Shares of home builder Persimmon rose 3.8% on Thursday morning, following the announcement of their first-half financial results. Despite reporting a pretax profit of £151.0 million ($192 million) for the six months ending June 30, the company fell short of market forecasts due to a drop in house sales. This decline can be attributed to factors such as higher mortgage rates, the conclusion of the U.K. government's Help to Buy program, and ongoing market uncertainty.
Financial Performance
Persimmon's revenue for the first half of the year decreased to £1.19 billion from £1.69 billion during the same period last year. Analyst consensus estimates were slightly surpassed, with expectations at £1.07 billion. The number of houses sold by the company was also lower, with 4,249 homes sold at an average price of £256,445. This compares to 6,652 homes sold at an average price of £245,597 in the previous year.
Full-Year Outlook
Despite the challenges faced in the first half, Persimmon remains confident about meeting profit expectations for the full year. The company has tightened its sales guidance upward and now aims to complete a minimum of 9,000 home sales in 2023. This adjusted guidance surpasses the previously announced range of 8,000 to 9,000 completions. In comparison, Persimmon completed 14,868 home sales in 2022.
Investors responded positively to these announcements, with Persimmon's shares rising by 43.0 pence (3.8%) to reach 1,166.5 pence as of 0851 GMT.
Overall, while Persimmon experienced a decline in profits and sales during the first half, they remain optimistic about their performance going forward. The company is committed to delivering quality homes to customers and is determined to navigate the challenges posed by prevailing market conditions.
Persimmon's Order Book and Profit Expectations
Persimmon, a prominent house building company, has reported a current forward order book worth GBP1.6 billion. Despite being lower than its previous standing at GBP2.2 billion, this figure represents a substantial increase of more than 49% since the beginning of 2023.
The company has expressed confidence in meeting profit expectations, although they have not disclosed a specific amount. According to a FactSet consensus forecast, analysts predict a decline in operating profit from GBP724.9 million to GBP355.2 million.
Fortunately, there has been a recent reduction in the current build cost inflation, which now stands at around 5%. This decrease comes after the sector experienced significant highs earlier this year. Persimmon anticipates further moderation in the inflation rate over the next few months.
In light of the challenging economic environment faced by the house building sector, Persimmon remains committed to maintaining discipline, cost control, and margin protection while enhancing its operational capabilities. Chief Executive Dean Finch expressed this commitment: "Persimmon's focus on discipline, cost control and margin protection while enhancing our operational capabilities continues."
The board has declared an interim dividend of 20 pence per share.
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