REG - Persimmon Plc - Q3 Trading Statement

PersimmonAnnouncement

07/11/2023 07:00

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RNS Number : 5547S  Persimmon PLC  07 November 2023

 

7 November 2023
 

Q3 Trading Statement

 

Trading in line with expectations; c. 9,500 completions expected for the full
year

 

Persimmon Plc is today providing an update on trading for the period from 1
July 2023 to 6 November 2023 ('the period').

 

Dean Finch, Group Chief Executive, commented:

 

"Trading in the period was in line with expectations and pricing was broadly
stable. We are on track to deliver around 9,500 quality new homes in 2023 with
operating profit in line with expectations and at an operating margin similar
to the first half. While the near term is likely to remain challenging and we
remain disciplined on costs, we continue to position the business for growth
when the market recovers, as demonstrated by our further progress on planning
in the period. The Group's national network of outlets providing a
high-quality product at a range of attractive prices is a crucial strength in
this market."

 

Q3 Highlights

                                                Q3 2023   Q3 2022   % change
 New home completions                           1,439     2,270     -37%
 Average open sales outlets                     271       269       +1%
 Net private sales per outlet(1)                0.48      0.63      -24%
 Current forward sales position(2)              £1.62bn   £2.09bn   -23%
 Of which private forward sales(2)              £0.93bn   £1.42bn   -35%
 Land holdings (plots owned and under control)  c.84,300  c.91,300

 

(1)Net private sales per outlet of 0.46 excluding bulk sales (Q3 2022: 0.61)

(2)Excluding completions year to date and as at 5 November for 2023 figure, as
at 6 November for 2022 figure.

 

2023 Trading

The Group traded in line with expectations during the third quarter,
delivering a total of 1,439 homes (Q3 2022: 2,270 homes). This included 1,234
private homes (Q3 2022: 1,894 homes) and 205 partnerships homes for our
housing association partners (Q3 2022: 376 homes).

 

The Group's private selling price on completions was up 2% in the quarter on
the prior year at £296,822. Our partnerships average selling price increased
20% in the same period, reflecting a higher weighting of completions to the
South compared with the prior year and the continued work of our dedicated
Partnerships team.

 

Average private sales per outlet per week were 0.48 in the period (Q3 2022:
0.63). Trading in the period followed the normal seasonal drop over the summer
months and a pick-up from September following the launch of our latest
marketing campaign. Pricing was broadly stable in the period despite continued
affordability constraints, particularly in the South of England where we have
seen an increase in the use of incentives. In the third quarter, average
incentives on private sales increased to c.3.6%.

 

Land, WIP and cash

Land spend in the third quarter was £78m (Q3 2022: £128m) of which £34m
related to the settlement of land creditors. Our owned and under control land
holdings stood at c. 84,300 plots on 30 September 2023 (30 June 2023:
84,751 plots) and the embedded margin of the land portfolio remains
industry-leading.

 

As a result of our proactive approach to planning, we achieved planning on
c.3,400 plots in the period across 19 sites, supporting our outlet network. We
have made good progress in converting our priority list of owned land with
outline planning permission, having secured detailed or full consents on c.80%
of these plots so far this year.

 

We continue to operate from a lean fixed cost base and pursue a highly
disciplined approach to WIP management. As a consequence, build rates in the
third quarter were c.30% lower year-on-year reflecting the slower sales
environment. Disciplined management of costs remains a key focus for the Group
and in addition to careful spend controls, the hiring freeze we have in place
means that headcount is likely to reduce by c.700 during 2023.

 

We continue to anticipate a cash balance of £300m-£500m at the end of the
current financial year.

 

Outlook

 

We are on track to deliver around 9,500 completions for 2023 with operating
profit in line with expectations and at an operating margin similar to the
first half. On the whole pricing remains broadly stable although we have seen
a slight reduction in Group private average selling price in the forward order
book and an increase in the use of incentives, particularly in the South where
affordability constraints are greater.

 

Over the past 5 weeks private sales rates have improved to 0.59 (2022: 0.45)
showing a strong pick up since the start of October. Of this 0.08 relates to
investor sales, with a series of small selective deals on targeted sites where
appropriate. We anticipate investor sales will represent c.5% of our full year
delivery. We are fully sold for 2023 and our current forward sales position
has increased to £1.6bn since the half year (30 June 2023: £1.4bn). Of this
£0.9bn relates to private forward sales (30 June 2023: £0.7bn) with a
private average selling price of c.£277,750, (30 June 2023: £282,316).

 

We have taken a proactive approach with suppliers and subcontractors to secure
price reductions on both materials and labour over the past few months. In
line with prior commentary, build cost inflation has been more stubborn than
expected at the start of the year and we anticipate the annualised impact of
build cost inflation through the P&L for 2023 will be c.8-9%. However,
build costs have moderated since the half year which will benefit completions
in 2024.

 

Into 2024, we anticipate market conditions will remain highly uncertain, but
we are well positioned with our focus on delivering high quality sustainable
homes for our customers at a price they can afford with our Persimmon Homes
average selling price c.25% below the national average(1). Our recent planning
success means we have a number of new sites progressing through the pipeline
which should support the opening of c.30 gross new selling outlets during
Spring 2024. The longer-term fundamentals for the market remain positive. We
have a proven track record of delivering strong returns through the cycle and
our good progress in improving our key quality and service capabilities will
allow us to respond quickly when conditions improve.

 

Our next scheduled updates will be our 2023 Trading Update on 10 January 2024
followed by our 2023 Final Results on 12 March 2024.

 

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/BId7d2026b455543f9876ad81afa2dee84
(https://protect-eu.mimecast.com/s/9W4kC89zyhzqx8wun5zzP?domain=register.vevent.com)

 

For further information please contact:

 Vicky Prior, Group IR Director           Olivia Peters
 Anthony Vigor, Group Director of Policy  Teneo

 and External Affairs

 Persimmon Plc                            persimmon@teneo.com (mailto:persimmon@teneo.com)

  01904 642 199                                                                        +44 (0) 7902 771 008

 

(1) National average selling price for new build homes sourced from the UK
House Price Index as calculated by the Office for National Statistics from
data provided by HM Land Registry.

 

 

Appendices:

 1.  2023 quarterly performance   Q1     Q2       HY       Q3     YTD
 Completions                      1,136  3,113    4,249    1,439  5,688
 Private (homes)                  902     2,379    3,281   1,234  4,515
 Partnerships (homes)             234     734     968      205     1,173
 Net private sales rate           0.62   0.58     0.59     0.48   0.56
 FTB % (private completions)      38%    33%      34%      32%    34%
 Average sales outlets            266    268      267      271    268

 

 

 2.  ASP       Q3 2023    Q3 2022    Change
 Private       £296,822   £291,259   +2%
 Partnerships  £155,844   £129,796   +20%
 Total         £276,738   £264,515   +5%

 

 

                   5 Nov 2023          6 Nov 2022          Change
 3. Forward sales  Value       Homes   Value       Homes   Value  Homes
 Private           £928.8m     3,344   £1,424.2m   4,993   -35%   -33%
 Partnerships      £688.0m     4,414   £664.5m     4,662   +4%    -5%
 Total             £1,616.8m   7,758   £2,088.7m   9,655   -23%   -20%

 

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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