08 August 2024
If you are covering Persimmon's half year results, please see the following comment from Oli Creasey, property analyst at Quilter Cheviot:
"Persimmon’s results this morning are encouraging, particularly sales volumes, which were +5% year-on-year and ahead of market expectations. Persimmon is now guiding to full year completions of 10,500, the top end of management’s prior guidance.
"The overall sales rate (sales per outlet per week) of 0.71x is also increased +5%. However, it does seem to be driven by increased bulk sales of over 500 units which is four times as many as H1 2023, while the private sales rate of 0.59x is a little disappointing given Taylor Wimpey’s equivalent figure last week was 0.69x.
"The average sales price is also up +3%. Combined, these factors account for a +11% growth in revenues compared to H1 2023, though the underlying operating margin has fallen 100bps to just 13%. Management has pointed to pricing pressure in H2 2023 as well as changes in sales mix and cost inflation, though it also expects a recovery in this figure, and forecast the 100bp fall to be cancelled out in H2 so that full year margins are unchanged year-on-year. This is not a situation unique to Persimmon; Taylor Wimpey experienced similar margin pressure and guided to a similar improvement. Despite the fall in margin, this is a beat versus consensus estimates.
"Performance since the start of July has been similarly encouraging – the private sales rate has improved to 0.69x, and management is keen to point out c.1,000 plots receiving planning permission since the start of the Labour Government. However, this may not be entirely down to the change in government – Persimmon averaged 835 new permissions per month in H1, so the increase is less than it might at first seem.
"These results are encouraging, particularly growing volumes and revenues, but it is notable that it has not yet translated into increased profits. Operating margins are still well below long-term averages, even if there is a recovery in H2 as management expects, and it will be a long road back to the sort of margins experienced pre-2022."
