Persimmon share price and full-year earnings results preview as sales likely dropped 30% in 2023

Persimmon 2023 sales likely to have fallen by around 30%

​UK housebuilder Persimmon is set to report its full year earnings next week, giving insight into how the company has navigated significant industry headwinds over the past year. The entire UK housing sector has faced challenges from rising interest rates, planning delays, and slowing demand. The high interest rate environment has made mortgages more expensive, directly hitting housing completions and sales across the sector. Persimmon is no exception and is expected to post an around 30% drop in sales for 2023.

​Besides falling completions, UK housebuilders like Persimmon have struggled to acquire new land sites due to planning delays. A recent report revealed that planning remains a major barrier for small and medium enterprise (SME) homebuilders with 46% seeing a 30%+ increase in planning permission costs over the past three years. This comes before recent additional hikes of up to 35% in planning fees.

​The surge in interest rates has also severely impacted SME builders, cited as a top barrier by 72%. However, fewer SMEs see material and labour supply and costs as major obstacles compared to last year, suggesting some easing of pandemic-related supply chain disruptions.

​While conditions are difficult currently, some analysts see potential for institutional investors to spark a housebuilding boom in the UK. Persimmon and other volume housebuilders could benefit from this source of demand. Successive tax changes have made small-scale buy-to-let investing less attractive in the UK, weighing on builders reliant on that source of demand. Institutional funding could help sustain volumes and support the government's target of 300,000 new homes annually.

​Demand for rented accommodation is robust, with occupancy rates near 100% and rents up 8% last year for major landlord Grainger. Declining property prices also make yields of 4-5% attractive versus commercial real estate for institutional investors. Their interest is notable in single-family rentals, with over £1 billion deployed last year.

​As for Persimmon, one recent major development was that the UK competition regulator is investigating it and seven other major housebuilders for sharing sensitive information and “anti-competitive behaviour.” The news of the investigation had an immediate negative impact on UK housebuilder share prices but the outcome of the investigation might have a further detrimental effect in the future.

​The announcement of the £2.5bn Barratt acquisition of Redrow, on the same day as the latter announced a 57% drop in half-year profits, also led to share price volatility in the sector. The merger is seen by some as a defensive move in a pressurised sector.

​Another development is the likelihood of political change in the UK, with Labour retaining a large lead in the opinion polls ahead of a general election due within a year despite Jeremy Hunt’s spring UK budget and 2 pence national insurance cut. The election is likely to perturb many in the house building sector, after many years of very supportive policy from successive Tory governments.

​While significant headwinds persist for UK housebuilders today, increasing institutional investment into rented homes could provide a valuable new source of demand for Persimmon in the coming years. As interest rates in the United Kingdom are forecast to significantly decline from their recent highs, the housing market should stabilize as well.

​Persimmon’s upcoming full year earnings will give key insight into how well the company’s volumes, profit margins, and bottom line have held up amidst the challenging conditions over the past year. Investors will also be watching closely for management commentary on expectations for the year ahead.

​When are PERSIMMON’s results expected?

​Persimmon, the British housebuilder, is expected to post its full-year results on 12 March 2024. The full-year results will be for the financial year ending in December 2023.

​What is ‘The Street’s’ expectation for the FY results?

​‘The Street’ expectations for the upcoming results are as follows:

​Revenue of £2,603 billion : -31.8% year-on-year (YoY)

​Earnings per share (EPS) : 82.18 pence : -66.5% (YoY)

​How to trade Persimmon into the results

LSEG (formerly Refinitiv) data shows a consensus analyst rating of ‘hold’ for Persimmon – 2 strong buy, 2 buy and 13 hold - with the median of estimates suggesting a long-term price target of 1,464 pence for the share, roughly 5% higher than the current price (as of 7 March 2024).

​PERSIMMON – technical view

​Persimmon’s share price, which year-to-date is slightly negative and greatly underperforms Bellway’s 8% rise, has been range trading since late-December between 1,501p and its 1,331.5p late-February low.

​It has done so after its over 50% rally from its October 925p low which didn’t quite reach its 1,531p January 2023 peak.

​Persimmon Weekly Chart

​For the long-term uptrend to resume a rise and weekly chart close above the January 2023 and 2024 highs at 1,501p to 1,531p needs to occur. Only then would the July 2022 low at 1,717.5p be back in sight.

​Persimmon Daily Chart

​A fall through and daily chart close below the 1,331.5p late-February low may lead to the 1,250p region being revisited. The Persimmon share price range traded there between mid-November and early-December and as such it may act as support, were it to be revisited.

​Below it meanders the 200-day simple moving average (SMA) at 1,200p.