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Persimmon – 2022 On Track, Volume & Prices To Fall In 2023

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Persimmon plc (LON:PSN) says it’s on track to deliver target completions of 14,500-15,000 homes this year, with build rates up 20%. The Group’s also been mitigating cost inflation of between 8% to 10% with higher selling prices.

However, the group cautions that cancellation rates have jumped to 28% in the last 6 weeks, from 21% in the 12 weeks prior.

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Average weekly sales per outlet were down 23% to 0.6 units between 1 July and 7 November. This has fallen to 0.48 in the last 6 weeks, which Persimmon puts down to recent political uncertainty and a deterioration in the economic outlook. Average selling prices are also down 2% in the last 6 weeks compared to the rest of the period.

Persimmon would not give specific guidance for 2023. But given the “recent and rapid change” in market conditions expects both completion levels and average selling prices to deteriorate. Forward orders for the year ahead are down 33% to £0.77bn.

Persimmon expects to end 2022 with cash down 10.5% to £700m, following £750m of capital returned to shareholders over the year.

The shares were down 7.8% following the announcement.

Persimmon's Earnings

Derren Nathan, Head of Equity Research at Hargreaves Lansdown:

“It feels like reality is starting to catch up with the housebuilders. Persimmon looks on track to make good on its promises for 2022, but this could still be at risk if cancellation rates continue to worsen.

Higher interest rates and economic uncertainty are weighing on both mortgage availability and customer behaviour, and Persimmons forward orders of £0.8bn are only two thirds of the levels seen this time last year. Its been riding the storm of late, managing to increase build rates before the market turned and pass on prices to its customers.

In 2023 prices are likely to come back, and if inflation keeps on going the way it is, that’s going to be a double hit to margins. Persimmon has more protection than some, with better margins than many of its peers and a strong value offering to its customers.

It also hasa large land bank, meaning that Persimmon has the flexibility to pull back on investment. Persimmon hasn’t given specific guidance on its dividends for this year, but reading between the lines of the new capital allocation policy, the double digit yield looks likely to moderate to a more realistic level.”