Persimmon shares were higher on Thursday after the housebuilder maintained guidance for completions and operating profit, saying they see cost inflation moderating in the coming months.
After a dismal first-half trading, the optimism in Persimmon’s outlook was cheered by traders and the stock was over 3% higher in early trade on Thursday.
Persimmon’s H1 2023 completions sank to 4,249 from 6,652 in the same period last year. Total housing revenue fell to £1.19bn from £1.69bn.
The sharp reduction in their key metrics reflects a challenging environment for housebuilders as mortgage costs rise and consumers are squeezed by inflation.
However, as we explained yesterday when reporting Bellway’s results, the bad news around the UK economy and poor housing market is largely priced into housebuilding shares and any signs of good news are met with buying. This was evident in both Bellway yesterday and Persimmon today.
Whether this can persist will depend on completion rates in the second half.
“Housebuilder Persimmon is sticking with its full year expectations and that suggests it is doing a decent job of managing said expectations,” said AJ Bell investment director Russ Mould.
“The first half was truly bleak and understandably so given the removal of the crutch provided by the Help to Buy scheme and as potential purchasers face up to much more expensive borrowing costs.
“Given the inflationary pressure on build costs has been in place for some time and shows no sign of disappearing any time soon, a drop in volumes and average selling prices was always likely to leave Persimmon exposed.
“Persimmon’s strategy of retrenchment and adopting a wait and see approach seems a prudent one. The company had already rebased its dividend and keeping a financial buffer to see it through the current turmoil seems sensible. The company is also looking at belt-tightening, putting pressure on contractors and adopting more efficient build processes.”