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Persimmon – Building On Solid Ground

By Jacob Wolinsky. Originally published at ValueWalk.

Persimmon Defense Stocks best performing Large-Cap Stocks of January 2022
  • Persimmon plc (LON:PSN), one of the UK’s leading house builders today reported pre-tax profits for 2021 of £967m on sales of £3.6bn. This was a rise of 12.7% and 8.4% respectively, with profit margins rising 40bps to 31.4%.

Q4 2021 hedge fund letters, conferences and more

  • The group sold 14,551 homes in the year, a rise of 7.2%, with selling prices averaging 2.8% higher at £237,000, some 20% below the national average.
  • The group plans to open a further 75 new sites in early 2022 to take its number of outlets over 300. Persimmon are working to ensure that no leaseholder in its developments built in the last 30 years has to pay for the costs of cladding rectification or related fire safety issues.
  • The shares reacted by dipping 0.5% in early trade.

Persimmon’s Earnings

Commenting on the numbers, Steve Clayton, fund manager at HL Select said:

“Persimmon have set a lot of concerns to rest with these numbers. Fears that volumes would be held back in 2022 are eased by news that the group has upped its rate of land-buying significantly in the latter part of 2021 and will now see a large number of new sites opening in the first half of the year. Margins pushed ahead, despite cost pressures and the group are indicating that the higher margins will remain. Rising capacity in their own brick and tile manufacturing plants will help the group keep costs under control, and an average selling price far below national averages gives scope to edge prices higher to accommodate cost increases, without losing competitiveness.

With margins so strong, the group continues to generate cash and has confirmed plans to distribute another 235p to shareholders, with the first 125p coming to holders on 1 April, with the remaining 110p expected in July. That puts the group onto a yield of almost 10%, and with almost £1.25bn of cash in the bank, the group looks strongly capitalised.

This is all solid stuff from Persimmon, but in truth, much was already known and a lot of the rest was expected. What the group have done is to soothe concerns, but they have not pulled a rabbit from the hat. That probably explains the markets initial, rather dismissive reaction to the figures. But if Persimmon can keep grinding out numbers like these, year after year, then shareholders will be amply rewarded through dividends.”


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