26 April 2023
If you are covering Persimmon’s Q1 trading statement, please see the following comment from Oli Creasey, equity research analyst at Quilter Cheviot:
"Persimmon’s Q1 trading statement this morning shows some evidence of recovery, or at least stabilisation, but reminds investors of the “significant impact” expected on profit margins this year.
"Sales rates are now recovering, from a low of 0.3x sales per week per outlet in Q4’22 to 0.62x in 2023 so far. More than double, but still well below the equivalent figure for early 2022 – 0.98x. Q1 completions were down -42% due largely to rollover of uncertainty from Q4 last year, and management believe that if sales rates continue on current trends, the company should hit the top end of prior volume guidance – close to 9,000 completions in 2023.
"Pricing appears to be holding firm, up +4% in the quarter. However, the company is typically offering 3% incentives to buyers, and notes that forward agreed sales are at prices -2% lower than Dec-22. Prices may not be falling fast, but they do appear to be wobbling. Meanwhile, build cost inflation continues to rise at 8-9%, eating into margins.
"Persimmon volumes have slowed but the firm is not replacing land as quickly as it builds & sells – the landbank has shrunk -6% year-on-year to 86,400 plots, while the cash balance is down -18% over the same period to £353m.
"Management is already looking towards 2024 for growth in outlets and margins, suggesting 2023 might be a year to forget."
