REG - Persimmon Plc - Q1 Trading Statement

PersimmonAnnouncement

26/04/2023 07:00

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RNS Number : 4496X  Persimmon PLC  26 April 2023

 

26 April 2023

Q1 Trading Statement

 

 

 

Persimmon Plc is today providing an update on trading for the period from 1
January 2023 to 31 March 2023, ahead of its Annual General Meeting ("AGM")
which is being held at 12.00 noon today in York.

 

Dean Finch, Group Chief Executive, commented:

 

"Our performance in the first quarter was as we expected and reflects the
challenging trading conditions in Q4 2022 and consequent lower forward order
book as we entered the year. Trading over recent weeks has offered some signs
of encouragement with visitor numbers up, cancellation levels normalising and
sales rates continuing the steady improvement evident since the start of the
year. If sales rates continue at the levels seen year to date, we would expect
full year 2023 volumes to be toward the top end of the previously indicated
range of 8,000 to 9,000 completions. Sales prices remained firm in the period
as customers recognised the quality, improved value and energy efficiency of
our homes, with a good response to our marketing campaigns driving strong
customer interest.

 

"We are delighted to have been awarded five star status for customer
satisfaction by the Home Builders Federation for a second year running,
reflecting the hard work that has gone into putting our customers right at the
heart of our business.

 

"Looking beyond 2023, Persimmon has a strong platform from which to grow
outlets and volumes as the market recovers. We have an excellent pipeline of
new land opportunities to support growth in 2024, subject to planning, and we
are encouraged by the early signs of improved customer confidence. The
longer-term demand fundamentals for new homes remain robust and Persimmon has
made significant progress over the past two years in building a stronger, more
sustainable business for the future."

 

Q1 Highlights

                                                Q1 2023   Q1 2022   % change
 New home completions                           1,136     1,950     -42%
 Average open sales outlets                     266       245       +9%
 Cash at 31 March                               £353m     £433m     -18%
 Net private sales per outlet(1)                0.62      0.98      -37%
 Current forward sales position(2)              £1.7bn    £2.4bn    -30%
 Of which private forward sales(2)              £1.0bn    £1.8bn    -47%
 Land holdings (plots owned and under control)  c.86,400  c.92,100  -6%

 

(1)Net private sales per outlet of 0.58 excluding bulk sales (Q1 2022: 0.98)

(2)Excluding completions year to date and as at 26 April 2023 for 2023 figure,
as at 27 April 2022 for 2022 figure.

 

Trading

The Group traded in line with expectations during the first quarter. As
previously announced, the forward sales position at 1 January 2023 was
£1.0bn, down 36% year-on-year as the challenging trading environment in the
second half of 2022 resulted in lower sales rates and elevated cancellation
rates, particularly in Q4. This reduced forward sales position led to a 42%
reduction in Group completions in the first quarter to 1,136 homes (Q1 2022:
1,950 homes). This included 902 private homes (Q1 2022: 1,631 homes) and 234
homes for our housing association partners (Q1 2022: 319 homes).

 

Since the start of the financial year, we have seen a steady improvement in
sales rates, achieving net private sales per outlet of 0.62 in the first
quarter, compared with 0.30 in Q4 2022 and 0.98 in Q1 2022. Customer interest
remains good, with our marketing campaigns continuing to generate healthy
traffic to site and online. Sales rates and cancellation rates have been
stable over the past few weeks although it is too early to tell whether they
will follow normal seasonal patterns during the remainder of the year.

 

Overall pricing remained firm in the first quarter, with the Group's private
average selling price on completions up 10% on Q1 2022 and up 4% on Q4 2022.
Incentives on new home reservations continue to run at around 3% on average,
with good interest generated by our part exchange and 10 months mortgage free
campaigns. Overall, build cost inflation continues to track at around 8-9%,
with limited signs of easing in the short-term.

 

We responded quickly to the deterioration in market conditions in the second
half of 2022, by controlling our costs and managing our build programmes to
conserve cash. Build rates in the first quarter were 30% lower year-on-year at
176 equivalent units per week (Q1 2022: 252 equivalent units per week).

 

As a result of the improved sales rates in the first quarter, our forward
sales position has increased to £1.7bn since the start of the year (31
December 2022: £1.0bn), of which £1.0bn relates to private forward sales
(31 December 2022: £0.5bn) with a private average selling price of
c.£276,200, (31 December 2022: c.£282,100).

 

Our vertical integration, through our Space4 timber frame facility, and our
Brickworks and Tileworks manufacturing facilities, remains a key part of our
strategy and a differentiator for the Group. In April, we committed to invest
£25m into TopHat, an innovative modular home manufacturer. This investment
provides Persimmon with guaranteed access to TopHat's highly energy-efficient
volumetric modular units as well as an innovative brick façade to use with
our Space4 timber frame products. The new partnership will provide further
build efficiencies, help manage the growing challenge of labour shortages in
key trades and expand our product range for customers.

 

Customer satisfaction

We are delighted to have been awarded five-star homebuilder status by the Home
Builders Federation for the second year running, reflecting the hard work that
has gone into putting customers right at the heart of our business as we
deliver high quality homes to them at a price they can afford.

 

Legacy building safety

During the first quarter, we signed both the UK Government's Self Remediation
Contract (in England) and also the Welsh Government's Developers' Pact, which
turn the respective Building Safety Pledges into binding commitments. The
industry is discussing with the Scottish Government the terms of a Scottish
Safer Buildings Accord. While these discussions are on-going, we remain
committed to completing any necessary works on buildings we developed. Work to
remediate the buildings for which Persimmon is responsible, is proceeding to
schedule.

 

Land, WIP and cash

Land spend in the first quarter was £173m (Q1 2022: £278m) of which £131m
was the settlement of land creditors. Our owned and under control land
holdings stood at c.86,400 plots at 31 March 2023 (31 March 2022: c.92,100
plots) and the embedded margin of the land portfolio remains industry-leading.
We have a strong platform to prepare for a new growth phase when market
conditions permit. Although 2023 will be a difficult year, Persimmon has the
opportunity to expand our outlet network at the right time through disciplined
and targeted investment. We remain focused on progressing these opportunities
through the planning system and converting them into active sites.

 

The Group acted quickly to enhance its already strong investment discipline
and working capital cost controls towards the end of 2022, to protect our cash
position and provide the flexibility to pursue new growth opportunities in the
longer-term. We ended the first quarter with cash of £353m (31 March
2022: £433m) and we will continue to pursue a highly disciplined approach to
WIP management, and cost control with the Group operating from an already lean
fixed cost base.

 

Outlook

While the outlook remains uncertain, we are encouraged by the level of
visitors to our sites and the normalisation of cancellation rates, which
resulted in a steady improvement in sales rates across the period which has
continued in early April. These early signs of increasing customer confidence
are particularly evident in demand for our three, four and five bed homes.
While interest remains good for all our homes, sales to first time buyers
remain more challenging, reflecting stretched affordability and reduced
mortgage availability at higher loan-to values, particularly in regions with
higher house prices.

 

We anticipate average open sales outlets will remain broadly flat during 2023
at 250-260 outlets.  If sales rates continue around the level seen year to
date, we would expect full year 2023 volumes to be toward the top end of the
previously indicated range of 8,000 to 9,000 completions. With sales rates
being atypical over the recent months, it remains unclear how trading will
develop for the remainder of 2023.  As outlined at our 2022 full year
results, lower completions and build cost inflation outstripping the more
modest increase in ASP are, as expected, having a significant impact on the
Group's profit margins this year.

 

Longer-term, we see excellent opportunities for the business and we have a
good pipeline of new sites expected to come through for 2024 to generate
growth in our outlet position, subject to planning.  With this growth in
outlets, and signs that the improvement in consumer confidence is being
sustained, we anticipate a return to volume growth and expansion of margins in
2024.

 

The Group entered this period of uncertainty with a strong balance sheet,
including a robust cash position and industry-leading embedded margins in our
land holdings. The longer-term demand outlook for new homes remains favourable
and we will continue to position the business for success in the future,
maintaining our focus on quality and customer service and converting our land
holdings into active developments as we look to grow our outlet position over
the medium-term.

 

On 28 February 2023, the Competition and Markets Authority (CMA) launched a
market study into housebuilding in England, Scotland and Wales. We have been
responding constructively in these early stages of the study.

 

Persimmon will host a conference call with analysts at 08.30am today.

 

All 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:

https://register.vevent.com/register/BI903699b16eba49bbacea663e8eb74c33
(https://protect-eu.mimecast.com/s/VNcxCJPKnhKN59wsVDQhO?domain=register.vevent.com)

 

For further information please contact:

 

 Vicky Prior, Group IR Director                                Kevin Smith
 Anthony Vigor, Group Director of Policy and External Affairs  Holly Gillis

                                                               Ellen Wilton
 Persimmon Plc                                                 Citigate Dewe Rogerson
 01904 642 199                                                 020 7638 9571

 

Appendices:

 1.Quarterly performance      Q1 2023  Q1 2022  Variance
 Completions (homes)          1,136    1,950    -42%
 Private (homes)              902      1,631    -45%
 Housing Association (homes)  234      319      -27%
 Net private sales rate(1)    0.62     0.98     -37%
 FTB % (private completions)  38%      33%      +500bps
 Average sales outlets        266      245      +9%

 

(1)Net private sales per outlet of 0.58 excluding bulk sales (Q1 2022: 0.98)

 

                      26 April 2023     27 April 2022     Variance
 2.Forward sales      Value    Homes    Value    Homes    Value  Homes
 Private              £1.0bn   3,496    £1.8bn   6,738    -47%   -48%
 Housing Association  £0.7bn   4,715    £0.6bn   4,369    +29%   +8%
 Total                £1.7bn   8,211    £2.4bn   11,107   -30%   -26%

 

Cautionary statements

Some of the information in this document may contain projections or other
forward-looking statements regarding future events or the future financial
performance of Persimmon Plc and its subsidiaries (the Group). You can
identify forward-looking statements by the terms such as "expect", "believe",
"anticipate", "estimate", "intend", "will", "could", "may" or "might", the
negative of such terms or similar expressions. Persimmon Plc (the Company)
wishes to caution you that these statements are only predictions and that
actual events or results may differ materially and as such undue reliance
should not be placed on these statements. The Company does not intend to
update these statements to reflect events and circumstances occurring after
the date hereof or to reflect the occurrence of unanticipated events. Many
factors could cause the actual results to differ materially from those
contained in projections or forward-looking statements of the Group, including
among others, general economic conditions, the competitive environment as well
as many other risks specifically related to the Group and its operations. Past
performance of the Group cannot be relied on as a guide to future performance.

 

Please see the most recent Annual Report and Accounts of Persimmon plc and
other disclosures through the Regulatory News Service ("RNS") for further
details of risks, uncertainties and other factors relevant to the business and
its securities.

 

The information in this trading statement is unaudited.

 

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