Persimmon encouraged despite 42% fall in completions

Shares of York-based house building giant Persimmon plc rose as much as 5% after it said its recent trading “has offered some signs of encouragement” despite reporting a 42% reduction in house completions in the first quarter to 1,136 homes.

In a trading statement for the first quarter to March 31, 2023, ahead of its AGM, Persimmon said it has seen a steady improvement in sales rates since the start of the financial year.

In its outlook, the York company said if sales rates continue around the level seen year to date, it would expect full year 2023 volumes to be toward the top end of the previously indicated range of 8,000 to 9,000 completions.

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,” said Persimmon.

“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.”

Persimmon CEO Dean Finch said: 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.”