12 January 2023
If you are covering Persimmon’s latest trading statement, please find below a comment from Oli Creasey, equity research analyst at Quilter Cheviot:
“Persimmon’s year end trading statement highlights the precarious nature of the UK housing market, where demand, or more specifically affordability, appears to have fallen off a cliff. The company reported reasonably strong data for 2022 as a whole (sales volumes + 2% vs 2021), but the sales rate dropped from 0.91x in H1 (measuring sales per outlet per week; 0.8-0.9x would be considered “good”), to 0.63x in Q3 and just 0.3x in Q4.
“The company also noted that the final seven weeks of the year, this completion rate fell even further to 0.19x. Seasonality is partly to blame, but this is still well below the equivalent figure for 2021. Persimmon note that the end of the Help to Buy scheme at the end of October is likely to have had a considerable impact on this. While clearly troubling data for housebuilders, we note that this is roughly consistent with the market – Barratt Developments reported an identical Q4 figure in yesterday’s announcement.
“Average sale prices grew by +5% in 2022, and given the strong first half of the year, it’s unlikely that a significant impact of falling volumes will be visible in 2022 financials when they are reported. However, all eyes will be on to what extent there is a recovery in volumes early in 2023. Mortgage pricing and availability appears to be improving slightly, and housebuilders may be willing to negotiate on price or customer incentives – Persimmon recently launched an offer where they will pay up to the first 10 months of mortgage payments for customers – all of which should help to stimulate demand. Persimmon has a strong balance sheet and ample cash, so the risk of serious distress is low, but the housebuilders will be keen to see volumes return to some sort of normality sooner rather than later.”
