Davy Research |
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Persimmon
(PSN LN)
Continuing to deliver on all fronts
03 July 2012
Killian Murphy
| Closing Price: | 635p | Rating: | Outperform | 30/06/09 |
FACTS: Persimmon has issued (July 3rd) a strong pre-close statement ahead of its H1 results in August.
ANALYSIS: The group recorded completions in the first half of 4,712 (+6% year-on-year and in line with our estimate of 4,732). Average selling prices were strong in H1, +7% yoy to £171,400 (Davy: £171,612), resulting in turnover of c.£805m, slightly behind our estimate of £812m. Cancelation rates remain below historical lows, but in line with recent years at 18%. The strong performance in price is due to the greater proportion of traditional family homes in the mix, supported by the group having opened 65 new sites in H1 (it expects to open 60 in H2). Forward sales of £774m are +7% yoy. The group continues to drive margin improvement, with operating margins +2.5% yoy to 11.5%, in line with our estimates. We expect this improvement to continue into H2 and are forecasting a FY margin of 12.5%. The balance sheet remains in great shape with net cash of £135m. The group continues to invest in its land bank, having acquired 5,600 plots in the first half, c.30% of which is from the strategic land bank. The first payment of the £1.9bn capital return to shareholders of £227m is expected to be completed in June 2013. The group remains confident that it will achieve its strategic objectives.
DAVY VIEW: This is a strong statement from Persimmon which continues to deliver on all fronts. The margin growth story is supported by continued investment in new land. In addition, the group is on track to return a significant amount of capital to shareholders without weakening its balance sheet or land bank. Persimmon remains our top pick in the sector.