TIDMPSN
RNS Number : 4635S
Persimmon PLC
09 July 2020
TRADING UPDATE
THURSDAY 9 JULY 2020
This announcement contains inside information.
Persimmon plc ("the Group") announces the following trading
update ahead of its Half Year Results to 30 June 2020, which will
be released on Tuesday 18 August 2020. This statement covers the
period from 1 January 2020 to 30 June 2020.
Highlights
Dave Jenkinson, Group Chief Executive, said:
"Throughout the period, we continued to be guided by our clear
purpose of delivering long term sustainable returns in the best
interests of all our stakeholders, while managing the risks
inherent to the housing market cycle. The benefits of this
consistent approach can be seen in the strength of Persimmon's
performance in a first half dominated by the challenges of
Covid-19.
"The safety of our colleagues, customers and suppliers has been
paramount. When lock down restrictions required the suspension of
site-based activity, Persimmon demonstrated its responsiveness with
colleagues working from home continuing to progress site
preparation work and our sales teams continuing to take
reservations online. This dynamic response was made possible by the
retention of all of our staff on full pay, without recourse to
Government assistance, and provision of necessary support to our
suppliers and subcontractors, to ensure operational continuity and
enable a safe and structured re-start to site operations. As a
result, our build programmes had returned to normal levels by
period end, and we have seen encouraging sales levels throughout
the period, in particular, over the last six weeks when net
reservations have been c. 30% ahead year on year.
"We enter the second half in a strong position, with work in
progress well advanced, forward sales c. 15% ahead year on year,
and cash holdings of c. GBP830m.
"Our financial strength and the agility of the business in
responding to Covid-19 has ensured Persimmon is in robust health,
and fully able to play its part in delivering the new homes the
country needs to support the UK's recovery, in a range of future
economic scenarios."
-- Covid-19 update
- The safety, health and wellbeing of our customers, our colleagues
and the public remain our top priority and Persimmon continues
to follow all public health guidance
- The Group has not made use of the Government's Coronavirus Job
Retention Scheme to furlough staff and has no plans to access
any UK Government's Covid-19 funding
- Having developed and tested new site protocols incorporating
the latest Government and Construction Leadership Council guidance,
the Group began a phased restart to work on site on 27 April
2020, with site-based sales offices re-opening on 15 May 2020
-- Trading highlights
- Total revenues(1) of GBP1.19bn (2019: GBP1.75bn)
- New home legal completions of 4,900 (2019: 7,584)
- Average selling price of c. GBP225,050 (2019: GBP216,942)
- Use of online resources ensured sales continued through the
lock down period, with c. 1,600 gross reservations secured in
the 9 weeks ended 17 May 2020
- Strong performance in the six week period since sales offices
re-opened in mid-May - with average weekly net private sales
reservations of 278 new homes, c. 30% higher than the same period
last year
- Encouraging forward order book with forward sales of new homes
at 30 June 2020 of GBP1.86bn (2019: GBP1.62bn), c. 15% higher
than last year
- Cancellation levels remain in line with historic trends
-- Customers remain at the centre of our business
- Customer care improvement plan now fully embedded in the business
and continuing to deliver significant progress
- Persimmon's HBF survey rating(2) has been trending above the
five star threshold since the start of 2020
- Communications with customers strengthened through the use of
enhanced digital technology and more frequent contact
- Our customer care teams remained in close contact with our customers
throughout the shutdown and, in England and Wales, scheduled
work re-commenced on 15 June 2020
- Our industry leading Homebuyer Retention Scheme has been well
received with over 40% of new private customers taking advantage
of the Scheme
- 'The Persimmon Way', the consolidation of the Group's approach
to new home construction, is progressing well and will be fully
operational by the end of the year
-- Continuing to support our communities
- Committed to providing 'homes for all' with a private average
selling price of c. GBP246,200, (2019: GBP242,912), c. 17% below
the UK national average(3)
- c. 50% of our legal completions in the six months to 30 June
2020 were to first time buyers
- Invested over GBP675m in local communities over the last eighteen
months, including the delivery of 4,263 new homes for lower
income families to our housing association partners
- Our Community Champions campaign donated over GBP370,000 in
the first half and, from 1 April 2020, began to target its support
to charities that assist the over-70s, a group who have been
particularly affected by the pandemic
- Our successful Building Futures campaign, joining forces with
Team GB, is in its second year and will donate c. GBP1m in 2020
to local community projects which benefit young people across
the UK
- Persimmon is a signatory to the Covid-19 Business Pledge and
is industry lead to the Social Mobility Pledge
-- Land
- Total land holdings at 30 June 2020 of c. 89,200 plots (December
2019: 93,246)
- Over 850 plots added in the period (2019: 3,582), with total
cash spend of c. GBP165m (2019: GBP239m) including land creditor
payments of c. GBP105m (2019: GBP127m)
- Deferred land commitments of c. GBP120m to be paid by 31 December
2020 (2019: GBP115m paid); total land creditors outstanding
at 31 December 2020 estimated at GBP250m (December 2019: GBP435m)
with the majority being settled over the next 3 years supporting
the Group's strong liquidity
-- Careful management of housing cycle risk is enabling Persimmon to
respond to the crisis from a position of strength
- A strong sustainable business model that: places customers at
the centre of our business, maintains high quality land holdings,
judges capital deployment at the right time in the cycle and
minimises financial risk
- Robust liquidity with cash reserves of c. GBP830m (2019: GBP833m)
- Land replacement over the last two years running at c. 55% of
consumption levels
Covid-19 update
The welfare of our customers and workforce is paramount and in
response to the pandemic, the Group has introduced Covid-19 secure
operating procedures which are fully aligned with Government
guidance.
On 25 March 2020, the Group announced a controlled and orderly
shutdown of its sites, sales offices, and off-site manufacturing
facilities.
The Group's strong financial position enabled us to: maintain
our workforce on full pay, including those colleagues that were
stood down, without recourse to Government funding; offer necessary
support to our suppliers and subcontractors; and to maintain our
community and charity programmes, throughout this time. The Group's
operating margin for the first six months of the year will reflect
this ongoing investment in the business and a necessarily reduced
level of first half completions.
While lock down restrictions required the suspension of
site-based activity, the business responded proactively to the
challenge, transitioning smoothly to remote working and preserving
operational continuity throughout. Momentum on key activities was
maintained, with colleagues working from home progressing planning
and construction management work, enabling a safe and structured
re-start to site operations. Our sales teams also remained fully
operational throughout the shutdown, using online resources,
including virtual viewings, and our digital sales reservation
platform.
During the shutdown period, Covid-19 safe operating procedures,
which are fully compliant with all relevant Government and
construction industry guidance, were developed for each of our
sites, sales offices, regional offices and off-site manufacturing
facilities. Appropriate guidance and training was provided to all
personnel as part of the re-start process. Once all Covid-19 safety
protocols were in place, our sites in England and Wales commenced a
phased re-opening on 27 April 2020 for construction operations and
on 15 May 2020 in England, 22 June 2020 in Wales and 29 June 2020
in Scotland for site-based sales activity.
These strong protocols are embedded within all Group operations.
All our site construction and sales team colleagues must confirm
their adherence to the relevant Covid-19 safe operating procedures
before they can be provided with a 'Covid-19 Passport to Work'
which allows them access to site. Each of our teams of Independent
Quality Inspectors, Group Health, Safety and Environment
Inspectors, and senior site management is continuing to actively
monitor and review the implementation of these procedures across
the Group in a disciplined and structured approach.
First half trading
Sales
The Group entered 2020 with a robust forward order book and made
a good start to the year, against a backdrop of strong customer
demand. In the first 11 weeks of the year the average private sales
rate per site was c. 10% ahead year on year.
As expected, from week 12, the impact of the Covid-19 pandemic,
and the Government's social distancing measures, resulted in delays
to the Group's build programmes and legal completions. All our
sales teams continued to work remotely using online resources
throughout the shutdown period, enabling sales to continue.
Customer enquiries remained at healthy levels throughout the
lockdown period resulting in the Group securing a weekly average of
c.177 gross private sales reservations from week 12 through to week
20. In addition, where appropriate, we continued to complete and
deliver homes for certain customers to avoid leaving them in a
vulnerable position.
Customer demand in the six weeks since the re-opening of our
sales offices in England has been positive, with weekly average net
private sales reservations of 278 new homes being c. 30% higher
than the same period last year. As anticipated, the Group is
benefitting from its decision to increase its investment in work in
progress in expectation of increased demand ahead of the end of the
current Help to Buy scheme.
We are pleased that on re-opening our sites in England and Wales
our construction teams are now achieving normal levels of
production, assisted by improved availability of sub-contract
labour, with all teams adhering to the Group's Covid-19 safe
operating procedures. The Group's work in progress position
represents c. 70% of the Group's forward sales at 30 June 2020,
with c. 14% more equivalent units of build carried forward at 30
June over last year.
Persimmon's total revenues(1) for the first six months of 2020
were GBP1.19bn (2019: GBP1.75bn). Housing revenues for the first
six months of GBP1.10bn were 33% lower than the prior year (2019:
GBP1.65bn), with new housing legal completion volumes of 4,900
(2019: 7,584) at an average selling price of c. GBP225,050 (2019:
GBP216,942) reflecting resilient selling prices throughout the
period.
Cash and liquidity
The Group's long term strategy, which focuses on the risks
associated with the housing cycle and on minimising financial risk
and maintaining flexibility, together with management's
preparedness, agility and responsiveness through this period of
extreme challenge, has placed the business in a strong position to
best serve the long term interests of all stakeholders. At 30 June
the Group held c. GBP830m of cash (2019: GBP833m) and had deferred
land commitments of c. GBP120m to be paid by 31 December 2020
(2019: GBP115m paid in the six months to 31 December 2019). Of the
Group's current land creditors, c. GBP250m is estimated to remain
at 31 December 2020 (December 2019: GBP435m) supporting the Group's
strong liquidity. In addition, the Group has an undrawn Revolving
Credit Facility of GBP300m, which has a five-year term out to 31
March 2025. As a result Persimmon is well placed to address the
risks associated with a range of possible future economic
scenarios.
In current circumstances the Group expects to continue to take a
highly selective approach to land replacement, with only those
opportunities that can meet strict criteria being considered.
Operational review
Our ongoing customer care improvement plan
The Group continues to focus on the implementation of its build
quality and customer service initiatives. Development of the
Persimmon Way has continued to progress well. This Group wide
consolidated approach to build programmes and inspections, and the
supporting digital technology, is being piloted across five
operating businesses and will be rolled out across the Group on
completion of the pilot study. We have developed a number of
training modules for our site and inspection teams and they are
being delivered to all relevant staff. The Persimmon Way will be
fully operational by the end of this year.
The planned enhancement of our approach to customer
communications has continued and our comprehensive customer portal,
which will support our customers from the point of reserving their
new home, will be implemented in the second half of 2020.
Over 40% of our private new home legal completions from 1
January 2020 have utilised our industry leading Homebuyer Retention
Scheme, which seeks to empower our customers and drive behavioural
change throughout the business. Our investment in the Scheme, and
in customer care resource and training, had led to a c. 20%
reduction in the time taken to resolve snagging items in the period
prior to the onset of the Covid-19 outbreak. Our Covid-19 safe
operating procedures included protocols for our customer care teams
to resume non-emergency scheduled works which recommenced from 15
June 2020 in England and Wales.
The Group's customer care improvement plan is now fully embedded
in the business. The significant progress being achieved is
illustrated by Persimmon's most recent HBF survey rating (2) ,
which has been trending above the five star threshold since the
start of 2020.
We welcome the planned introduction of the New Homes Ombudsman
which will further enhance consumer rights in our industry.
Providing 'homes for all'
To help meet local communities' housing needs, Persimmon
delivers good quality homes at affordable prices in areas where
people wish to live and work across the UK.
Approximately 50% of our private new homes were delivered to
first time buyers in the first half of the year, a similar
proportion to the prior year. Our commitment to delivering
affordable homes is further demonstrated by the Group's average
private selling price which is c. 17% lower than the national
average for new-build homes sold to owner occupiers (3) .
In addition, in the first half of the year the Group delivered
871 new homes to its housing association partners for provision of
new housing to lower income families supporting the creation of
inclusive communities across the UK. The Group is a leading builder
of social housing in the UK delivering GBP1.5bn of affordable
housing to local communities over the last five years.
Our national site network
The Group has a strong national site network of c. 335 sales
outlets. Whilst all non essential construction works and site-based
sales activity ceased during the lockdown period, in line with our
business continuity plans, the Persimmon sales team remained fully
open for business, allowing customers to reserve homes remotely. We
welcome the recent Government guidance on opening up the planning
system, including the use of social media to conduct planning
consultation processes. We commenced construction on 57 sites
during the first half. Working with local planning authorities and
local communities we plan to commence construction on a similar
number of sites during the second half and we are confident that
the hard work done during lockdown will support a healthy outlet
network for the balance of the year.
Our land holdings
In recognition of the risks associated with the cycle, during
the last couple of years, prior to the onset of the Covid-19
outbreak, the Group's investment in new land had become
increasingly selective. Reflecting this cautious approach to land
replacement, the Group's total land spend in the period, including
c. GBP105m of land creditors, was c. GBP165m (2019: GBP239m).The
Group added over 850 plots to its land holdings in the first half
of the year. The Group's high quality land holdings and network of
31 housebuilding businesses across the UK provide a strong platform
for its future growth.
Off-site manufacturing
Our off-site manufacturing capabilities for timber frames,
room-in-the-roof systems, bricks and roof tiles have ensured
strength and security of supply of key materials on the reopening
of our construction sites and have eased the burden on our supply
chain.
Outlook
We are encouraged by the level of customer reservations in the
period since our sales offices reopened in mid-May with customer
website enquiries and sales office appointments continuing at
healthy levels. Selling prices have remained firm. As at 30 June
2020, the value of the Group's forward sales of new homes was c.
15% ahead of the prior year at GBP1.86bn (2019: GBP1.62bn). The
average selling price of the c. 5,150 forward sold private new
homes was c. GBP242,400 (2019: c. GBP238,350). c. 4,950 homes were
forward sold to the Group's housing association partners with an
average selling price of c. GBP123,280 (2019: c. GBP120,900).
As previously announced, the proposed 125p per share interim
dividend payment of surplus capital due to be paid on 2 April 2020
was cancelled and the proposed annual final dividend of 110p per
share due to be paid on 6 July 2020 was postponed. The payment of a
final dividend for the year ended 31 December 2019 will be
re-evaluated in the second half of this year.
The longer-term impact of the Covid-19 pandemic on consumer
confidence and the UK economy has yet to be seen. However, despite
this uncertainty, we remain confident of the Group's future
success. Our long-term strategy, which recognises the risks
associated with the cyclical nature of the housing market by
maintaining operational flexibility, minimising financial risk and
deploying capital at the right time in the cycle, has ensured that
the Group is well prepared with the necessary strength and
resilience to address a range of future economic scenarios.
The strength of Persimmon's position and its performance through
the first half is testament to the dedication and skill of the
Persimmon team and the Board would like to thank them all for their
continued hard work and commitment.
There will be a call for analysts at 09.00 BST today. Please use
the dial-in details below:
Telephone number: +44 (0)33 3300 0804
PIN: 81364047#
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 Tel: +44 (0) 7771 784
446
Mike Killoran, Group Finance Director Kevin Smith Tel: +44 (0) 7710 815
924
Enquiries via Citigate Dewe Rogerson on Ellen Wilton Tel: +44 (0) 7921 352
the day 851
Tel: +44 (0) 1904 642 199 thereafter
The person responsible for the release of this announcement on
behalf of the Group is Tracy Davison, Company Secretary.
Footnote 1
Total Revenues - The Group's total revenues include the fair
value of consideration received or receivable on the sale of part
exchange properties and income from the provision of broadband
internet services. Housing revenues are the revenues generated on
the sale of newly built residential properties only.
Footnote 2
The Group participates in a National New Homes Survey, run by
the Home Builders Federation, the rating system is based on the
number of customers who would recommend their builder to a
friend.
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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