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Housing building triumvirate, Persimmon, Taylor Wimpey, and Bovis Homes to post 2018 results

Government schemes like help-to-buy and easier mortgage access have meant housebuilders have been able to boost revenues in recent years, but these external conditions are changing
Housebuilding
With recent trading updates from all three having disclosed sales volumes and average sale prices during 2018, the focus will be on margins and cash returns

A triumvirate of housebuilders will issue full-year results during the coming week, with FTSE 100-listed Persimmon PLC (LON:PSN) and Taylor Wimpey PLC (LON:TW.), plus FTSE 250-listed Bovis Homes PLC (LON:BVS) due to report on Tuesday, Wednesday and Thursday respectively.

Government schemes like help-to-buy and easier mortgage access have meant housebuilders have been able to boost revenues in recent years.  However, these external conditions are changing, with Help to Buy set to be scaled back and to come to an end in 2023, and house price growth is slowing on the back of Brexit uncertainties, so investors will be keener to hear what the outlook statements offer than the historic numbers.

READ: Persimmon expects 2018 profits to be modestly ahead of market consensus, thanks to new developments

With recent trading updates from all three having disclosed sales volumes and average sale prices during 2018, the focus will be on margins and cash returns.

Help to buy, CEO succession a focus for Persimmon

Full-year results from Persimmon PLC (LON:PSN) on Tuesday, however, could be overshadowed after weekend press reports suggested that the FTSE 100-listed housebuilder could be stripped of its right to participate in the government’s Help to Buy scheme.

According to The Times, the government is considering banning Persimmon from the scheme amid complaints about the quality of the company’s homes and leasehold charges attached to new homes, so any reaction comments will be eyed.

The other focus will be on the permanent successor for chief executive Jeff Fairburn who was asked to resign in November following a furore over the award to him of a nine-figure bonus which was reduced to £75mln after the group received criticism from shareholders and the public.

Announcing that Fairburn’s would depart at the end of 2018, Persimmon said it believed the “distraction” around this pay had continued to have a “negative impact on the reputation of the business”. The group appointed managing director David Jenkinson as its interim chief executive.

In a preview of full-year numbers, analysts at UBS said: “The most likely (is) outcome that the current interim CEO is appointed as the new permanent CEO.”

In a trading update last month, Persimmon disclosed its sales volumes and average sale prices during the year and said it expected 2018 pre-tax profit to be modestly ahead of the market consensus forecast.

The UBS analysts said, therefore, the focus for the results will be on the group’s margins and cash returns. The Swiss Bank’s analysts expect the firm to report an operating margin of 30.5% resulting in an increase in pre-exceptional pre-tax profit of £1.086bn, up from £977mln a year earlier.

They see Persimmon confirming a dividend payment of 125p, in addition to the 110p pay-out it made in July last year.

Flat 2019 volumes an issue for Taylor Wimpey

For Taylor Wimpey on Wednesday, the UBS analysts expect the firm to deliver an operating margin of 21.5% in 2018, slightly up from 21.2% in the previous year, leading to an exceptional pre-tax profit of £856mln, up from £812mln.

The FTSE 100-listed group has already confirmed plans to pay £600mln through dividends in 2019, so the key focus will be on guidance and current trading.

The UBS analysts expect Taylor Wimpey’s 2019 volumes to be flat, with average selling prices to rise by 2.2% and margins to compress by -60 basis points year-on-year.

They added: “Sales rates should be flat to down against a still somewhat challenging comparison basis of 0.81 sales per site per week from last year.”

Volume growth seen continuing for Bovis

Meanwhile, FTSE 250 listed Bovis Homes has already said it expects to report a 2% rise in 2018 revenues to £1055mln, with operating profit up 36% to £174mln at an increased margin of 16.5%, up from 12.9% the year before.

UBS’s analysts expect Bovis on report 2018 pre-tax profit of £167mln on net income of £135mln on Thursday.

They also think the housebuilder’s management will provide a more detailed outlook for full-year 2019, which they forecast showing +2% volume growth and a rise in operating margin to 17%.

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