York, U.K., homebuilder Persimmon reports cancellation rates at record low of 18%; 2011 sales on target to reach 9,300 units, similar to last year's level but at lower average selling price
November 8, 2011
– Persimmon plc today releases its Interim Management Statement which covers the period from 1 July 2011 to 7 November 2011 and confirms current trading in line with expectations.
Visitor levels to site continue to be encouraging, prices remain firm and cancellation rates continue to run at historically low levels of c. 18%. These represent good indications of the current stability in the housing market.
As reported at the time of our half year results on 23 August 2011, weekly private sales rates through the quieter summer weeks were c. 4% ahead of the prior year for the period from 1 July 2011. As expected, since then we have experienced improved sales rates in the traditionally stronger autumn sales season. Weekly private sales rates from the start of September have been c. 19% higher than for the same period last year.
Since 1 July first time buyer visitors are over 35% higher than for the equivalent period last year, with customers being keen to participate in the Government sponsored FirstBuy shared equity scheme introduced to the market on 1 July 2011. We are now taking good levels of reservations using this incentive which is delivering attractive savings for customers when compared to the cost of an equivalent rented property. This is providing welcome relief for first time buyers from the otherwise constrained mortgage market place.
As previously stated at our half year results, we anticipate sales volumes for the full year will be consistent with the previous year at more than 9,300 legal completions. Due to an expected increase in legal completions associated with the pick-up in first time buyer activity that we have recently experienced, we now anticipate our average selling price for the full year of 2011 to be slightly lower than the c. £169,000 of last year. Currently the average selling price of the private sales of £190,080 held within our total forward sales is higher than at the same point last year (2010: £188,329).
We are now fully sold up for this year and have c. £460m sales already reserved beyond 2011, a c. 7% increase over this time last year. In the second half of the year 63 of the c. 70 new sites we anticipated starting have now been opened. We have seen encouraging levels of visitors and pent up demand on opening new outlets and expect to maintain our outlet network at c. 390 active sites through to the start of 2012. We continue to exercise close control over build activity on all our sites and anticipate further improvement in returns from the capital we have invested in our national site network.
We remain confident of delivering further profit margin improvement in the second half of the year building upon the underlying operating profit margin of 9.0% for the first six months to 30 June 2011. Our strategy of introducing house designs that increase the efficiency of our build, exercising tight control over build costs and using new replacement land at lower cost is continuing to result in improved profitability. Further gross margin gains are held within our forward orders for 2012.
We continue to replace our land selectively and have acquired over 2,200 plots through the second half of the year so far. Strategic land remains a key focus for the Group and we continue to work with local communities to deliver new developments. The Group has a long history of successfully obtaining planning permission on strategic land, which delivers significant additional profit and cash returns when new homes are sold from these sites. Further successful conversion has delivered over 30% of our replacement plots through the second half of the year to date.
We welcome the Government's proposals to reform the planning process. We believe the National Planning Policy Framework, as currently drafted, will not only provide an improved platform for the increase in the supply of new homes, but will help support vital economic growth and job creation.
We have maintained good free cash generation whilst ensuringthe appropriate level of capital is reinvested in the business and now anticipate having net cash at the year end to support our future growth.
We will give a further update on progress and trading following the year end on Monday 9 January 2012.
Mike Farley and Mike Killoran will host a conference call with analysts at 9.15 a.m. today. To participate please dial +44 (0) 20 3059 5845. The password is "Persimmon".