Persimmon PLC (LSE:PSN) reported a 42% fall in completed new home sales in the first quarter but said there were some signs of encouragement, which led to its shares leaping 6% and driving gains across the sector.
The FTSE 100-listed housebuilder said in recent weeks visitor numbers are up, cancellation levels are normalising and sales rates continue the steady improvement evident since the start of the year.
“If sales rates continue at the levels seen year to date, we would expect full year 2023 volumes to be toward the top end of the previously indicated range of 8,000 to 9,000 completions,” the company said.
But Persimmon cautioned: “As outlined at our 2022 full year results, lower completions and build cost inflation outstripping the more modest increase in ASP are, as expected, having a significant impact on the group's profit margins this year.”
It also said sales to first-time buyers “remain more challenging, reflecting stretched affordability and reduced mortgage availability at higher loan-to values.”
New home completions totalled 1,136 in the quarter to March reflecting the challenging market conditions in the fourth quarter and the consequent lower forward order book.
Net private sales per outlet fell to 0.62 from 0.98 a year prior but above 0.30 posted in the fourth quarter.
Overall pricing remained firm in the first quarter, with the group's private average selling price on completions up 10% on the first quarter of 2022 and up 4% on the previous quarter.
Shares in Persimmon, which have underperformed peers over the past year, rose 6% to 1,307p.
Befoe today the shares had risen 2% in the year to date, versus the larger peer group up 20%, especially in the past two months.
The sequential recovery in sales per site per week from 0.30 sales per site per week to 0.62 was "consistent with our expectations", said analysts at UBS, noting that reservations have been stable over recent weeks into early April and that volume guidance was also "broadly consistent" with consensus forecasts.
The material impact on profit margins this year was not further quantified but "this seems to be broadly baked in" to the consensus forecast, with the company also providing early guidance for improvement into 2024, with an expectation of volume recovery and also margins improving.
Underlying profits (EBIT) are forecast to rebound to £440mln in 2024 from £367mln this year.
"We think shares could react somewhat positively on signs of stabilising trading, but we remain concerned about the pace of mid-term profit recovery and a relatively high valuation (compared to peers)."
At broker Peel Hunt, analysts did not anticipate significant changes to consensus, though they noted the range of forecasts was wide at £327-501m so is likely to narrow.
They noted that the price-to-net assets valuation of the shares is well below the historic range but reflects the group's lower return on equity, which has fallen from a peak of 28.5% in 2017 to an expected 7.9% this year.
*** UPDATE: Adds share price, broker comment ***