17 August 2022
If you are covering Persimmon’s half year results, please see the following comment from Oli Creasey, property research analyst at Quilter Cheviot:
“Persimmon’s half year results show a company that is still very much on track despite a number of headwinds facing the UK housing market.
“Sales rates were relatively low, with the company only selling 6,623 homes in the period. That is a relatively low volume for the UK’s largest public builder (vs 7,400 in H1’21), but a reflection of internal cyclicality – fewer outlets and homes ready to sell – rather than a structural change. The company remains confident of the full year target to sell between 14,500-15,000 homes, and volumes and open outlets are ramping up to achieve this.
“The company remains a highly profitable business with an operating margin of 31%, slightly ahead of this time last year. 12% growth in property prices is offsetting increasing build costs, allowing profitability to be maintained. The company continues to build to a high standard and is on track to retain its 5* HBF rating next year.
“Early indications are that H2 might be a little less easy, but not yet a challenging environment. Sales volumes in the first seven weeks of the period are down -11% versus 2021, however last year was an extraordinary period coming out of Covid lockdowns and was unlikely to be repeated. More appropriate is a comparison to 2019, and 2022 is +8% ahead versus the last ‘normal’ year. Management are mindful of the issues that may impact the housing market – notably higher interest rates, cost of living, and the withdrawal of the Help 2 Buy scheme, but believe that the structural demand will remain. We expect that there may well be a correction in house prices that has yet to be felt, but any decline is likely to be relatively minor and easily absorbed by Persimmon’s industry-leading operating margin.”
