TIDMPSN
RNS Number : 4459J
Persimmon PLC
27 April 2022
TRADING UPDATE
WEDNESDAY 27 APRIL 2022
Awarded 5-star builder for the first time in our history
Persimmon plc ("Persimmon" or "the Group") is today providing an
update on trading for the period from 1 January 2022 to date, ahead
of its Annual General Meeting ("AGM") which is being held at 12.00
noon today.
Dean Finch, Group Chief Executive, said:
"Persimmon continues to perform well. We are currently trading
in line with expectations, demand remains strong, our private
average sales rates are c. 2% higher year on year and we have a
robust forward order book of c. GBP2.8bn.
"As expected, reflecting the profile of outlet openings, we
anticipate that completions this year will be weighted towards the
second half, with first half completions being lower than those
delivered in the first half of 2021. We continue to expect to
deliver volume growth for the full year 2022 of around 4-7% of 2021
levels, with resilient industry-leading margins.
"We were delighted to be awarded a five-star rating in the
annual HBF survey for the first time in our history and are
determined to continue to build on this excellent progress,
delivering high quality homes consistently to our customers.
"Earlier this month we signed the Government's pledge on
cladding removal and fire safety remediation, the principles of
which are consistent with the commitment we announced over a year
ago. As such, we continue to believe the GBP75m provision we have
already set aside remains appropriate.
"The UK housing market remains supportive and Persimmon is
well-placed for the future, with a strong and experienced senior
management team, positive momentum in outlet openings, improving
build quality and customer service and growing land holdings with
industry-leading embedded margins. While we remain mindful of
current uncertainties, particularly regarding consumer confidence,
rising interest rates and the impact of the tragic conflict in
Ukraine, the Board is confident of the Group's future disciplined
growth and success."
Trading
Persimmon's market positioning, delivering a range of high
quality homes that are attractively priced(1) in areas where people
wish to live and work, has continued to generate strong demand in a
supportive UK housing market. The Group, which had a relatively low
number of outlets coming into the year (c. 290 active outlets), has
had an encouraging start to 2022 with trading in line with
expectations and private average weekly sales rates running c. 2%
higher year on year. Demand for new homes continues to outstrip
supply with good levels of customer enquiries and cancellation
rates remaining at low levels.
The Group's current forward sales position, including year to
date legal completions, reflects this lower outlet position, at c.
GBP2.8bn (2021: c. GBP3.0bn). The average selling price for homes
sold to private owner occupiers in the forward order book is c.
GBP266,000 (2021: c. GBP252,000).
We are seeing good momentum in growing our outlet position and
are successfully bringing through sites into construction. The
Group is currently on track to open c. 75 new outlets during the
first half of 2022, subject to achieving timely planning consents.
We had opened over half of these outlets by the end of March 2022,
resulting in around 300 active outlets across the UK, providing a
strong platform for growth. Advancing our build programmes, in
order to meet demand and provide more choice for our customers,
whilst maintaining high levels of build quality, remains a key
focus for the business and we are pleased with the build rates we
are achieving.
We are continuing to invest in high quality land opportunities
at industry-leading embedded margins to provide a strong platform
for the Group's future growth. Approximately 6,600 plots have been
brought into the business in 22 locations across the UK during the
period, with almost half of last year's delivered plots being
replaced in the first three months of this year.
Our vertical integration, through our Space4 timber frame
facility, and our Brickworks and Tileworks manufacturing
facilities, continues to provide efficiencies in our build
programme and enhanced security of supply. They also provide some
mitigation to the cost pressures being experienced across the
sector. There has been an easing of some of the supply chain issues
experienced during 2021, however we are mindful that the situation
remains uncertain, with some isolated instances of product
shortages occurring which the business is currently managing. We
expect our industry-leading margins to remain resilient, with good
levels of price growth currently mitigating the impact of build
cost inflation.
Persimmon has a strong balance sheet and high levels of
liquidity. After returning GBP399m to shareholders on 1 April 2022
and investing GBP314m in high quality land opportunities at
industry-leading embedded margins, the Group held GBP446m of cash
at 22 April 2022 with deferred land commitments of approximately
GBP160m to the end of the current year. In addition, the Group has
an undrawn GBP300m Revolving Credit Facility, which has a four year
term to 31 March 2026.
Building excellence: build right, first time, every time
The Group's unrelenting focus on 'build right, first time, every
time', delivered through the implementation of the Persimmon Way,
our construction excellence programme, continues to drive quality
and customer service improvements across the business. We were
delighted to be awarded a five-star rating in the annual HBF survey
for the first time in Persimmon's history. We have continued to
track ahead of the five-star threshold for this survey year and
have made further advances with a current customer satisfaction
score(2) of 92.3% (92.0% for the survey year to 30 September
2021).
Our customers consider broadband connectivity from moving in day
to be an essential utility and we continue to support them through
the provision of FibreNest, the Group's ultrafast full fibre
broadband service. FibreNest, currently has c. 22,000 customers
across more than 300 of our developments (2021: c. 14,000
customers) and enjoys strong online service ratings compared to
other major operators.
Sustainable communities
We recognise our role as a responsible builder and remain
focused on creating and supporting sustainable communities. Since
announcing net zero carbon targets for our homes in use and our
operations last year, we have undertaken several initiatives aimed
at reducing our greenhouse gas emissions. Our homes are up to 30%
more energy efficient than existing housing stock making them more
economical for our customers to run. We have also already taken
action to reduce our own emissions, switching all our offices,
manufacturing facilities and on-site electrical use to 100%
renewable energy last year. In addition, electric vehicles have
been introduced into our fleet and we have recently commenced a
trial of alternative fuel on a number of our sites as part of our
efforts to drive down our operational emissions.
On 5 April 2022, we signed the Department for Levelling Up,
Housing and Communities' Developer Pledge on cladding removal and
fire safety remediation. The pledge was consistent with the
industry-leading commitment we made over a year ago, that
leaseholders in any multi-storey building Persimmon constructed
would not have to pay to remove any cladding or correct fire
related safety issues.
We have already pledged that we would not claim any money from
the Government's Building Safety Fund to complete works on these
buildings and will reimburse any funding already claimed by the
Management Companies involved. Our Special Projects team,
established specifically to manage relevant remediation works,
continues to engage proactively with the Management Companies, or
their agents, of the 33 developments we have identified as
potentially requiring remediation, to progress works as quickly as
reasonably possible. The GBP75m provision set aside (and announced
alongside our February 2021 commitment) reflects the number of
developments we have constructed which potentially require
remediation, together with an assessment of the scope of works
needed, and is subject to ongoing review as remediation works
evolve.
On 13 April 2022, the Government announced that it intends to
extend the Building Safety Levy ("the Levy") to all new residential
developments in England to fund fire safety remediation work on
'orphaned' buildings between 11 and 18 metres. While many of the
specific details remain subject to consultation, the Government has
indicated that it expects the Levy to raise up to GBP3bn over ten
years. Alongside the rest of the industry we will consult with
Government over the design, implementation and scale of the Levy
with the aim of ensuring that it fairly balances the funding needed
with contributions already made by parts of the industry.
Capital Return Programme
On 2 March 2022, the Board re-iterated its intention to return
235p per share in 2022. The first payment of the regular annual
distribution of 125p per share was made on 1 April 2022 (rather
than July 2022 as originally intended). The Board remains committed
to its well-established strategy of returning capital that is
surplus to the needs of the business to its shareholders. Given the
successful trading result of the Group in 2021 and its strong
financial position, the Board is pleased to confirm that it will
return 110p per share surplus capital on 8 July 2022, to
shareholders on the register on 17 June 2022. There will be no
further dividend payments in relation to the year ended 31 December
2021.
Outlook
Persimmon remains well-positioned in its markets. By offering
high quality homes at attractive prices(1) we are widening the
opportunity of home ownership to customers who otherwise may not be
able to afford it. The Group's forward sales position is robust and
as announced in March 2022, we expect to deliver volume growth of
4-7% for the full year 2022 from 2021 levels, whilst maintaining
the Group's industry-leading margins. Reflecting the outlet growth
profile of the business and resulting build progress, we anticipate
that our first half completions will be lower than those delivered
in the first half of 2021 but given the encouraging start to the
year, we expect our first half result to fall only modestly short
of that delivered to June 2021. We anticipate a greater proportion
of completions in the second half of 2022 as our outlet numbers
increase.
The UK housing market remains supportive and the longer-term
fundamentals are strong. Demand for new build homes continues to
outstrip supply and mortgage availability remains positive. We
remain mindful, however, of the shorter-term uncertainties,
particularly regarding consumer confidence, cost inflation, rising
interest rates, the cessation of Help to Buy and the impact of the
tragic conflict in Ukraine. Obtaining timely planning consents
remains a challenge, with for example, the recent widening of the
geographical areas impacted by elevated nutrient levels resulting
in increased complexity and delay. Persimmon's market positioning,
high quality land holdings, robust balance sheet and liquidity,
together with its vertical integration and experienced and agile
management team, provide a strong platform to navigate these
uncertainties and the Board is confident of the Group's future
disciplined growth and success.
Next Update
The Group will provide a further update in its next Trading
Update on 7 July 2022.
1 The Group's private average selling price of GBP259,231 for
the year to 31 December 2021 was over 20% lower than the UK
national average. The n ational average selling price for newly
built homes was sourced from the UK House Price Index as calculated
by the Office for National Statistics from data provided by HM Land
registry.
2 The Group participates in a National New Homes Survey, run by
the Home Builders Federation. The Survey year covers the period
from 1 October to 30 September. The rating system is based on the
number of customers who would recommend their builder to a
friend.
For further information, please contact:
Dean Finch, Group Chief Executive Kevin Smith
Mike Smith, Group Financial Controller Jos Bieneman
Julia Nichols, Group Strategy Ellen Wilton
& Regulatory Director
Persimmon Plc Citigate Dewe Rogerson
Tel: +44 (0) 1904 642199 Tel: +44 (0) 20 7638 9571
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END
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