Persimmon shares gain as forward sales rates rise after dismal 2023

Persimmon shares gained on Wednesday after the housebuilder said completions fell by 33% to 9,922 in 2023 but saw sales rates increase at the beginning of 2024.

Persimmon shares were over 4% higher at the time of writing on Wednesday.

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The last year was a terrible year for the housebuilder. Profits will be down substantially and dividend payouts were a shadow of the shareholder returns in prior years.

Persimmon’s cash as of 31st December 2023 had more than halved to £420m compared to a year ago.

“Despite the difficult and uncertain trading backdrop, Persimmon’s valuation’s been on the charge in recent months. New home completions came in ahead of group expectations in 2023 but were still down by a third on the previous year. Alongside an increased use of incentives, these lower volumes mean there’s much less cash coming in the door,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

“In a bid to keep the cash coffers in reasonable shape, investment in new land has been reigned right back – something we expect to continue in the near term, given the group’s healthy land bank.

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“Market forecasts are suggesting a 35% fall in revenue for 2023. Coupled with the effect of lower volumes and build cost inflation remaining more stubborn than the group had anticipated, operating profit margins look set to roughly halve year-on-year to around 14%. While that’s not ideal, it’s a picture that’s largely being repeated across the sector.”

However, today’s share price reaction suggests investors are starting to look to the future and the eventual recovery in the UK property market. Private forward sales rising to £499m is a reason to be optimistic.

Persimmon’s trading update is released amid falling mortgage rates which will buoy housing activity.

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