Persimmon sees housing market staying strong as profits rebound

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Persimmon PLC (LSE:PSN) (LSE:PSN) said it expects margins to remain resilient even though it is seeing staff and raw material costs rise.


Shortages of components, skilled staff and rising wages have been highlighted across the construction sector since the end of lockdown, but Persimmon said it expects to generate superior and sustainable returns.


The builder added the UK housing market should remain healthy going forward though it expects the boom that followed the easing of lockdown restrictions to calm down to more normal levels of trading.


Profits in the six months to June 2021 rose 64% to GBP480mln on sales 55% higher at GBP1.84bn.


Completions rose 7,406 from 4,900 with prices on average up 4.9% at GBP236,000 though private house sales were at GBP258,000 on average.


Persimmon said forward sales currently are around 6,500 units at a price for private houses of GBP253,000, which in volume terms is 9% ahead of 2019 or pre-the pandemic while weekly sales so far this year are running 20% ahead of two years ago.


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.”


Cash at the year-end amount to GBP1.32bn.


The strength of the housing market was underlined by ONS housing statistics that showed the fastest rate of growth since 2004, with prices in June 13.2% higher than a year ago. That followed a 9.8% rise in May.


Chancellor Rishi Sunak’s temporary cut in stamp duty has fuelled the housing boom with home working also sparking a surge in demand for larger properties.


The North-West saw the biggest rise over the past 12 months with prices jumping by 18.6% with London the worst regional performer, though it still saw prices climb by 6.3%.


Liberum added that Persimmon is being helped by both its strong presence in the northwest and also among first-time buyers.


The broker has a target price of 3,400p compared to the market’s 2,881p up 0.5% today.




–adds broker, house price data–





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