TIDMPSN
RNS Number : 5921R
Persimmon PLC
07 July 2022
TRADING UPDATE
THURSDAY 7 JULY 2022
Persimmon plc ("the Group") announces the following trading
update ahead of its Half Year Results to 30 June 2022, which will
be released on Wednesday 17 August 2022. This statement covers the
period from 1 January 2022 to 30 June 2022.
Dean Finch, Group Chief Executive, said:
"I am pleased we have further enhanced our build quality in the
period while also driving build efficiency to historical highs and
increasing housing gross margin. We continued to complement this
progress with high quality, disciplined investments in land driving
growth in our outlet position. We have delivered this despite the
significant on-going challenges being faced by the industry. As we
rebuild our outlet position, delays in the planning system,
disruption in material supply chains and challenges in securing
labour have impacted completions in the period. We anticipate,
however, profit at the half year to be modestly above our
expectations reflecting strong demand and positive pricing
conditions. Our forward sales position is robust.
"Our disciplined investment is further enhancing our strong land
holdings which alongside our rigorous focus on margins is
underpinning our continued financial strength. We are expanding our
unique vertical integration capabilities to provide further supply
resilience and cost efficiency. Our enhanced product range and
service quality are strengthening our customer proposition. My
ambition firmly remains for Persimmon to become Britain's best
housebuilder for both customers and shareholders alike, by
resolutely focusing on the delivery of high quality homes, improved
customer service and strong financial returns."
-- Highlights
- 6,652 legal completions (2021: 7,406)
- Total revenue(1) of GBP1.69bn (2021: GBP1.84bn)
- Forward sales of GBP1.87bn (2021: GBP1.82bn)
- Improving housing gross margin with house price inflation currently
offsetting build cost inflation
- c. 300 active outlets at 30 June 2022 with c. 70 forecast to open
in H2 2022
- c. 8,800 plots of land brought into the business across 37 sites
at industry-leading embedded margins
- c. GBP0.78bn of cash at 30 June 2022 (June 2021: GBP1.32bn)
- Five-star builder - improving current customer satisfaction score
of 92.2%(2)
Trading review
The Group delivered 6,652 new homes in the first half of the
year (2021: 7,406) which, as guided, was below the first half of
2021, but also slightly lower than we previously expected due to
further delays in the planning system and material and labour
shortages. Total revenues(1) for the period were GBP1.69bn (2021:
GBP1.84bn) including housing revenues of GBP1.63bn (2021:
GBP1.75bn).
The Group's average selling price increased by 4.0% year on year
in the first half to c. GBP245,600 (2021: GBP236,199) reflecting
strong demand and a reduction in the proportion of homes sold to
our housing association partners. In the period, 5,553 (83%) of the
Group's legal completions were delivered to owner occupiers (2021:
6,104 (82%)) with an average selling price of c. GBP267,300 (2021:
GBP258,220).
Rising energy prices, supply constraints on certain materials
and increased labour costs are driving upward pressure on total
build costs. Currently, house price inflation is continuing to
offset these increases. As a result, we expect to deliver a housing
gross margin that is slightly ahead year on year, although, the
lower number of completions will result in a slight fall in
operating margin reflecting the reduced efficiency of the Group's
overhead recovery rates. Despite this, we anticipate the Group's
profit at the half year to be modestly above our expectations.
As previously announced, the Group entered the year with a low
number of outlets (c. 290) reflecting its robust volume performance
in 2020 and 2021 together with relatively fewer land additions in
2019 and 2020. As a result of the Group's high quality land
investment, we successfully brought c. 65 outlets into construction
in the period, however, the planning system remains slow impacted
by a Covid-related backlog and increasing complexity. For example,
across the industry there are c. 120,000 plots in England currently
stalled within the system due to Natural England's nutrient
neutrality guidance. In the absence of firm guidance from
government this uncertainty will continue. Persimmon currently has
around 1,500 plots affected by this issue which were due for
delivery to local communities over the next five years.
Building an even stronger business
The Group continues to invest in high quality land opportunities
at industry-leading embedded margins providing excellent support
for Persimmon's high quality growth. During the period, c. 8,800
new plots were brought into the business across 37 locations. As at
30 June 2022, the Group held around 89,000 plots in its owned and
under control land holdings and around 100,000 plots in its
strategic land portfolio.
Persimmon has a robust balance sheet and high levels of
liquidity. After returning GBP399m to shareholders on 1 April 2022,
investing GBP416m (2021: GBP200m) in high quality land
opportunities at industry-leading embedded margins and increasing
investment in the Group's work in progress balance, the Group held
GBP0.78bn of cash at 30 June 2022 (December 2021: GBP1.25bn) with
deferred land commitments of approximately GBP125m to the end of
the current year. At 30 June 2022, the Group had work in progress
of c. 4,400 equivalent units of new home construction (December
2021: c. 4,100). In addition, the Group has an undrawn GBP300m
Revolving Credit Facility which is in place until 31 March
2026.
The Persimmon Way, the Group's construction excellence
programme, continues to drive benefits throughout the business.
Whilst delivering higher quality homes with great levels of
customer service, and in a highly challenging operating environment
where we have seen material and labour shortages, our build rates
are improving and since March, have exceeded historical
performance. The vertical integration afforded by our own
Brickworks and Tileworks manufacturing facilities has helped
mitigate some material shortages.
FibreNest, the Group's ultrafast full fibre broadband service,
continues to grow, providing our customers with a key utility from
moving in day. FibreNest currently has c. 24,000 customers across
315 of our developments (2021: c. 16,500 customers).
As previously announced, on 5 April 2022, Persimmon signed the
Department for Levelling Up, Housing and Communities' Developer
Pledge on cladding removal and fire safety remediation. Our
proactive approach and engagement with Management Companies, or
their agents, is actively helping progress remediation of a number
of buildings.
Capital Return Programme
On 2 March 2022, the Board re-iterated its intention to return
235p per share in 2022. The first payment of the regular annual
distribution of 125p per share was made on 1 April 2022 (rather
than July 2022 as originally intended). As announced on 27 April
2022, 110p per share of surplus capital will be returned to
shareholders on 8 July 2022. There will be no further dividend
payments in relation to the year ended 31 December 2021.
Outlook
Demand across the UK remains strong. During the first six months
of the year, the Group's average private weekly sales rate per site
was around 1% ahead of that achieved during the same period in
2021. Customer enquiry levels are healthy and cancellation rates
low. As at 30 June 2022, the value of the Group's forward sales was
robust at c. GBP1.87bn (2021: GBP1.82bn) with c. 8,800 homes (2021:
c. 9,550) in our forward order book at 30 June 2022, c. 4,680 of
which are sold into the private market (2021: c. 4,950). The Group
is around 75% forward sold for the full year. The average selling
price of new homes forward sold to owner occupiers was c.
GBP280,700, c. 12% ahead of the prior year (2021: c.
GBP250,350).
At 30 June 2022, the Group had c. 300 active outlets across the
UK and, subject to planning, we expect to bring c. 70 outlets into
the business in the second half of the year, enabling us to deliver
a strong increase in our net outlet position. Whilst there are a
number of external factors outside of the Group's control which are
impacting volume delivery and making it difficult to forecast with
accuracy, we currently anticipate delivering around 14,500 to
15,000 legal completions this year while retaining our
industry-leading margins and securing profit growth.
Persimmon is performing strongly within all the areas it
directly controls whilst actively managing broader economic and
regulatory challenges. The Group is investing in high quality land,
improving its build rates and through its relentless pursuit of
both quality and service, strengthening its product appeal in its
core markets. With the longer-term fundamentals of the housing
market remaining strong, we are confident that with this progress
together with our continued disciplined approach to investment, the
Group is well positioned for the future.
The Board would like to take this opportunity to thank the
Persimmon team for their hard work and commitment throughout this
period.
There will be a call for analysts at 09.00 BST today. Please use
the dial-in details below:
Telephone number: +44 (0) 33 0551 0200
Password: Persimmon
An audiocast of the call will be available on
www.persimmonhomes.com/corporate from this afternoon.
For further information please contact:
Dean Finch, Group Chief Executive Kevin Smith
Mike Smith, Group Financial Controller Jos Bieneman
Julia Nichols, Group Strategy & Ellen Wilton
Regulatory Director
Persimmon Plc Citigate Dewe Rogerson
Tel: +44 (0) 1904 642199 Tel: +44 (0) 20 7638 9571
Footnote 1
Total Revenues - 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.
Footnote 2
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.
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END
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