Persimmon Shares Rose 5.3% Despite H1 Profits Falling Massively

The Persimmon plc (LON: PSN) share price rose 5.32% despite releasing its half-year results for the six months ended 30 June 2023. The company noted that its revenues fell by about 30% from £1.69 billion in H1 2022 to £1.69 billion in H1 2023.

The home building company attributed its lower revenues to the lower number of completed houses during the period, as its completions fell by 36% to 4,249 from 6,642 in H1 2022. The company still expects its full-year house completions to reach 9,000, as initially predicted.

The rally higher in Persimmon’s share price indicates that investors were expecting today’s news and were not surprised by the declining performance. The record-high mortgage rates and persistent UK inflation have made it extremely hard for home-building companies to perform well. 

Persimmon’s new-build margin fell to 21.5% in H1 2023 from 31% a year ago, driven by higher sales incentives and persistent build cost inflation. The company’s underlying operating margin almost halved from 27% to 14%, resulting in a profit before tax of £152 million compared to £441 million last year.

The home builder announced an interim dividend payment of 20p per share despite the company’s earnings per share falling from 106.5p to 34.4p. The reinstated dividend payment will be distributed on 3 November 2023. 

Persimmon’s forward private sales amounted to £875.9 million at the end of the period, marking an 83% improvement compared to 1 January 2023, where it was at £478.5 million. 

Dean Finch, Persimmon’s Group CEO, said: “Against a backdrop of higher mortgage rates, the removal of Help to Buy and significant market uncertainty, Persimmon has delivered a robust sales rate excluding bulk sales whilst growing the private average selling price in our forward order book and also securing cost savings. We are on track to deliver profit expectations for the year and are building a platform for future growth. We have maintained targeted investment in exceptional new land opportunities and enhanced key capabilities to deliver high-quality homes for customers consistently. We have proactively managed our cost base; however, this has been done without losing our focus on quality.”

Persimmon share price. 

The Persimmon share price rose 5.32% to trade at 1182.0p, from Wednesday’s closing price of 1122.3p.