06 November 2024
If you are covering Persimmon’s latest financial results, please find below a comment from Oli Creasey, property research analyst at Quilter Cheviot:
“Persimmon’s third quarter statement this morning is focused on volume and revenue – closely watched metrics given the challenging environment. The sales per outlet figure of 0.70x is much improved versus this time last year (up 37%), and the order book is 17% larger compared to the third quarter in 2023. However, the sales rate figure does appear to have stalled recently, having been up at 0.71x in the first half of the year, and is still well below the long-term average, which is closer to 0.85-0.9x. The summer holiday season can sometimes dampen demand, and the recent speculation budget may have also encouraged some would-be buyers to defer purchases until the new tax situation was known, so achieving a flat sales rate for the period may prove to be an achievement in itself. Investors will have to wait until the full year figures are released to know if the recovery trend has picked up again in Q4, or if volumes have stagnated at this level.
“Persimmon has reiterated guidance for the full year completions of 10,500 homes, the majority of which have now been sold or reserved. Prices remain largely unchanged, up 0.3% in the quarter. In short, not much has changed at all, which is fine for one summer quarterly update, but investors will hope that this isn’t a long-term trend – the revenue metrics are improved compared to their lows in 2023, but are still some way off the figures seen during the low interest rate environment.
“The outlook for 2025 appears mixed. Persimmon management have remarked that they expect a growth in the number of outlets and overall volumes in 2025, although it is not clear to what extent the volume growth will come from the higher outlet numbers vs organic demand. More troublingly, they also note that build cost inflation is rearing its head (again) in negotiations over prices in 2025. Persimmon is keen to keep a lid on these costs, as well as dealing with higher employer NI contributions. Profit margins are still relatively low compared to long-term averages, albeit 2023 will probably prove to be the low point, and previously unexpected cost inflation will put more pressure on those margins and slow the recovery further.”
