Persimmon expect profits to meet expectations, however revenues decline

Persimmon expect profits to meet expectations, however revenues decline

Persimmon (LON:PSN) have told shareholders that it expects a decline in full year revenue, however profit will meet expectations.

Shares in Persimmon trade at 2,823p (+0.97%). 15/1/20 10:47BST.

Across the annual period, the firm said that revenue is expected to total £3.65 billion, a 2.4% fall from £3.74 billion last year.

Notably, new housing revenue dropped 3.5% year-on-year to £3.42 billion with new legal completion volumes down 3.6% to 15,885 from 16,449.

The firm said that average selling prices remained consistent with 2018, in a year of political uncertainty which has hampered the property development market.

Average selling prices edged 0.1% higher to £215,700 from £215,563.

In Westbury Partnerships, which sells social housing to housing associations in the UK, the unit’s average selling price rose 1.3% year-on-year to £119,150 from £117,653.

Westbury Partnerships contributed 21% of group sales in 2019, Persimmon said, up from 19% in 2018.

The firm looked at the new year and told shareholders that it enters 2020 with froward sales totaling £1.36 billion, 2.9% down year-on-year from £1.40 billion.

Persimmon added that they have 365 developments in construction, which remains flat year on year and plans to open 80 new sites in the first half of 2020.

Dave Jenkinson, Group Chief Executive commented

“Persimmon continues to make good progress with the implementation of its customer care improvement plan. Central to this plan is putting customers before volume, with new home legal completions for 2019 being 4% lower than last year.

“Delivering the maximum benefit to our customers from our quality and service improvement initiatives will continue to be my top priority for 2020. I am pleased with the progress we have made in 2019 and there is more to do. Action taken to maintain our increased levels of work in progress investment, the increase in quality assurance and customer service resources, and our plans for the implementation of the recommendations of the recent Independent Review, will all add to our momentum.

“While our plans for delivering a sustained improvement in quality go far beyond a focus on the criteria of the HBF customer satisfaction survey, our current rating, which is trending strongly ahead of the Four Star threshold, is tangible evidence of the improvement we are making.  I am determined that we will make further headway this year, supported by the introduction of Persimmon’s customer retention scheme from July 2019, which was a first for the industry.

“I am encouraged by the enthusiasm and commitment with which the whole Persimmon team is making the step change necessary to deliver higher levels of quality and service to our customers.  When combined with Persimmon’s strong forward build and sales position, robust liquidity and industry-leading land holdings, I am confident of the Group’s future success.”

The firm also announced that Claire Thomas will step down as a Non-Executive Director to pursue other interests.  Thomas will leave Persimmon on 1st February 2020.

Thomas who joined the Persimmon board in August 2019, said: “I have valued being part of the Persimmon Board and the experience it presented but it has also made clear to me my preference for working in a large scale complex global business environment.  In my time on the board I have seen clear and determined efforts to transform the business and I wish Persimmon the best in their ongoing efforts.”

Roger Devlin, Chairman, said: “Claire has made a strong contribution to the board during her time and we are disappointed to see her leave.  We wish her every success for the future.”

Optimism somewhat pays off for Persimmon

At the start of November, the firm gave shareholders reassurance that it could perform in a market hit by Brexit complications.

Persimmon joined firms such as Asda, who are owned by Walmart (NYSE:WMT) and Morrisons (LON:MRW) in citing Brexit complications as a hinderance on business.

Persimmon reported that Summer trading had met expectations, and this was down to robust trading and consumer resilience.

In the second half of 2019, Persimmon commented on the ‘resilient’ trading patterns alluding to full sale allocations for the year.

Around £950 million of forward sales are secured beyond 2019, compared to £987 million this time a year ago. Despite the fall in forward sales, the housing market has been slow amid falling house price growth.

Sales volumes for the first half of 2019 dipped 6% year-on-year to 7,584 homes, but this was due to an approach of selling homes only when they are at an advanced stage of construction. Persimmon expects second half sales to be above the first half.

Taylor Wimpey – Persimmon rival

Yesterday, a rival in Taylor Wimpey (LON:TW) told the market that they expect their results to be in line with expectations.

The FTSE 100 trader said that the housing market remained stable in the last year, however there were challenges faced in London and the South East.

Taylor Wimpey noted that total house completions in 2019 has increased by 5% to 15,719 which included joint ventures.

“While 2020 will continue to be a year of change for the UK, we welcome the increased political stability following the general election,” the company said.

“We start the year with a strong order book and continue to target a smoother profile of completions throughout the year but expect 2020 to continue to be second half weighted,” the house builder said.

2019 ended with a record total order book valued at £2.17 million, which showed a ruse from the £1.78 figure a year ago.

The house builder said that it remains cash generative and intends to return £610 million to shareholders in a dividend form.

Operating profit for the period was down 9.4% to £311.9 million, however this was attributed to higher build costs and geographic mix.

The British property market and homebuilding market is still coping with tense Brexit relations, however shareholders of Persimmon will not be too worried as the firm has still managed to keep profits consistent despite falling revenues.