As an owner of Persimmon (LSE: PSN) shares, it was only natural that this week’s full-year results from the UK housebuilder would grab my attention. As it turns out, the market was less than impressed by what it heard on Tuesday (12 March) and the price fell.
However, I’m wondering whether I should buy more now the dust has settled.
Tough market
Granted, the headline numbers weren’t great. Persimmon announced it had generated pre-tax profit of £351.8m in 2023. Not only was this a huge reduction on that achieved a year earlier (£730.7m), it also missed analyst expectations of £359.5m.
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Revenue also fell from £3.82bn to £2.77bn as trading in southern and eastern counties suffered in particular.
The outlook was pretty bleak too with Persimmon warning of subdued market conditions throughout 2024.
To add to the pain, ongoing investment means it will move from an average net cash position to an average net debt position during the year, resulting in charges of somewhere between £15m and £20m.
Although this isn’t a huge issue for me (especially if it means the firm’s being able to capitalise on the rebound when it comes), I do understand why it may not have sat well with some investors. Especially those who remember what happened to the sector during the Great Financial Crisis.
Chinks of light
On the flipside, there were things that made me cautiously optimistic. For example, net private sales per outlet per week were higher in the first 10 weeks of 2024 compared to the same period in 2023. That might sound insignificant but it suggests to me that the worst might be over, even if the economic clouds are still to lift.
And while it was inevitable that CEO Dean Finch would attempt to put a positive spin on the numbers any way he could, I find it hard to disagree that “significant pent-up demand for homes remains unchanged“.
In the meantime, the business has forward sales of £1.55bn and plans to complete 10,000-10,500 homes this year.
Dividend maintained
The fact management maintained the total dividend at 60p per share was another positive.
Sure, a hike would have been nice. After all, the £4bn-cap returned no less than 235p per share a couple of years ago. But this is clearly unrealistic in the current environment.
Regardless, sticking with this payout in FY24 would still leave the stock yielding 4.5%. That beats what I’d currently get from either a FTSE 100 or FTSE 250 tracker.
Long-term focus
Of course, it’s near-impossible to say exactly how well the shares will perform in the months ahead. We don’t know when interest rates will finally be cut and mortgage availability will improve.
We also don’t know what plans the next government will have for the sector or even when the next UK election will happen.
But this is why I apply the same attitude to my holding as I do to all of my investments. It’s the performance over the long term that really matters.
So long as I’ve judged my risk tolerance correctly, I can simply sit on my hands and (hopefully) be rewarded for my patience in time.
On reflection, I’ll probably add to my position when cash becomes available. But staying diversified remains a must.
