UK
housebuilder
Persimmon
(PSN)
on
Tuesday
braced
shareholders
for
another
subdued
year
after
pretax
profit
in
2023
more
than
halved
in
challenging
markets.
Shares
in
Persimmon
fell
3.6%
to
£13.24
each
in
London
on
Tuesday.
Morningstar’s
fair
value
estimate
for
the
stock
is
£23
and
our
analysts
think
the
listed
housebuilding
sector
is
undervalued.
The
company’s
shares
are
up
nearly
9%
over
one
year
but
are
down
3.4%
in
2024
so
far.
The
housebuilder
said
in
2023
pretax
profit
slumped
to
£351.8
million
from
£730.7
million
in
2022,
hit
by
lower
volumes
and
build
cost
inflation.
Diluted
earnings
per
share
tumbled
to
79.5
pence
from
174.3p.
Total
revenue
decreased
27%
to
£2.77
billion
from
£3.82
billion.
Morningstar
Metrics
for
Persimmon
Stock
•
Fair
Value
Estimate:
£23
•
Morningstar
Rating: ★★★★★
•
Morningstar
Economic
Moat
Rating:
None;
•
Morningstar
Uncertainty
Rating:
High
New
Home
Completions
Down
Persimmon
said
new
home
completions
totalled
9,922,
down
one
third
from
14,868
last
year,
ahead
of
initial
guidance
with
strong
delivery
in
the
fourth
quarter.
The
annual
dividend
was
unchanged
at
60p
per
share.
Chief
executive
Dean
Finch
said
although
the
near-term
outlook
“remains
uncertain,
the
significant
pent-up
demand
for
homes
remains
unchanged”.
“We
are
well
placed
to
manage
the
ongoing
uncertainty
and
we
have
good
visibility
over
our
land
pipeline
which,
over
the
medium-term,
will
support
a
return
to
growth
in
outlets
and
volumes,
alongside
improved
margins
and
robust
cash
generation,
paving
the
way
for
sustainable
shareholder
returns,”
Finch
continued.
UK
Housing
Market
Will
be
Subdued
in
2024
Persimmon
said
the
new
financial
year
had
started
in
line
with
expectations.
Enhanced
competition
in
the
mortgage
market
and
wage
growth
have
contributed
to
improved
affordability
albeit
it
continues
to
be
constrained,
the
housebuilder
said.
Persimmon
noted
a
regional
disparity
in
performance,
with
trading
in
southern
and
eastern
counties
more
challenging
with
weaker
pricing,
offset
by
a
more
robust
trading
performance
in
the
northern
regions.
Net
private
sales
rate
per
outlet
per
week
in
the
first
10
weeks
of
2024
were
0.59
against
0.54
in
the
comparable
period
in
2023.
Persimmon
said
it
expects
market
conditions
to
remain
subdued
throughout
2024.
It
expects
to
deliver
between
10,000
and
10,500
completions
for
2024,
of
which
it
has
full
planning
on
98%,
with
a
housing
operating
margin
in
line
with
2023.
Build
cost
inflation
is
expected
to
be
around
3%
to
5%
in
2024,
with
spot
inflation
currently
running
at
around
1%,
Persimmon
said.
In
2024,
Persimmon
expects
to
use
its
£700
million
revolving
credit
facility
and
to
move
from
an
average
net
cash
position
to
an
average
net
debt
position.
This
reflects
investment
in
work
in
progress
in
anticipation
of
a
housing
market
upturn.
Persimmon
estimates
net
finance
charges
of
around
£15
million
to
£20
million
in
2024.
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