Persimmon Plc (LON:PSN) today announced its half year results for the six months ended 30 June 2019.
Highlights
“Improving the quality and service delivered to our customers remains our top priority and I am encouraged with the progress made in the first half, which clearly shows that Persimmon is changing. Our customer satisfaction ratings for the current HBF survey year are showing improvement and I am particularly pleased that, in July, Persimmon became the first housebuilder to introduce a retention scheme for customers placing us at the forefront of strengthened consumer rights for homebuyers.”
“The improvements to our customer service approach had two main impacts in the period. First, customer service spend increased by c. 40% year on year and these additional initiatives are anticipated to increase our annual customer care costs by an estimated £15m. Second, and as noted earlier in the year, our decision to invest an additional c. £140m in work in progress as we held back some sites for later sales release to give customers more accurate moving-in dates reduced the Group’s overall sales volumes. Allowing for these impacts, Persimmon’s trading in the first half of 2019 was strong.”
“I am proud of the commitment and dedication our teams have shown in supporting the many initiatives we have introduced to deliver a step change in our customers’ experience.”
“I am confident that the progress we are making with our initiatives, our strong forward build, healthy forward sales and robust balance sheet place Persimmon in a strong position for the second half.”
Dave Jenkinson, Group Chief Executive
Strategic focus
• Improving customer service levels
– Customer satisfaction ratings in the HBF survey year commencing 1 October 2018 have continued to improve
– Significant investment in improving customer care, with an additional c. £140m invested in work in progress and an estimated £15m increase in annual customer care spend
– Decision to delay sales release to later stage of construction in higher demand locations beginning to deliver anticipated benefits
– Customer care portal to be launched in the second half of this year
• Improving build quality and safety
– New industry leading retention scheme introduced in July, with cover extended to include any faults identified during the first week of occupation
– Construction programmes advancing – 19% increase in new home inventory volumes year on year at period end improving new home availability and delivery
– New independent team of construction quality inspectors being introduced to strengthen our current assurance processes across each of our regional businesses
– Incorporating core building safety principles of the Hackitt Review into operating procedures to help the Group more clearly identify and manage key risks at each individual site
• Housebuilder for all
– Increasing the supply of good quality homes for everyone with more first time buyers helped onto the housing ladder than any other UK housebuilder – 3,082 new home sales in H1 were sold to first time buyers, representing 52% of all private sales
– Group average selling price c.17% lower than the national average for newly built homes sold to owner occupiers1
– Creating opportunities for all – directly employing more tradespeople (c. 1,950) than any other housebuilder, with 630 trainees employed through the last academic year and over 150 new trainees anticipated for our autumn intake
– £255m invested in local communities in the first half, including the delivery of 1,621 new homes for lower income families to our housing association partners
– Launched our Building Futures campaign, joining forces with Team GB, the Great Britain and Northern Ireland Olympic Team run by the British Olympic Association, to support children across the UK
Financial highlights
• Financial trading performance remains strong
– Profit before tax of £509.3m (2018: £516.3m)
– 7,584 new homes sold (2018: 8,072)
– Total new home average selling price of £216,942 (2018: £215,813)
– Total Group revenue 4.5% lower at £1.754bn (2018: £1.836bn)
– Underlying new housing operating margin2 up by 130 basis points year on year to 31.0% (2018: 29.7%); a reduction from 31.8% in the second half of last year
– Net free cash generation3 of £182.4m (2018: £240.4m)
– Basic earnings per share of 129.3p (2018: 134.9p)
– Return on average capital employed4 of 40.5% (2018: 41.7%)
– Return on equity5 of 31.0% (2018: 30.2%)
• Excellent platform for future growth
– 3,582 plots of new land secured in the period, including 1,962 plots converted from the Group’s strategic land bank; 75,444 plots owned at 30 June (December 2018: 75,793 plots)
– Increase in work in progress investment to £1,024.0m (2018: £749.6m)
– £832.8m cash held (December 2018: £1,048.1m), prior to £350.1m capital return paid 2 July 2019
– Strong current forward sales of £2.048bn (2018: £2.120bn)
• Shareholder returns
• Return of surplus capital of 125 pence per share (£397.7m) paid 29 March 2019 in addition to the scheduled payment
1 National average selling price for newly built homes sourced from the UK House Price Index as calculated by the Office for National Statistics from data provided by HM Land registry. Group average private selling price is £242,912.
2 Stated before goodwill impairment (2019 : £4.1m, 2018 : £4.4m)
3 Net cash generation stated before Capital Return Plan payments
4 12 month rolling average stated before goodwill impairment and includes land creditors
5 12 month rolling profit after tax generated from the average of the opening and closing total equity for the 12 month period
Persimmon Plc was founded in 1972 and is today one of the UK’s leading housebuilders. With headquarters in York, the Group operates from 31 regional offices throughout the UK. The Group trades under the brand names of Persimmon Homes, Charles Church and Westbury Partnerships, building quality homes across England, Wales and Scotland.
