TIDMPSN
RNS Number : 4297E
Persimmon PLC
04 July 2019
TRADING UPDATE
THURSDAY 4 JULY 2019
Persimmon plc ("the Group") announces the following trading
update ahead of its Half Year Results to 30 June 2019, which will
be released on Tuesday, 20 August 2019. This statement covers the
period from 1 January 2019 to 30 June 2019.
Highlights
-- Good early progress on improving customer satisfaction
o Decision to delay sales release to later stage of construction in higher demand locations
beginning to deliver anticipated benefits
o Build rate remains robust with new home inventories increased by 19% year on year at period
end
o Customer satisfaction rating improved in the first seven months of the new HBF Survey period
o New customer retention scheme being introduced in July, with cover extended to include any
faults identified during the first week of occupation
-- Strong financial performance maintained
o Total revenues(1) of GBP1.754 billion (2018: GBP1.836 billion)
o Legal completions of 7,584 (2018: 8,072), reflecting the outcome of our customer service initiatives
and later sales releases which reduced average active sites by 8% in H1
o Average selling price of c. GBP216,950 (2018: GBP215,813)
o Anticipate underlying housing operating margin(2) of 30.8% for full year 2018 to be a reasonable
guide for H1 2019
-- More first-time buyers helped on to the housing ladder than any other UK housebuilder
o 3,082 new home sales in H1 were to first time buyers - 52% of all private sales (full year
2018 - over 6,850 new home sales, 51% of all private sales)
Dave Jenkinson, Group Chief Executive, said: "I am pleased that
there are some clear early signs that our focus on increasing the
quality and service delivered to our customers is beginning to bear
fruit, with some encouraging improvements being made right across
the business. Although we are still in the early days of our
improvement plans our customer satisfaction rating, as measured by
the HBF, has increased during the period.
"Our progress on customer service shows that Persimmon is
listening carefully to all stakeholders and making the changes
needed to position the business for the future, while maintaining a
robust trading performance. We enter the second half with our build
programme well progressed, healthy rates of sale on site and an
encouraging forward sales position. I look forward to giving
further details of our progress at the interim results in
August."
First half trading
Persimmon's total revenues(1) for the first six months of 2019
were GBP1.754bn (2018: GBP1.836bn). Housing revenues for the first
six months of GBP1.645bn were 5.6% lower than the prior year (2018:
GBP1.742bn), with new housing legal completion volumes of 7,584 new
homes (2018: 8,072) at an average selling price of c. GBP216,950
(2018: GBP215,813).
The value of the Group's total forward sales of new homes at 30
June 2019 remains healthy at GBP1.622bn (2018: GBP1.680bn). The
average selling price of the c.4,400 new homes sold forward into
the private sales market was c. GBP238,350, slightly ahead of the
prior year (2018: GBP236,700). The Group's new homes sold forward
to its housing association partners at 30 June 2019 had an average
selling price of c. GBP120,900.
As previously stated, we expect that the Group's underlying
housing operating margin(2) for the 2018 full year of 30.8% will be
a reasonable guide for the first half of 2019.
The Group's top priority is to deliver continued improvement in
its service to customers. Persimmon is investing in a number of
initiatives to deliver these improvements including giving
customers greater accuracy of anticipated moving-in dates. To help
achieve this we are adopting a more targeted approach to the timing
of new home sales releases on certain sites and plots where demand
is particularly strong. As a result, the average number of active
sales outlets through the first half was c. 345 sites, which was c.
8% lower than last year. As expected, these measures reduced the
number of sales reservations that earlier sales release would
attract. However, despite this, our weekly private sales rate per
active site for the first half continued to be strong at c. 0.74
(2018: c. 0.78).
We anticipate that the Group's full-year volumes will reflect
the continued focus on progressing our customer service initiatives
which are important in positioning the business for the future.
These initiatives have included a greater focus on the handover of
properties to customers which has impacted the volume of new homes
completed in the period. A key part of this approach is advancing
our build programmes to ensure we have greater availability of
homes for sale which are at a more advanced stage of construction.
At 30 June we had the equivalent of c. 6,150 new homes of
construction inventory, c. 19% more than at the same time last
year. As we have seen in the first half, whilst our decision to
hold back sites and plots in certain locations for later sales
release may lead to a reduction in the volume of new homes handed
over to customers in the period, the Group is in a stronger build
position moving into the second half of the year. The impact of
these actions in this financial year will ultimately depend on the
strength of market conditions in these locations during the second
half as sites and plots are released for sale at the appropriate
stage of construction. As these customer service initiatives are
being introduced there are some encouraging early signs of our
customer service initiatives supporting improvement in the Group's
customer satisfaction rating as measured by the Home Builders
Federation (HBF).
As a national home builder Persimmon delivers good-quality,
newly built homes at affordable prices in locations across the UK
where people want to live and work. Reflecting local communities'
housing needs, we provide a wide range and choice of new homes on
all our developments, with a particular emphasis on first-time
buyers. With 51% of Persimmon's sales into the owner occupier
market in 2018 being made to first time buyers, Persimmon is
pleased to help more people onto the housing ladder than any other
UK housebuilder. Indeed, we have sold 52% of our new homes to first
time buyers in the first half of the current year. Our support for
the Government's aim of increasing the supply of good quality homes
for everyone is further demonstrated by the Group's average selling
price which is c. 17% lower than the national average for new-build
homes sold to owner occupiers(3) . Consumer confidence remains
resilient in our markets and the Group's developments have
continued to attract good customer interest with total visitor
levels running in line with the prior year.
We are pleased to confirm that we will be the first major UK
housebuilder to offer a retention to customers in July. Since the
initial announcement in March 2019 we have continued to listen to
feedback from our stakeholders and, as a result, have further
improved its design. The retention has been extended to cover
faults identified in the first week after moving in, not just by
the moving in day itself. At present the availability of this added
customer service benefit may be determined by which mortgage lender
the customer chooses. We remain hopeful that in due course all
lenders will support this important initiative. We will provide a
further update at our half-year results in August.
The Group currently has a strong sales network of c. 345
outlets. Working in collaboration with local planning authorities
and communities we plan to commence construction of a further c. 85
new developments during the second half of the year. This reflects
the Group's long-term commitment to meeting local community housing
needs and investment in the wider benefits and infrastructure that
help local communities thrive. Since 2012, the Group has opened c.
1,450 new developments and invested c. GBP2.5bn in local
communities including the delivery of over 17,900 new homes for
lower income families to our housing association partners.
During the first half of the year, the Group has continued to
pursue selective investment in new land opportunities to maintain
its high-quality land bank whilst being mindful of the increased
uncertainties regarding the future performance of the UK economy
and the cyclicality of the markets that we operate in. We have
brought 22 new land parcels for the delivery of c. 3,600 new homes
into the business. Our total land spend in the period was c.
GBP239m (2018: GBP343m). We have successfully converted c. 1,950
plots from the Group's strategic land portfolio, which represents
c. 54% of the total plots brought into the business.
The Group's strategy includes the return of surplus capital to
its shareholders. For 2019, a payment of 125p per share or GBP398m
was paid to shareholders on 29 March with a further 110p per share,
or GBP350m, paid on 2 July in line with our current plan.
The Group entered the current year with strong cash reserves of
GBP1,048m (2018: GBP1,303m). The Group's free cash generation
through the first half of the year before paying down land
creditors and making the capital return remained healthy at c.
GBP244m (2018: GBP196m). Land creditors at 30 June are anticipated
to be c. GBP490m (2018: GBP611m). At 30 June the Group held c.
GBP833m of cash (2018: GBP1,155m) prior to payment of the scheduled
capital return of GBP350m on 2 July 2019.
The Independent Review of our quality and customer care
operations has commenced and we look forward to its recommendations
on the Group's approach and processes in the final quarter of this
year.
Persimmon has a great platform to continue to build the new
homes needed by local people in communities across the UK with its
healthy forward sales, strong financial position and high-quality
land holdings, which place the business in a robust position for
the future.
There will be a call for analysts at 0900 BST today. Please use
the dial-in details below:
Telephone number: +44 (0)333 300 0804
PIN: 76521190#
Password: Persimmon
An audiocast of the call will be available on
www.persimmonhomes.com/corporate from this afternoon.
For further information please contact:
Persimmon plc Citigate Dewe Rogerson
Dave Jenkinson, Group Chief Executive Simon Rigby
Mike Killoran, Group Finance Director Kevin Smith
Jos Bieneman
Tel: +44 (0) 20 7638 9571 on the day Tel: +44 (0) 20 7638 9571
Tel: +44 (0) 1904 642 199 thereafter
Footnote 1
Total Revenues - IFRS 15 Revenue from Contracts with Customers
became effective from 1 January 2018. In line with the explanation
provided at Note 1 to the 2018 Financial Statements, the Group's
total revenues include the fair value of consideration received or
receivable on the sale of part exchange properties (H1 2019:
GBP108.5m: H1 2018: GBP93.8m). Housing revenues are the revenues
generated on the sale of newly built residential properties and
exclude the fair value of this part exchange property
consideration.
Footnote 2
Underlying housing operating margin - presented before goodwill
impairment (FY 2018: GBP9.2m)
Footnote 3
National average selling price for new build homes sourced from
the UK House Price Index as calculated by the Office for National
Statistics from data provided by HM Land Registry.
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END
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