- Sales still well below prior-year levels
- Margins and earnings to fall sharply this year
- Shares fall almost 10% on selling pressure
Investors in housebuilder Persimmon (PSN) rushed for the exit after chief executive Dean Finch warned completions, margins and profits would be ‘down markedly’ this year due to the sharp slowdown in the new-build market.
The shares fell more than 9% to £13.19, making the stock the worst performer in the FTSE 100 and dragging down with it shares in rivals Barratt Developments (BDEV), Bellway (BWY), Taylor Wimpey (TW.) and Vistry (VTY).
Also not helping sentiment were weak housing figures from Nationwide which showed the biggest dip in prices since 2012.
MAJOR MARGIN DOWNGRADE
For 2022, Persimmon put in a respectable performance, with new home completions up slightly to 14,868 and average selling prices up just under 5% to £248,616 leading to a 6% increase in revenues to £3.82 billion.
However, the shock to the market from the mini-budget last year means the current forward sales book stood at just £1.5 billion at the end of December against £2.2 billion the previous year.
This reflects the ‘significant drop’ in private sales in the final quarter of 2022, which fell to 0.3 per sales outlet per week against 0.77 a year earlier.
While sales rates have improved to 0.56 in the first eight weeks of this year, they are still well below the same period in 2022 (0.96) implying full-year 2023 completions of between 8,000 and 9,000 homes.
Assuming build-cost inflation remains at its current rate of 8% and there is no increase in selling prices, the firm warned gross margins are likely to fall by around 5% from last year’s 30.9%.
Reduced volumes, together with greater sales incentives and marketing costs, could ‘further impact operating margins’ by around 8%.
SHAREHOLDER RETURNS TO SHRINK
During 2022 the firm paid out dividends of 125p per share at the start of April and 110p per share in July, which represented the capital return from 2021.
In November last year, the company announced a new capital allocation policy to take account of the sharp slowdown in the new-build market, higher taxes and the drag on earnings from building safety remediation costs.
As a result, the board has proposed a single dividend of 60p per share in respect of 2022 earnings, which will be paid in May, and for this year the aim is to at least maintain that 60p per share payout ‘with a view to growing this over time’.
