Last updated 8 March 2023
Persimmon Group Plc
Persimmon Group is one of the UK’s three largest housebuilders, along with Barratt and Taylor Wimpey. The company was formed in 1972 by racehorse enthusiast and life president Duncan Davidson and named after a celebrated Derby winner. Persimmon listed on the London Stock Exchange and was the first pure housebuilder to be promoted to the blue chip FTSE 100 of the UK’s leading quoted companies and sells more than 14,000 homes a year.
Financials
After a slipping back in the previous year, turnover in the 2022 calendar year rose to £3,815.8 million (2021: £3,610.5 million) but profit before tax slumped to £730.7 million (2021: £966.8 million) due to a £275 million for the cost of safety retrofitting high-rise buildings to comply with new regulations imposed in the wake of the Grenfell disaster. At an operating level, Persimmon’s profit dropped back to £724.9 million (2021: £960.5 million).
To view the financials for Persimmon Plc, visit Companies House and use Company ID 1818486.
Operations
After a period of organic growth, Persimmon began to expand by acquisition in 1996 with the purchase of the Ideal Homes group of companies. In 2001, Beazer Group was acquired for £538 million. In January 2006 Westbury was acquired for £643 million and this acquisition propelled Persimmon to top spot in the rankings of top UK housebuilders by market value.
Persimmon has a network from nine regions in England, four in Scotland and three in Wales. operating businesses.
In 2022, legal completions rose to 14,868 units (2021: 14,551 units) and the average selling price (ASP) increased 5% to £248,616 (2021: £237,078). The group sold 12,174 homes to private owner occupiers (2021: 12,018) at an ASP of £272,206 (2021: £259,231) and 2,694 new homes to housing association partners (2021: 2,533) at an ASP of £142,017 (2021: 131,976).
In 2022, the group added over 20,750 plots of land from on market purchases and its strategic land holdings. At the end of 2022, the owned and controlled land bank slipped to 87,190 plots (2021: 88,043 plots) and there was a net land spend of £447.7 million. The strategic landbank contained 71,942 plots (2018: 75,793 plots).
Glenigan Data
According to Glenigan’s research, in 2022 Persimmon submitted 96 detailed planning applications (2021: 95). These submissions contained a total of 13,547 units (2020: 20,290 (2020: 14,233 units).
Conclusion: Slump ahead
The 2022 financial year may prove a high point for Persimmon, certainly in the near term. Sales edged up as the number of sales outlets was increased to 272 (2021: 234) but profits fell and the group expects completions will halve to around 8,500 homes in the current year. Further falls seems likely as the land holdings shrank and the group’s planning activities reduced.
After a 42% leap in the number of units in the planning pipeline in 2022, the latest year saw the number of units proposed slump by a third as the wider economy suffered in the wake of Russia’s invasion of Ukraine. This had a knock-on impact on the UK housing market with prices expected to fall between 5-8% in 2023.
The operating margin is amongst the best in the industry but slipped to 27.2% (2021: 28.0%) despite attempts to secure the supply chain in the wake of Brexit by expanding expanded inhouse materials manufacturing capacity. In December 2019, Persimmon completed construction of a tile manufacturing operation, Tileworks. In 2021, a new Space4 factory opened and the Brickworks and Tileworks manufacturing plants will insure against materials price rises.
In 2022, Persimmon still applied to build more new homes than any other housebuilder according to Glenigan’s research but like many of its peers there was a significant reduction in activity. The group is looking to build smaller developments with a strong focus on family-friendly housing and a reduction in the building or apartments. In 2022, the average planning application submitted by Persimmon contained 141 units (2021: 214 units).
There has also been a continued and significant reduction in exposure to the market for apartments, which are typically in high-rise buildings that are now affected by new regulations on cladding introduced in the wake of the Grenfell disaster.
In 2013, 21% of the homes in Persimmon’s planning pipeline were flats but by 2018 this measure was just 8%, with family housing making up the remaining 92% of the planning pipeline and this trend has continued. In 2022, just 3% of units in detailed planning applications were flats and the balance housing (2021: 99% houses/1% flats).
The government’s changes to social housing and the freeing up of restrictions in this area offer greater opportunities for growth, which the increase in manufacturing at Space4 will help. Persimmon is still committed to a programme of returning cash to investors and this will inevitably restrict land buying.
There was strong cash generation in the latest year of £1,002.7 million (2021: £1,209.8 million) but this was before a capital return of £750.1 million and spending on land of £637.6 million. As a result, cash held at the end of 2022 slumped to £861.6 million (2021: £1,246.6 million).
Going forward, the phased end of Help to Buy in 2023 casts as a shadow over trading as will an expected 8% rise in material prices, which will hit margins and profits, and a significant upturn in completions seems unlikely in the short term.
Winning Work With Persimmon Group
Persimmon is a member of a number of trade bodies and initiatives, including the Home Builders Federation and the National House-Building Council. The group has used an Enterprise Content Management (ECM) solution provided by The Content Group (TCG) to reduce paperwork in procurement and also uses the COINS system and has embraced etendering. Information on the group’s sourcing of materials can be viewed here.
Persimmon has a number of existing supply chain agreements with a variety of suppliers and sub-contractors. Companies interested in working for one of Persimmon’s regional businesses are asked in the first instance to contact the reception of the particular division involved and send in details, which will be forwarded on to the relevant people.
The group’s tendering processes has been strengthened through greater central oversight and an expanded use of framework agreements. From the fourth quarter of 2022, new disciplines were introduced to ensure prices on new contracts were not beyond six months. Where incumbents are not willing to negotiate, Persimmon will go to a tender process, while maintaining quality, service and safety standards, to secure best value.
Key Persimmon procurement contacts include:
Commercial director – Mark Platts, tel: 0191-3774000
Mark.platts@persimmonhomes.com
Chief buyer – Colin Blackley, tel: 0191-3774000