REG - Persimmon Plc - Trading Statement

PersimmonAnnouncement

13/01/2022 07:05

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RNS Number : 2771Y  Persimmon PLC  13 January 2022

TRADING STATEMENT

THURSDAY 13 JANUARY 2022

Persimmon plc today announces the following update ahead of its Final Results
for the year ended 31 December 2021, which will be released on 2 March 2022.

Highlights

Dean Finch, Group Chief Executive, commented:

"Persimmon's performance has been excellent through the year, delivering high
quality growth. I would like to thank my colleagues and our wider workforce
for their hard work and commitment in achieving the Group's strong
performance. Whilst continuing to provide five star levels of customer
satisfaction the business provided 14,551 new homes at an anticipated full
year underlying operating margin of c. 28%(1), maintaining our
industry-leading performance.

 "We have continued to secure high quality land opportunities, bringing over
20,500 new plots into the business in 2021 representing in excess of 140% of
current consumption levels. This strong pipeline provides excellent momentum
for the Group's future growth. Our teams are working diligently to bring these
sites into construction as soon as possible to enable us to deliver much
needed homes across the UK.

"Whilst the industry continues to face the ongoing operational and economic
challenges as a consequence of the pandemic, particularly as the Omicron
outbreak unfolded in the last six weeks of the year, the Group continues to
manage these ongoing challenges comprehensively. The long term fundamentals of
the UK housing market remain strong and I am confident of Persimmon's future
success."

Highlights

                                 2021            2020
 New home completions            14,551          13,575
 Average selling price           c. £237,050     £230,534
 Total Group revenues            £3.61bn         £3.33bn
 New housing revenues            £3.45bn         £3.13bn
 Cash at 31 December             £1.25bn         £1.23bn
 Current forward sales position  £1.62bn         £1.69bn
 Dividend paid in the year       235p per share  110p per share

 

Trading

Persimmon has delivered total Group revenues of £3.61bn, (2020: £3.33bn) in
the year. New housing revenues of £3.45bn were c. 10% ahead of last year
(2020: £3.13bn) and c. 1% ahead of 2019 (2019: £3.42bn). As expected, new
home legal completions of 14,551 were c. 7% ahead of the prior year (2020:
13,575) and included 12,018 new homes sold to private owner occupiers (2020:
11,363). The Group's average selling price increased by 2.8% over last year to
c. £237,050, reflecting in part the greater proportion of new homes sold to
our housing association partners compared with last year. At c. £259,200, the
average selling price of our new homes sold to owner occupiers was c. 3% ahead
of the prior year (2020: £250,897), the underlying improvement in selling
prices being diluted to a degree by the year on year changes in the regional
mix of sales achieved. However, with the second half benefitting from the
particular mix of legal completions achieved in the period, we anticipate the
Group's industry-leading underlying operating margin for the full year will be
c. 28%(1) (2020: 27.6%).

The Group delivered 2,533 new homes to its housing association partners
representing 17.4% of  total homes delivered, an increase from 16.3% last
year. We look forward to delivering further growth in sales to our housing
association partners as the Group brings through its new outlets planned for
2022 and beyond.

The Group has seen good levels of demand throughout the second half of the
year underpinning positive pricing conditions. The Group's sales rates were c.
20% higher than those in the second half of 2019 (a more comparable period
given the pandemic-related disruption to the industry in 2020) reflecting
Persimmon's positioning in a strong market. Our customer enquiry levels have
remained encouraging throughout the period despite the changes in the
Government's Help to Buy scheme and the stamp duty regime. Cancellation rates
have remained in line with historical low levels throughout the period.

The business has managed the ongoing challenges of the pandemic well,
including disruption to the supply chain and customer support services which
increased in the latter part of 2021 with the onset of the new Omicron
variant. The corresponding updated Government guidance has led to a pick-up in
sickness related absenteeism, with some customers also choosing to delay
moving into their new home as they isolated in line with best advice. Through
these challenges, the Group maintained its focus on delivering high quality
homes consistently to our customers.

Our vertical integration through our Brickworks, Tileworks and Space4 timber
frame manufacturing facility has continued to assist in securing supply of key
materials. As indicated, we anticipate that our industry leading margins will
remain resilient after recognising the expected increase in our build cost
inflation of c. 5.0% in 2021.

Persimmon traded from c. 285 active outlets on average in the second half
compared with c. 305 in 2020. The Group continues to bring new land through
into construction although there have been delays to some outlet openings due
to the slower planning system experienced across the industry. At the end of
the year the Group had 290 developments under construction across the UK
reflecting the combined effect of both the healthy sales rates we have
achieved and the planning delays. The Group has a strong pipeline of sites
progressing through the planning system and our teams are focused on opening
these new outlets into the traditionally strong spring season, taking
advantage of the healthy levels of interest already expressed by customers.

The Group's forward sales at 31 December 2021 were £1.62bn, c. 20% ahead of
2019 (2019: £1.36bn) (2019 being a more comparable year due to the
pandemic-related disruption to 2020).

We have maintained our well-established disciplined land replacement whilst
continuing to take advantage of exciting opportunities in the market. Over
20,500 plots have been brought into the business during the year, representing
over 140% of current consumption levels, strengthening the Group's UK wide
network. The Group's land spend for the year to date is c. £460m (including
c. £180m of deferred land creditor payments).

The Group's balance sheet and liquidity remain robust. The Group held £1.25bn
of cash at 31 December 2021 with deferred land commitments of c. £400m. In
addition, the Group has an undrawn £300m Revolving Credit Facility which has
a five year term out to 31 March 2026.

Continuing to support our customers

The Group places customers at the centre of our business as we strive to
'build right, first time, every time'. Whilst achieving good rates of
construction we continue to control the timing of release of homes for sale on
new developments and existing sites to ensure we can provide both greater
predictability of "moving-in" date to support higher levels of customer
satisfaction, and to maintain build quality. The Persimmon Way, our end-to-end
consolidated construction process, is operating well across the business.

The expansion of the Group's team of Independent Quality Controllers is
delivering the anticipated benefits of strengthening site supervision,
assisting site management teams in monitoring build at key construction stages
and providing further guidance and training, as well as enforcement of the
Group's quality standards. As planned, this is now also being complemented
with the external verification of our processes with the aim of covering all
the Group's operating companies by summer 2022.  We welcome the appointment
of a New Homes Ombudsman partner and the publication of the New Homes Quality
Code, which was published on 17 December 2021, and their aim of driving up
build quality and customer service standards across the industry. We expect to
register for the new Code shortly.

Our customers are already experiencing the benefits of some of these
improvements. Over 92%(2) of customers that have moved into their new home
since 1 October 2020 for the 2020/2021 HBF survey year say they would
recommend Persimmon to a friend. The Group has continued to trend ahead of the
90% HBF survey five star threshold since January 2020.

We share the Secretary of State's aspiration that leaseholders should not have
to pay to remove cladding.  Indeed, we made a commitment a year ago that
leaseholders in buildings constructed by Persimmon, including all those above
11 metres, should not have to cover the cost of cladding removal. We have
constructed only a very small proportion of buildings affected by this issue.
In common with the rest of the housebuilding industry, we will shortly begin
paying the cladding levy announced in the Budget.

Our communities

The Group is proud to deliver a range of house types making owning a home
accessible for all whilst creating attractive neighbourhoods for people to
enjoy. Our private average selling price of c. £259,200 for the year to 31
December 2021 (2020: £250,897) is c. 18%(3) below the UK national average
with c.  50% of our private home completions for the year having been to
first time buyers.

FibreNest, the Group's ultrafast, full fibre broadband service, continues to
grow, serving c. 20,500 new households across c. 260 of our developments. The
service, which is highly rated by our customers, is becoming increasingly
important as families rely on it to support their efforts to work from home
and to access essential services online.

Minimising our environmental impact

Persimmon is committed to playing its part in reducing greenhouse gas
emissions, helping to create an enduring sustainable legacy for future
generations. Earlier in the year, the Group set science based carbon reduction
targets, in line with the Paris Agreement, which were fully accredited by the
Science Based Targets Initiative. It also set ambitious 'net zero' targets,
aiming to deliver 'net zero' homes in use to its customers by 2030 and become
'net zero' in its operations by 2040.

Our homes are already significantly more energy efficient than existing
housing stock and our pathway to 'net zero' homes in use by 2030 has clear
interim milestones. For example, prior to the full implementation of the
Future Homes Standard, there will be a step change to improve the energy
efficiency of our homes which will increase by a further c. 30% as we improve
the fabric efficiency of our homes, install more efficient heating systems and
increase usage of solar PV.

The Group has already made good progress on its carbon reduction roadmap with
a number of projects to research the most effective method of delivering a
'net zero' home in use and engaging a third party expert to measure the
embodied carbon of our homes. In our operations, the Group has introduced
electric vehicle options into its fleet, is now purchasing 100% renewable
energy for its offices and manufacturing facilities and is investigating
methods of reducing the Group's red diesel consumption and increasing the use
of alternative fuels.

Outlook

The longer term fundamentals of the housing market remain positive with
resilient consumer confidence, demand continuing to outstrip supply across the
UK and good levels of mortgage availability. Some nearer term uncertainties
remain as the pandemic continues. Our vertical integration through our
Brickworks, Tileworks and Space4 manufacturing facilities mitigate some supply
chain disruption risk and the current positive pricing conditions are
anticipated to accommodate potential cost inflation.  Interest rates, whilst
anticipated to rise over the short term, remain at historically low levels,
with owning a home, rather than renting, continuing to be the most affordable
option. The Group aims to continue to focus on helping as many families as
possible to realise their life ambition of acquiring their own home by
offering an affordable range and choice of high quality homes across all our
new developments at compelling prices. The pandemic appears to have led many
customers to re-assess the type of accommodation that they wish to enjoy.
Persimmon is well placed to help communities fulfil these needs.

Persimmon is in a strong position with industry leading margins remaining
resilient, a strong management team and high quality land holdings providing
an excellent platform for future growth. Our well established strategy of
recognising the risks associated with the economic cycle and the housing
market, minimising associated financial risk and judging the deployment of
capital on high quality land at the right time in the cycle safeguards a
strong balance sheet and the Group's future success.

We enter the new year with the value of the Group's total forward sales at
£1.62bn (2019: £1.36bn). The Group's strong pipeline of outlets adds to the
Group's robust platform with c. 75 new outlets forecast to open in the first
half of 2022, assuming the planning system proves supportive.

The Group has maintained pre-Covid build rates throughout the year, supporting
the delivery of the increased volume of new homes to our customers. We are
focused on driving strong levels of build throughout 2022 and managing the
continuing operational challenges and those associated with the ongoing
pandemic to invest further in Group inventories, add to stock levels and
provide compelling choice for our customers. The Group's level of work in
progress of c. 4,100 equivalent units of new home construction at the end of
the year provides a robust opening position from which the Group will be able
to realise its ambitions for 2022.

We will give an update on our assessment of the housing market over the early
weeks of 2022 when we announce our results for the year ended 31 December 2021
on Wednesday 2 March 2022.

Persimmon will host a conference call with analysts at 09.00 am today. To
participate please use the details below:

 

 Dial in:   +44 (0) 33 0551 0200
 Passcode:  Persimmon

 

For further information please contact:

 Dean Finch, Group Chief Executive      Kevin Smith   Tel: +44 (0) 7710 815 924
 Mike Killoran, Group Finance Director  Jos Bieneman  Tel: +44 (0) 7834 336 650
 Persimmon Plc                          Ellen Wilton  Tel: +44 (0) 7921 352 851

 

Footnotes

1. Stated on new housing revenue and underlying profit from operations and
calculated before goodwill impairment.

2. 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.

3. Rolling 12 month 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.

 

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