ii view: housebuilder Persimmon confident in long-term prospects

Full-year results to 31 December

• Revenue down 27% to £2.77 billion
• Pre-tax profit down 52% to £352 million
• Final dividend of 40p per share, down from 60p last year
• Total 2023 dividend of 60p, unchanged from 2022
• Net cash of £420 million, down from £862 million year-end 2022

Guidance:

• Adjusted operating profit margin expected to remain flat at 14%
• Expects home completions for the year ahead of between 10,000 to 10,500
• Hopes to at least maintain the dividend payment over the year ahead

Chief executive Dean Finch said:

“The Group successfully navigated the challenging market conditions in 2023. Completions were ahead of expectations, margins were industry-leading, we maintained our strong balance sheet and we continued to deliver further improvements in our product quality and service.

“We are well placed to manage the ongoing uncertainty and we have good visibility over our land pipeline which, over the medium-term, will support a return to growth in outlets and volumes, alongside improved margins and robust cash generation, paving the way for sustainable shareholder returns.”

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ii round-up:

Persimmon (LSE:PSN) operates from 29 UK regional offices and 3 offsite manufacturing facilities where it makes items ranging from timber frames and roof systems to bricks and tiles.  

Its brand names are Persimmon Homes, Charles Church and Westbury Partnerships. Employing just over 4,800 people, it completed 9,922 new homes in 2023, down from 14,868 in 2022. 

For a round-up of these latest results announced on 12 March, please click here. 

ii view:

Started in 1972 and headquartered in York, Persimmon is today the UK’s fourth-largest housebuilder by stock market value, behind rivals Berkeley Group Holdings (The) (LSE:BKG), Taylor Wimpey (LSE:TW.), and Barratt Developments (LSE:BDEV). A constituent of the FTSE 100 index, it generally has more exposure to lower priced affordable sales and in particular first-time buyers. Geographically, its broad UK coverage is weighted towards the North. 

For investors, the company is still affected by customer affordability constraints given mortgage rates are comfortably above the recent historic lows, and government-backed assistance schemes such as ‘help-to-buy’ have been ended. Group cash levels have reduced, planning challenges across the UK generally persist, while a recent investigation into the industry by the Competition and Markets Authority (CMA) is not to be overlooked. 

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On the upside, hopes that mortgage rates will reduce later this year have seen customer enquiries and recent sales rates improving. Build cost inflation has eased, potential for new industry assistance under a newly elected government is possible, while an estimated price-to-net asset value of around 1.2 times is now comfortably below the three-year average, suggesting the emergence of better value. 

For now, and while trading for the year ahead is likely to remain difficult, a forecast dividend yield of around 4.6% arguably offers some reward for those investors prepared to wait for a broader housing market recovery.   

Positives

• Broadly stable selling prices
• Mortgage rates may have peaked

Negatives

• Uncertain economic outlook
• CMA sector investigation

The average rating of stock market analysts:

Hold