12 March 2024
If you are covering Persimmon’s latest results, please see the following comment from Oli Creasey, property research analyst at Quilter Cheviot:
"Persimmon’s full year results show that 2023 was a tough year for the housebuilder. House prices were up +3%, but most other metrics moved in the wrong direction, notably sales volumes, which were down -33% year-on-year. Revenue fell -27%, and the operating margin almost halved to 14%.
"However, most of this was known or expected; 2023 was a tough year for housebuilders (and buyers) in general. What is of greater concern for shareholders is that the outlook for 2024 isn’t really any better. Current sales volumes year-to-date are going through at approximately the same rate as 2023, and management expect overall volumes to be only marginally (+3%) ahead of the prior year, and for the operating margin to be about the same. It’s worth noting that the sales rate of 0.53x so far in 2024 is some way lower than peers such as Taylor Wimpey, whose equivalent rate was 0.67x.
"Persimmon has long had a reputation as a highly cash generative business, but the year-end cash balance halved in 2023, finishing at just over £400m. It is notable that management have stated that they expect to burn through this cash balance and return to a net debt position at some point in 2024. The company expects to finish 2024 with net cash between £0-200m. Commentary suggests this is to support expansion in anticipation of an upturn in the housing market. The board intends to at least maintain the 60p dividend in 2024, despite the falling cash balance, but investors may need to be convinced that the falling cash is not an issue, noting that the company has always finished the year with more cash than this every year since 2012.
"Persimmon has continued to improve its build quality statistics, reducing the number of reportable issues per home built by -43%, and reducing the injury rate on site by -22%. Customer satisfaction scores continue to improve, and Persimmon has maintained its status as a five-star builder."
