Persimmon – first-quarter performance lays foundations for a solid year ahead
Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “After a shaky 2023, Persimmon’s first-quarter trading has laid the foundations for a solid year ahead. Performance has been in line with management’s expectations, with sales rates ticking slightly higher while pricing has held firm. Given Persimmon’s houses are typically cheaper than the UK average, its selling prices were always likely to prove more resilient than other names in the sector during tough times. The private order book has also climbed at double-digit rates, indicating that buyers have more confidence about the health of the market than they did 12 months ago, so are more willing to sign on the dotted line. Alongside its in-house materials business, which is a key differentiator against peers, Persimmon’s profitability might just hold up better than most this year.
Despite all the positives, there’s still plenty of uncertainty in the UK housing market. High mortgage rates and the removal of the Help-to-Buy scheme continue to weigh on buyer affordability, meaning there’s unlikely to be a step-change in fortunes in 2024, with markets expecting revenue to remain broadly flat year-on-year. With all of the current pressures, it’s not surprising to see the valuation below its long-run average. But broadly speaking, Persimmon’s still trading at a premium to most of its peers, meaning investors searching for value would be wise to look at other names in this cyclical sector.”
