- Completions above forecast
- Profit seen top end of range
- Strong base to build on for 2025
With its shares trading at 12-month lows, there was little optimism surrounding the 2024 trading statement from housebuilder Persimmon (PSN) but the firm delivered a positive surprise with completions ahead of market expectations and a forecast of pre-tax profit towards the top end of estimates.
The stock responded positively tacking on 50p or 5% to £11.06, making it the biggest gainer in the FTSE 100 on a day when most stocks were trading lower.
SOLID FOUNDATIONS
For the year to December, the company delivered 10,664 homes, 7% above 2023’s level and a couple of percentage points above the consensus, driven by an 18% increase in private home completions and fewer partnership homes.
Private selling prices were higher than the previous year but thanks to a 6% increase in partnership prices the blended average was 5% above 2023, while net private sales per week, a figure closely watched by analysts, rose from 0.58 to 0.7, a 21% increase.
As a result, 2024 underlying pre-tax profit is now seen towards the upper end of market expectations, which lie between £350 million and £390 million, with operating margins similar to 2023.
In terms of outlook, the company’s forward sales position rose by 8% to £1.15 billion, thanks to a 31% increase in private forward sales and a 4% increase in average private selling prices, putting it on a firm footing for the current year.
ANALYST VIEWS
Yanmei Tang at Third Bridge commented: ‘Buyer sentiment in the housing market remains tricky to assess due to the seasonal slowdown, but while demand for high-priced homes is softening, lower-priced properties are holding up well.
‘Persimmon is better positioned than many competitors by focusing on mid-market to lower-priced homes, which could provide a buffer against broader market pressures.’
Tang also highlighted Persimmon’s strategy of ‘competing fiercely’ for land and the possibility of more agricultural sites coming onto the market due to changes in inheritance tax.
Oli Creasy at Quilter Cheviot said the trading update would be ‘reassuring’ for shareholders but seen in the wider context completions were still well below historical norms, and while profits are seen growing, margin guidance of mid-teens percent is still half the level of a few years ago, so the recovery ‘still has a long way to go’.
LEARN MORE ABOUT PERSIMMON
