First half profit before tax fell 1.4% to £509.3m, as the previously announced decline in completions hit revenues.
That reflects Persimmon's efforts to address customer satisfaction concerns. The group's new quality initiatives are expected to increase customer care costs by around £15m a year.
The shares were little moved following the announcement.
News about Persimmon is dominated by customer satisfaction issues.
A flurry of complaints means sales are taking a hit, as the group slows the release of new homes in response. Not ideal, but we think it's a sensible move, and it's not what investors should focus on.
Wider operational performance has been strong, with margins knocking around the 30% mark, which is well above those of peers. That's partly driven by Persimmon's disciplined approach to land, which sees it acquire more profitable plots. The balance sheet is also in better health than when the financial crisis hit - Persimmon has a deep land bank for future development and, officially it has built up a strong net cash position. Even the "unofficial" debt of money owed to land creditors is declining.
It's not difficult to see why the shares trade on 3.8 times book value, well above the longer term average of 2.6.
But that doesn't mean Persimmon is home and dry, it's being buoyed by factors it doesn't control. Things like mortgage affordability, record employment and schemes like Help to Buy all support housing demand - 52% of private sales were to first time buyers in the first half of the year.
But Help to Buy is due to end in 2023. And with such a large chunk of sales relying on government help, investors will want to know how Persimmon plans to bridge any gap in sales rates. Added to that looming deadline, is Brexit uncertainty. If the UK's exit from the EU turns nasty, the housing market would feel the pain. Housebuilder profits could quickly look a lot less sustainable.
The shares currently offer a prospective yield of 12.7%, which is attractive - especially since the payments look secure in the short term. Although, dividend plans currently only stretch to 2021, and beyond that it's unclear what will be paid out. No dividend is guaranteed, and even management seem to accept the current level of returns is exceptional.
Despite the blips in build quality, we generally find Persimmon's performance impressive. However, all the political and economic uncertainty around means we think a healthy dose of caution is needed, especially given the stock's premium rating.
Half year results
Revenue was 4.5% lower, at £1.8bn - although this was in line with expectations. The drop reflects lower completion and sales volumes, with 7,584 homes being sold in the period, compared with 8,072 last year. The weekly private sales rate, per site, per week was 0.72 (2018: 0.76), which reflects Persimmon's decision to release some homes more slowly in response to customer concerns.
The forward order book represents £2bn of sales, which is slightly lower than last year's £2.1bn. The average selling price improved to £216,942 (2018: £215,813).
The group's land bank contained 75,444 plots at the end of the half. That reflects additions of over 3,500 new plots during the half including 1,962 plots converted from the strategic land portfolio.
New housing operating margins are 31%, compared to 29.7% last year.
Following the returns to shareholders, net cash fell 28.7% to £823.7m.
Looking ahead, the group continues to see build cost inflation across the sector due to Brexit headwinds. It remains mindful of the uncertain political and economic conditions.
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