RNS Number : 6009F
08 November 2022
TRADING STATEMENT AND CAPITAL ALLOCATION POLICY UPDATE
TUESDAY 8th NOVEMBER
Persimmon plc today announces its Trading Statement which covers
the period from 1 July 2022 to 7 November 2022 ('the period').
Dean Finch, Group Chief Executive, commented:
"Persimmon entered 2022 in a strong position with healthy
forward sales and good weekly sales rates which continued
throughout the first half of the year. This, together with our
increasing levels of build efficiency, means we are well positioned
to deliver new home completions for the year within our previously
stated target range, while maintaining an industry-leading housing
margin, despite the recent deterioration in market conditions
leading to increased cancellation rates.
"Rising interest rates and broader economic uncertainty are
clearly impacting mortgage lending and customer behaviour and this
is reflected in our recent weekly sales rates and forward sales
position. Persimmon enters this more challenging period as a
five-star builder, with average selling prices below the market
average, high quality land holdings, and a robust balance sheet.
The recent strengthening of our land holdings with disciplined
investment will maintain our industry-leading embedded margins.
"Our highly experienced senior operational management team are
drawing on their decades of detailed knowledge across many housing
cycles to continue to rigorously assess every aspect of our
business to ensure we are building quality homes for customers in
the most cost-efficient manner. This relentless focus on customers,
cost-efficiency, cash management and disciplined investment will
help us navigate this more challenging market while also
strengthening our ability to capitalise on future opportunities. We
recognise how important sustainable returns are for our
shareholders and today we are setting out a new capital allocation
policy that balances this with the need to invest in our future
"We were proud to lead the industry with our pledge to protect
leaseholders from the costs of cladding removal in any multi-storey
development built by Persimmon. We have made good progress and
continue to proactively engage with management companies to agree
work plans. This proactive programme, together with more certainty
over the broadened scope of work required by the Government, means
we are increasing our provision to meet our pledge to protect
-- Resilient sales performance for the period - average
net private weekly sales rate per outlet for the period
of 0.60 (2021: 0.78); GBP0.77bn of forward sales reserved
beyond the current year (2021: GBP1.15bn).
-- Good progress on build rates - c. 20% ahead of the prior
-- On track to deliver full year 2022 volume target of between
14,500 to 15,000 homes, despite some increased risk from
recent elevated cancellation rates.
-- Five star quality and service - levels of customer satisfaction
remain above 90%(1) .
-- Industry leading margins - balance of inflationary pressures
being managed well supporting resilient industry leading
-- Projected cash position of c. GBP700m at 31 December
2022, after total capital return of GBP750m paid in the
year to date.
-- Building safety provision expected to be increased to
GBP350m reflecting the broader scope demanded by Government,
additional developments becoming eligible and clearer
costings from pro-active engagement.
-- Previous capital return programme to be replaced with
new, forward looking capital allocation policy - which
balances sustainable returns for shareholders with the
need to invest in the Group's future success.
The Group entered the period with a healthy forward sales
position for full year 2022. Build rates have remained strong
running at c. 20% ahead year on year, at five-star quality,
resulting in the delivery of additional work in progress of c.
1,000 equivalent units compared with the prior year. Persimmon is
now fully reserved for the current year. Legal completions to 6
November 2022 totalled 9,974 (2021: 10,728, reflecting the delivery
of pent-up post-Covid demand) and 3,328 additional properties had
exchanged. While the Group remains well-positioned to deliver its
full year volume expectations of between 14,500 and 15,000 units,
the last six weeks have seen cancellation rates increase to 28%
from 21% in the preceding 12 weeks from 1 July 2022, introducing
The Group has continued to manage the balance of inflationary
pressures well, as higher selling prices mitigate the impact of
cost inflation of between 8% and 10%. Our vertical integration
capabilities through our Brickworks and Tileworks manufacturing
facilities continue to play an important role in providing security
of supply and each facility has increased output year on year. We
will continue to invest further to enhance our capabilities to
build high quality, energy efficient, good value homes in a cost
effective manner. This reflects the disciplined approach to
investment and cost management that has seen us maintain an
industry-leading margin in recent years and will remain a key focus
in the years to come.
The Group's average net private weekly sales rate per outlet for
the period of 0.60 reflects customers' response to the
macro-economic headwinds of increased interest rates and reduced
mortgage availability, together with increasing cost of living
pressures. Reflecting the uniquely disruptive political conditions
and deteriorating economic outlook since September, in the last six
weeks the average net private weekly sales rate per outlet has
fallen to 0.48. Average selling price for private reservations over
the same period reduced by c. 2% compared with the 12 weeks
commencing 1 July.
Help-to-Buy has now closed for new applications, and was
utilised on c. 20% of completions in the year to date. We believe,
however, that our unique value proposition will provide an enduring
strength in an uncertain market, as our lower average selling price
combined with the cost advantage of new homes' c. 30% energy
efficiency premium above existing housing stock, prove attractive.
In addition, our new, experienced Head of Sales has already
completed a detailed review of our sales processes and is putting
in place new systems to enhance the service offered, capitalise on
new opportunities and reduce risks.
Persimmon has a strong, diverse, outlet network, operating from
an average of 305 active sites in the period, of which an average
of 268 were sales outlets. The Group's disciplined land investment,
bringing c. 13,600 plots into the business in the year to date,
provides a flexible pipeline which will underpin our future
performance. During the period, we opened c. 30 sales outlets and
anticipate operating from 290 to 300 active sites at the end of the
year, of which 250 to 260 will be sales outlets, depending on sales
rates and planning consents obtained in the rest of the year.
Overall land spend for the year to date is c. GBP590m (2021:
GBP370m) with c. GBP175m of land spend being incurred in the period
(including c. GBP37m on settlement of land creditors). A further c.
GBP115m of land spend is committed for the remainder of the year.
We will continue our highly selective approach when investing in
land opportunities as we navigate the uncertain outlook for the UK
housing market. Where we see quality opportunities, we will
purchase land, however we anticipate land additions in 2023 to be
significantly lower compared with 2022, reflecting our existing
high quality land holdings. This, together with rigorous control of
work in progress, will underpin our prudent approach to cash
management in the year ahead. We expect to broadly maintain our
current outlet numbers throughout 2023, subject to planning
consents achieved and market conditions.
Persimmon's financial position and liquidity remain strong. We
expect to end the year with c. GBP700m of cash at 31 December 2022
(June 2022: GBP782m) after the GBP750m capital return paid in the
We continue to make good progress on our commitment to protect
leaseholders from the cost of cladding removal and life-critical
fire-safety work on any multi-storey developments built by
Persimmon. Our dedicated team has been holding monthly meetings
with relevant management companies or their agents to agree work
plans which, as they have progressed, have also provided a more
detailed assessment of the likely costs. This work has already
enabled 31 developments to either secure EWS1 certificates or
conclude any necessary works. Remediation work is either underway
or tenders agreed on a further 18.
Since signing the Developer Pledge in April 2022, we have worked
constructively with the Government to agree the 'Long Form
Contract' that turns the pledge into a legal agreement. While the
negotiations have added to recent cost uncertainty, we believe they
are now sufficiently advanced to be concluded shortly. Further, as
we have worked through this process and accommodated the expanded
scope, the number of eligible multi-storey developments we are
responsible for has increased and currently stands at 71. We are -
as stated - already engaged or seeking engagement with each of
these developments to expedite works and carry out fire risk
assessments which, where appropriate, includes paying for interim
protection measures for residents. This work has led to a more
detailed understanding of costs, which now include non-cladding
fire related build defects. Combined with the broader scope
required by Government, which has resulted both in an increase in
the amount of work required and in the number of eligible
buildings, and against a background of significant build cost
inflation, we expect to increase our provision for this multi-year
programme at the 2022 year end to approximately GBP350m. The
expected unaudited provision is
based on management's current best estimates and assumptions
which could evolve, as the long form contract and regulation are
The Board recognises the importance of sustainable dividends for
shareholders and will continue to prioritise value creation from a
strong return on capital. Following a review and reflecting the
increased uncertainty in the political and macro-economic
environment, alongside increased corporation tax and the
residential property developer tax, the Board has decided to
conclude the previous capital return programme, which was
introduced in 2012.
The Board will implement a new Capital Allocation Policy with
the following key principles:
-- Invest in the long-term performance of Persimmon by ensuring
the business retains sufficient capital to continue our
disciplined and appropriately timed approach to land acquisition.
-- Operate prudently, with low balance sheet risk, and a
continued focus on achieving a superior return on capital.
-- Ordinary dividends will be set at a level that is well
covered by post-tax profits, thereby balancing capital
retained for investment in the business with those dividends.
-- Any excess capital will be distributed to shareholders
from time to time, through a share buyback or special
The 2022 dividend per share will be announced in March 2023,
alongside the Group's full year 2022 results, and paid in Q2 2023.
Guided by the new policy, when proposing the 2022 dividend the
Board will carefully consider the business' performance, financial
position and outlook at that time. There will be no special
distribution for 2022.
For the 2023 financial year and onwards, dividends will be paid
out semi-annually, with an interim dividend for 2023 expected to be
paid in the second half of 2023.
The Group has traded well through 2022, maintained its
disciplined approach to land replacement and continued to open new
outlets, despite the challenging planning system. We are
well-positioned to deliver full year completion numbers within our
expected range of between 14,500 and 15,000 homes.
During the third quarter of 2022, we entered a period of
heightened market uncertainty, with rising interest rates and
inflation balanced with continued high levels of employment. While
we have already seen mortgage providers and customers start to
adapt to higher interest rates, the full impact of this uncertainty
on consumer behaviour is yet to be determined. We have good
visibility on our outlet pipeline and we anticipate our outlet
numbers will remain broadly in line with the current position
throughout 2023, subject to planning consents achieved and market
conditions. However, it is too early for us to provide specific
guidance for 2023 given the recent and rapid change in market
conditions; our current expectation is for fewer legal completions
than in 2022 and this together with a deterioration in average
selling prices will have an impact on 2023 margins.
Persimmon will continue to prioritise building high quality,
energy efficient, good value homes for customers ahead of volume,
underpinning strong financial returns. Our uniquely strong
combination of quality and price provides an attractive opportunity
for customers looking for value in an uncertain market. We have a
highly experienced senior operational management team who have
worked within the industry and Persimmon through many housing
cycles. As a result of this experience, together with our existing
high quality land holdings, we can maintain our discipline on
taking a highly selective approach to future land investment, and
robustly control work in progress and costs, leaving the Group
well-placed to manage short term uncertainties and further
strengthen our ability to capitalise on future opportunities.
In the medium to longer term, the demand for new homes will
remain strong. Our continued investment in, and strengthening of,
our vertical integration capabilities will provide a unique ability
to meet this demand in an increasingly productive and cost
effective manner. By maintaining our focus and progress on build
quality and customer service, we will continue to enhance and
strengthen our product offering in the years ahead. Persimmon is
well positioned to serve the continuing need of customers across
the UK who seek high quality and energy efficient new homes at a
price they can afford.
We will give a further update on progress and trading, following
the Group's year end, on 12 January 2023.
This announcement contains inside information. The person
responsible for the release of this announcement on behalf of the
Company is Tracy Davison, Company Secretary.
Persimmon will host a conference call with analysts at 08.30am
A ll participants must pre-register to join this conference
using the Participant Registration link. Once registered, an email
will be sent with important details for this conference, as well as
a unique Registrant ID.
Participant registration page:
For further information please contact:
Vicky Prior, Group IR Director Kevin Smith
Anthony Vigor, Group Director of Policy and Holly Gillis
Persimmon Plc Ellen Wilton
Citigate Dewe Rogerson
01904 642 199 020 7638 9571
1. The Group participates in a National New Homes Survey,
run by the Home Builders Federation. The Survey year covers
the period from 1 October to 30 September. The rating system
is based on the number of customers who would recommend
their builder to a friend.
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(END) Dow Jones Newswires
November 08, 2022 02:00 ET (07:00 GMT)
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