Persimmon revenues touch pre-pandemic levels

January 13, 2022 / Isla MacFarlane
Persimmon revenues touch pre-pandemic levels

Persimmon has almost rebuilt its revenues to pre-pandemic levels, according to a trading update.

Highlights

  • Persimmon has delivered total Group revenues of £3.61bn, (2020: £3.33bn) in the year.
  • New housing revenues of £3.45bn were c. 10% ahead of last year (2020: £3.13bn) and c. 1% ahead of 2019 (2019: £3.42bn).
  • As expected, new home legal completions of 14,551 were c. 7% ahead of the prior year (2020: 13,575) and included 12,018 new homes sold to private owner occupiers (2020: 11,363).
  • The Group’s average selling price increased by 2.8% over last year to c. £237,050, reflecting in part the greater proportion of new homes sold to housing association partners compared with last year.
  • At c. £259,200, the average selling price of our new homes sold to owner occupiers was c. 3% ahead of the prior year (2020: £250,897), the underlying improvement in selling prices being diluted to a degree by the year-on-year changes in the regional mix of sales achieved.
  • However, with the second half benefitting from the particular mix of legal completions achieved in the period, the Group’s underlying operating margin for the full year will be c. 28%1 (2020: 27.6%).
  • The Group delivered 2,533 new homes to its housing association partners representing 17.4% of  total homes delivered, an increase from 16.3% last year.

The Group reported good levels of demand throughout the second half of the year underpinning positive pricing conditions. The Group’s sales rates were c. 20% higher than those in the second half of 2019 (a more comparable period given the pandemic-related disruption to the industry in 2020) reflecting Persimmon’s positioning in a strong market. Cancellation rates have remained in line with historical low levels throughout the period.

The business has managed the ongoing challenges of the pandemic well, including disruption to the supply chain and customer support services which increased in the latter part of 2021 with the onset of the new Omicron variant. The corresponding updated Government guidance has led to a pick-up in sickness related absenteeism, with some customers also choosing to delay moving into their new home as they isolated in line with best advice.

Vertical integration through Brickworks, Tileworks and Space4 timber frame manufacturing facility has continued to assist in securing supply of key materials. As indicated, margins will remain resilient after recognising the expected increase in our build cost inflation of c. 5.0% in 2021.

Persimmon traded from c. 285 active outlets on average in the second half compared with c. 305 in 2020. The Group continues to bring new land through into construction although there have been delays to some outlet openings due to the slower planning system experienced across the industry. At the end of the year the Group had 290 developments under construction across the UK. The Group has a strong pipeline of sites progressing through the planning system.

The Group’s forward sales at 31 December 2021 were £1.62bn, c. 20% ahead of 2019 (2019: £1.36bn) (2019 being a more comparable year due to the pandemic-related disruption to 2020).

Persimmon reported a private average selling price of c. £259,200 for the year to 31 December 2021 (2020: £250,897), c. 18%3 below the UK national average with c.  50% of private home completions for the year having been to first time buyers.

Dean Finch, Group Chief Executive, said: “Persimmon’s performance has been excellent through the year, delivering high quality growth. I would like to thank my colleagues and our wider workforce for their hard work and commitment in achieving the Group’s strong performance. Whilst continuing to provide five star levels of customer satisfaction the business provided 14,551 new homes at an anticipated full year underlying operating margin of c. 28%1, maintaining our industry-leading performance.

“We have continued to secure high quality land opportunities, bringing over 20,500 new plots into the business in 2021 representing in excess of 140% of current consumption levels. This strong pipeline provides excellent momentum for the Group’s future growth. Our teams are working diligently to bring these sites into construction as soon as possible to enable us to deliver much needed homes across the UK.

“Whilst the industry continues to face the ongoing operational and economic challenges as a consequence of the pandemic, particularly as the Omicron outbreak unfolded in the last six weeks of the year, the Group continues to manage these ongoing challenges comprehensively. The long term fundamentals of the UK housing market remain strong and I am confident of Persimmon’s future success.

Outlook

“The longer term fundamentals of the housing market remain positive with resilient consumer confidence, demand continuing to outstrip supply across the UK and good levels of mortgage availability. Some nearer term uncertainties remain as the pandemic continues. Our vertical integration through our Brickworks, Tileworks and Space4 manufacturing facilities mitigate some supply chain disruption risk and the current positive pricing conditions are anticipated to accommodate potential cost inflation.

“Interest rates, whilst anticipated to rise over the short term, remain at historically low levels, with owning a home, rather than renting, continuing to be the most affordable option. The Group aims to continue to focus on helping as many families as possible to realise their life ambition of acquiring their own home by offering an affordable range and choice of high quality homes across all our new developments at compelling prices. The pandemic appears to have led many customers to re-assess the type of accommodation that they wish to enjoy. Persimmon is well placed to help communities fulfil these needs.

“We enter the new year with the value of the Group’s total forward sales at £1.62bn (2019: £1.36bn). The Group’s strong pipeline of outlets adds to the Group’s robust platform with c. 75 new outlets forecast to open in the first half of 2022, assuming the planning system proves supportive.

“The Group’s level of work in progress of c. 4,100 equivalent units of new home construction at the end of the year provides a robust opening position from which the Group will be able to realise its ambitions for 2022.

“We will give an update on our assessment of the housing market over the early weeks of 2022 when we announce our results for the year ended 31 December 2021 on Wednesday 2 March 2022.”

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