranges with overall private average selling prices that are below the market average. The investments and operational changes that we have made in the past few years mean that we are trusted by our customers to deliver consistently high-quality homes.
We can achieve this while positioning the business to maintain industry-leading financial returns as markets recover, supported by our vertically integrated business model, strategic land buying and disciplined approach to cost control. Through further investments in innovation, I believe we can build even higher quality homes better, faster and more efficiently over time.
We are well placed to manage the ongoing uncertainty and we have good visibility over our land pipeline which, over the medium-term, will support a return to growth in outlets and volumes, alongside improved margins and robust cash generation, paving the way for sustainable shareholder returns.”
Financial Highlights
| 2023 | 2022 | |
| New home completions | 9,922 | 14,868 |
| New home average selling price | £255,752 | £248,616 |
| Total Group revenue | £2.77bn | £3.82bn |
| New housing revenue | £2.54bn | £3.70bn |
| Underlying new housing gross margin1 | 20.5% | 30.9% |
| Underlying operating profit2 | £354.5m | £1,006.5m |
| Underlying operating margin3 | 14.0% | 27.2% |
| Profit before tax | £351.8m | £730.7m |
| Dividend per share | 60p | 60p |
| Cash at 31 December | £420.1m | £861.6m |
| Land holdings at 31 December – plots owned and under control | 82,235 | 87,190 |
| Average number of selling outlets | 266 | 259 |
| Current private forward sales position4 | £946m | £908m |
| Underlying return on average capital employed5 | 10.5% | 30.4% |
| Customer satisfaction score6 | 92.9% | 90.6% |
Navigated a challenging market well with further quality improvements
| · | 9,922 new home completions in FY23, ahead of our initial guidance with strong delivery in Q4 |
| · | Net private sales rate of 0.58 per outlet per week in 2023 |
| · | Underlying operating profit and margin impacted by lower volumes, build cost inflation and mix as expected in 2023 |
| · | 43% improvement in NHBC reportable items to deliver our highest quality homes yet |
| · | NHBC customer satisfaction score6 improved to 92.9%, continued five-star HBF rating |
| · | Private ASP held up well with some softening in second half, reflected in forward order book pricing |
| · | Successfully controlled WIP investment to match demand, without compromising on investment for future growth |
| · | Enhanced planning approach working well with c.11,000 plots achieving detailed consent in the period, resulting in a 7% increase in ‘owned plots with detailed planning’ |
| · | Net land spend of £398m including £253m for the settlement of land creditors |
| · | CDP climate survey score of A- (2022: B) |
Current trading and outlook
We have started the year in line with expectations, with our recent marketing campaign generating a significant number of leads for our sales teams. Enhanced competition in the mortgage market and wage growth have contributed to improved affordability albeit it continues to be constrained, particularly for first time buyers, and demand for homes remains varied across the country. Trading in the southern and eastern counties remains more challenging with weaker pricing, offset by a more robust trading performance in the northern regions. We continue to selectively use incentives, including part exchange, to drive reservations and overall, our net private sales rate per outlet per week was ahead in the first ten weeks of 2024 at 0.59 against 0.54 in the comparable period in 2023. Excluding bulk sales, the net private sales rate was 0.53 per outlet per week, broadly in line with the prior year (2023: 0.54; excluding First Homes7: 0.50). Cancellation rates remain at normal levels at c.16%.
With interest rates expected to remain at current levels and a general election on the horizon, market conditions are expected to remain subdued throughout 2024. However, we are well placed to manage this and are positioning the business for sustainable future growth over the medium-term. We remain on track to open a gross new 30 outlets for the spring selling season as we work towards growing our outlet base back to over 300 open outlets over the medium-term.
Our current forward sales position is £1.55bn, including £946m of private forward sales with a private ASP of c.£280,000. Overall, we expect to deliver between 10,000 and 10,500 completions for 2024, of which we have full planning on 98%, with a housing operating margin in line with 2023. Build cost inflation is expected to be c.3-5% in 2024, with spot inflation currently running at c.1%.
As we look to expand our outlet base and invest in work in progress in anticipation of a housing market upturn, we expect to utilise our new £700m Revolving Credit Facility during 2024. Consequently, we anticipate transitioning from an average net cash to an average net debt position through 2024, resulting in an estimated net finance charge of approximately £15m-£20m for the 2024 financial year. We currently anticipate our net cash to be between zero and £200m as of 31 December 2024.
While we are prepared for 2024 to be another challenging year, we are confident of our ability to manage this. The longer-term fundamentals for the housing market remain positive. Our focus on maintaining a robust balance sheet while investing for growth gives us confidence in our ability to generate strong cash generation and industry-leading returns over the medium-term.
Footnotes
1 Stated before legacy buildings provision charge (2023: £nil, 2022: £275.0m) and based on new housing revenue (2023: £2,537.6m, 2022: £3,696.4m).
2 Stated before legacy buildings provision charge (2023: £nil, 2022: £275.0m) and goodwill impairment (2023: £7.6m, 2022: £6.6m). Operating profit after legacy buildings provision charge and goodwill impairment is £346.9m (2022: £724.9m).
3 Stated before legacy buildings provision charge (2023: £nil; 2022: £275.0m) and goodwill impairment (2023: £7.6m; 2022: £6.6m) and based on new housing revenue (2023: £2,537.6m; 2022: £3,696.4m).
4 2024 figure as at 10 March 2024; 2023 figure as at 12 March 2023.
5 12 month rolling average calculated on operating profit before legacy buildings provision charge (2023: £nil, 2022: £275.0m) and goodwill impairment (2023: £7.6m, 2022: £6.6m) and total capital employed. Capital employed being the Group’s net assets less cash and cash equivalents plus land creditors.
6 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. The rating used here reflects the live score at time of publication.
7 First Homes is a Government scheme designed to help local first time buyers and key workers onto the property ladder, by offering homes at a discount to the market price.
There will be an analyst and investor presentation at 09.00 today, hosted by Dean Finch, Group Chief Executive.
Analysts unable to attend in person may listen live via webcast using the link below. All participants must pre-register to join the webcast. Once registered, an email will be sent with important details for this event, as well as a unique Registrant ID. This ID is to be kept confidential and not shared with other participants.
Live webcast: https://edge.media-server.com/mmc/p/ncpttutb/
An archived webcast of today’s analyst presentation will be available from this afternoon on www.persimmonhomes.com/corporate.
