Persimmon talks of resilient performance amid ongoing economic uncertainty

Persimmon updated the market on its third quarter on Thursday, reporting that trading over the summer weeks was in line with its expectations, with the group seeing “the usual pick-up” in customer activity as it moved into the autumn season.

The FTSE 100 housebuilder said consumer confidence remained “resilient”, despite ongoing uncertainties around Brexit and broader challenges surrounding the UK economy.

It said the resilience of the housing market was still reflecting strong levels of employment in the UK and some real wage growth, along with low interest rates and a “competitive but disciplined” mortgage market.

The group said it was well positioned in its regional markets, where it remained focussed on delivering a “good range and choice” of new homes at lower price points, with Persimmon’s average selling price being around 17% lower than the national average for newly-built homes sold to owner occupiers.

Supporting sustainable communities and delivering housing to lower income families in those communities remained a “key component” of the group's development approach, the board said, as more than 2,100 new homes had been delivered to housing association partners in the financial year to date.

The firm said it was “encouraged” by the ongoing progress being made through the implementation of its customer care improvement plan, achieving the ‘four star’ status level in the most recent HBF quarterly customer satisfaction survey, and trending strongly ahead of that threshold in recent months.

While it now believed it had sufficient momentum to be confident of an overall rating of four stars for the 2018-2019 survey year as a whole, Persimmon said its recent actions along with additional initiatives that were currently being introduced should enable it to continue to deliver sustainable improvements in quality and customer service into the future.

As it had previously reported, to support its customer care improvement plans, the company had continued to restrict the release of new homes for sale in higher demand areas until construction reached the appropriate advanced stage, both on selected new sites and, in some cases, on existing sites.

As expected, that had reduced the number of sales reservations that earlier release would have delivered, and resulted in the company having 5% lower average active sales outlets year-on-year, at around 350 sites.

“Our substantial additional investment in work in progress, which amounted to £140m at June 2019, has been a fundamental driver of the improvements in quality and service, and will continue with further investment through to the year end,” the board said in its statement.

“Trading has continued to be resilient through the second half of the year with the group's average weekly private sales reservation rate per site of 0.67 being in line with last year.

“We are now fully sold up for the current year and have £950m of forward sales reserved beyond 2019,” it added, which was down from £987m at the same time last year.

Sales prices remained firm across regional markets, Persimmon claimed, with customers continuing to make “carefully considered” reservation commitments, particularly in relation to higher-value new homes.

Cancellation rates were running in line with last year, at historically lower levels.

In the first half of the year, the group's approach of releasing homes for sale only at a more advanced stage of construction resulted in total legally-completed sales volumes reducing by 6% year-on-year to 7,584 homes.

While the company said it was currently expecting its consistent application of that approach to result in a similar situation in the second half, it said it expected second half volumes would be greater than for the first half, reflecting the normal seasonality of the market.

In the second half of 2018, Persimmon launched a new business - ‘FibreNest’ - to provide ultrafast full fibre-to-the-home broadband services.

The group said it was continuing to invest in establishing its full fibre network, and currently had more than 3,350 customers signed up to the service across more than 100 developments, with plans for a continued rollout.

Looking ahead, Persimmon said it was mindful of the uncertainties facing the UK economy but remained “keen” to bring new developments through the planning system as promptly as possible.

That, it said, would help ensure Persimmon's home building activities continued to support around 50,000 construction jobs on its sites and in its supply chain.

The group said its investment in high quality land holdings over many years provided a “sustainable long-term platform” for each of its 31 regional house building businesses.

It added that it had continued to be selective in its land replacement activity, having secured more than 3,700 new plots of land, and spent more than £170m, including payment of deferred land creditors, during the period to date.

Of the replacement land secured so far this year, around 38% had been converted from the group's strategic land holdings.

“Persimmon's top priority is the delivery of higher levels of quality and customer service through the implementation of its detailed customer care improvement plan,” said group chief executive officer Dave Jenkinson.

“Central to this plan is putting customers before volume, with sales volumes in the first half of the year being 6% lower than last year, together with making significant additional investments in both our annual customer care resources, by £15m each year, and in the level of the group's work in progress, which amounted to £140m at 30 June.

“The group has continued to make good progress with these plans through the second half.”

Jenkinson noted that on 1 July, Persimmon became the first UK housebuilder to introduce a customer retention scheme, and said he was “pleased” that the company’s progress had resulted in it achieving the ‘four star’ status level in the latest quarterly HBF customer satisfaction survey results.

“I am determined to ensure that the group makes further headway by implementing our additional quality and customer care initiatives.

“I am confident that the continued successful implementation of our detailed customer care improvement plans together with our strengthened forward build position, healthy forward sales, robust balance sheet and industry-leading land holdings provide a sound platform for the successful future development of the group.”

Persimmon said it would give a further update on progress and trading, following the year-end, on 15 January.

As at 0802 GMT, shares in Persimmon were up 0.4% at 2,285p.