Housing market set to return to more regular levels after pandemic-caused swings in activity
Following an upturn in activity during the pandemic, Persimmon is expecting the market to get back to a more normal level.
In its half-year earnings report released on Wednesday, Persimmon revealed that its sales rate for new homes was 20% quicker than the same period of 2019, before the pandemic. The FTSE 100 house builder also said that its forward sales were 9% higher than the same six-month period in 2019.
Persimmon made a profit before tax of £480m from £1.84bn in revenue, compared to £292m and £1.19bn for the first six months of 2020, a period that was affected by the pandemic.
While the UK market will be healthy moving forward, Persimmon says, it is expecting more normal levels of trading to resume following the easing of restrictions.
However, the housebuilder believes that demand for new homes will remain above pre-pandemic levels.
Completions increased to 7,406 from 4,900 with prices on average rising by 4.9% at £236,000.
“Expectations were high for Persimmon and certainly well ahead of other similar operators in the housebuilding sector. However, it has delivered half year results in-line with these expectations. The business is clearly well on its way to recreating 2019’s figures, reporting sales volumes of 7,400 (-2% vs 2019) and an operating margin of 27.6% (vs 31.0% in H1’19). Overall profit before tax was only -5% down on the equivalent 2019 figure,” said Oli Creasey, property research analyst at Quilter Cheviot.
“It could be argued that in some ways the company is actually ahead of its position in 2019 and has recovered from the pandemic. The cash balance is now over £1.3bn, and provides considerable support to the 8% dividend payout for 2021 & 2022, and likely beyond as well. Similarly, the company is monitoring its Home Builders Federation satisfaction score, which at 92% is trending well ahead of the 5-star threshold. It was inevitable that the renewed focus on customers’ experience would have come to impact on both volumes and margins, and so to achieve this score while operating so close to 2019 financial metrics is remarkable, particularly within the further context of a global pandemic.”
Dean Finch, chief executive, said: “We have a strong platform for future growth with high-quality landholdings, a diverse UK wide network and a business operating from approximately 300 outlets on average throughout the current year.
“We are expecting an increase of c.10% in new home legal completions this year (FY 2020: 13,575 legal completions).
“With c.85 new outlets opening by the end of this year and a similar number of new outlets targeted to open in the first half of 2022 , subject to the timely granting of planning permission, we have a good pipeline of new outlets coming through the business.”
The Persimmon share price is down by 0.77% during the morning session on Wednesday.
