Persimmon Plc (LON:PSN) has announced its half year results for the six months ended 30 June 2023.
Dean Finch, Group Chief Executive, said:
“Against a backdrop of higher mortgage rates, the removal of Help to Buy and significant market uncertainty, Persimmon has delivered a robust sales rate excluding bulk sales whilst growing the private average selling price in our forward order book and also securing cost savings. We are on track to deliver profit expectations for the year and are building a platform for future growth.
“Our private sales rate has remained broadly consistent throughout the period resulting in a private forward order book that is now 83% higher than it was at the beginning of the year, despite controlled use of sales incentives and limited recourse to investor deals. Our pricing overall has remained resilient with continued positive momentum in the forward order book. However, the reduced volumes in the first half of the year has negatively affected our operating margins as we predicted earlier in the year. As we look forward, we expect increasing completions to result in improving operating margins.
“We have been proactive in managing our cost base however, this has been done without losing our focus on quality. We were delighted to retain a five-star customer service rating in the period and have made very pleasing progress in our Trustpilot scores. The Group’s national network of outlets providing high quality products at a range of attractive prices and an improved brand reputation are crucial strengths in this market.
“We have maintained targeted investment in exceptional new land opportunities and enhanced key capabilities to deliver high quality homes for customers consistently. Subject to the challenges in the planning system we are determined to grow our outlet numbers in a disciplined way. Our new Space4 factory and investment in TopHat modular manufacturer will help us drive even greater efficiencies in the coming years. We are carefully strengthening our operations and national outlet network to position ourselves for future growth while protecting margins.
“With the historic under-supply of homes the longer term outlook for housing remains positive. Persimmon has a proven track record of delivering strong returns through the cycle. I am confident that the combination of a relentless focus on our key enduring strengths while enhancing key capabilities, will again drive strong returns through the next cycle.”
Financial highlights
| H1 2023 | H1 2022 | |
| New home completions | 4,249 | 6,652 |
| New home average selling price | £256,445 | £245,597 |
| Total Group revenue1 | £1.19bn | £1.69bn |
| Underlying new housing gross margin2 | 21.5% | 31.0% |
| Underlying operating profit3 | £152.2m | £440.7m |
| Underlying operating margin4 | 14.0% | 27.0% |
| Profit before tax | £151.0m | £439.7m |
| Earnings per share | 34.4p | 106.5p |
| Interim dividend per share | 20p | – |
| Cash at 30 June | £0.36bn | £0.78bn |
| Land holdings at 30 June – plots owned and under control | 84,751 | 89,052 |
| Underlying 12 month rolling return on average capital employed5 | 21.1% | 30.9% |
Trading highlights
· 4,249 new home completions in H1 (2022: 6,652), reflecting the lower forward order book coming into the year following the market challenges after last Autumn’s ‘mini-Budget’
o Group private average selling price of £288,327, up 8% year on year, partially reflecting a greater proportion of larger homes sold
o Group average selling price of £256,445 up 4% year on year
· Sales rate of 0.59 for the period (2022: 0.91), broadly sustaining the higher than expected rates seen in the first quarter and secured with the controlled use of incentives and investor deals
o Average incentive levels of 3.2% in the period on the Group’s private sales (H2 2022: 1.5%)
o Investor deals accounted for 0.03 of the sales rate in the period; continue to assess approaches from interested parties on a case-by-case basis
· Cash at 30 June 2023 of £357m, after £192m in dividend payments and £182m of land creditors paid in the period
o Continued close WIP and cost control, to manage cash and margins while maintaining capability for upturn
o New revolving credit facility signed in July, increasing to £700m and extending to July 2028; includes sustainability-linked metrics
· Interim dividend of 20p per share to be paid on 3 November 2023, to Persimmon shareholders on the register on 13 October 2023
Operational highlights
· Maintained five-star customer satisfaction rating for second year running and have made good progress on our Trustpilot scores
· Excellent progress on build quality with a c.50% reduction in Reportable Items6 over the last year; building homes customers can rely on at a price they can afford
· Continued targeted investment in vertical integration through a new Space4 factory and TopHat, a modular home manufacturer
· Maintained positive progress on building safety remediation programme; many active tenders and works on-going; 36 of 80 developments completed; £350m provision announced in March remains unchanged
· Continue to engage with the Competition and Markets Authority Housing Market Study
Land and planning highlights
· Selective approach to land buying with 3,245 plots brought into the business across 15 locations, maintaining good coverage across the country
· Selling outlets remained broadly flat in the period (June 2023: 273; December 2022: 272)
o Our ambition remains to return to pre-Covid outlet numbers in the medium term, subject to planning constraints
· Sharpened approach to planning through local engagement with 5,102 plots across 33 sites achieving detailed planning consent in the period
o Represents 120% of completions in the period; focus on seeking permissions on already owned land
o Some progress in addressing nutrient neutrality through proactive local engagement on mitigation
Outlook
· Current forward sales position (including 5 weeks post period end) of £1.6bn; 30% lower year on year (2022: £2.2bn)
o Forward private sales of £875.9m, up 83% compared to 1 January 2023 (£478.5m)
o Forward private average selling prices up 0.9% compared to 1 January 2023
· Full year completions expected to be at least 9,000, the top end of our previously indicated range, with operating profits in line with expectations given stubborn build cost inflation in the period
o Prevailing build cost inflation of around 5%, we expect it to moderate further in the months ahead
Persimmon Plc Footnotes
1 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.
2 Stated on new housing revenues of £1,089.6m (2022: £1,633.7m) and gross profit of £234.0m (2022: £506.2m).
3 Stated before goodwill impairment (2023: £5.8m, 2022: £3.2m).
4 Stated before goodwill impairment (2023: £5.8m, 2022: £3.2m) and based on new housing revenue.
5 12 month rolling average calculated on operating profit before goodwill impairment of £9.2m (2022: £5.5m) and legacy buildings provision charge of £275.0m (2022: £nil) and total capital employed (including land creditors). Capital employed being the Group’s net assets less cash and cash equivalents plus land creditors.
6 A Reportable Item is an area of non-compliance with NHBC standards. The item is rectified fully before completion of the home.
