Persimmon earnings preview: sales rates set to fall

Housebuilder Persimmon will report earnings next Tuesday and is expected to confirm a sharp drop in sale rates during 2023.

This will not be ‘new news’ for investors expecting a soggy set of results from the housebuilder who has been dogged by higher mortgage rates.

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“Persimmon’s already told investors that its full-year sales rates fell around 16% in 2023, as high interest rates and the removal of the Help-to-Buy scheme have weighed on affordability. As a result, total completions of new homes were reduced by around a third, to 9,922,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“These lower volumes, coupled with build-cost inflation, mean operating profit margins are set to roughly halve, to around 14%, when Persimmon reports full-year numbers on Tuesday.

“There was a “strong improvement” in fourth-quarter sales rates and investors are keen to see if this uplift has carried over to the new year. Markets expect operating profits to grow at double-digit rates to around £398mn in 2024. And with early signs that challenges for buyers are easing, there will be a focus on where Persimmon lays the marker for its 2024 guidance.”

A poor 2023 is already factored into the Persimmon share price and investors will pour over the release for any signs of improvements in the early months of 2024.

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Guidance for 2024 will likely be the most important element of Persimmon’s upcoming full-year results. Any upside revisions to completion expectations will be very well received.

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