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Persimmon Release Latest Results, Industry Reacts

Persimmon has reported that its current forward sales position is 23 per cent ahead of last year, and 11 per cent ahead of the same point in 2019.

The statement from one of the UK’s largest homebuilding firms was released on its website yesterday. The company said that its build rates across developments remained at pre-pandemic levels, despite maintaining Covid-secure protocols. It also reported a net land spend of £140m from the beginning of the year until today, covering 6,000 plots across 29 locations. The average price for homes in its forward order book, said the firm, is around £252,000, up from £244,500 last year.

As of 23 April, the company said it held £940m in cash with deferred land commitments of £90m to the end of the year. It also said it had a £300m Revolving Credit Facility.

Dean Finch, group chief executive of Persimmon, said in a statement: “Demand for newly built homes remains healthy and the Group’s sales rates are encouraging. Persimmon’s high-quality land holdings, balance sheet strength and liquidity provide a strong platform to continue to deliver the homes the country needs, underpinning long-term sustainable returns for the benefit of all of its stakeholders.”

There was much comment within the industry on Persimmon’s figures. David O’Brien, equity analyst at Goodbody, called it a ‘solid update’ that placed the company at the ‘front of the pack’ for the recovery of the UK housing market.

He added: “Furthermore, the Group continues to guide for volumes in the second half of 2021 to be in line with the first, implying around 15,200 units for the year as a whole. This means that expectations are for 2021 volumes to be just 4 per cent below 2019 levels. Beyond 2021, a net land spend of £140m year-to-date gives comfort that Persimmon can continue to ramp-up outlet numbers and thus leave the Group primed to deliver further growth into 2022.”

Ben Nuttall, senior analyst at Third Bridge, put Persimmon’s results into a wider context. He said: “UK housebuilders have benefited from a string of demand-side policies. Stamp duty holidays have been extended, Help-To-Buy has been prolonged, and most recently 5 per cent deposits have been introduced to further stimulate the market. Pent-up demand for housing is also coming through on the back of consumers accumulating lockdown savings and being subject to fewer outgoings.”

However, Nuttall did have a more-critical view of the UK’s housing situation. He said: “The UK’s demand-side policies are great for helping individuals, couples, and families get on the housing ladder. However, according to our experts, whilst a chronic under supply of UK housing persists, demand-side policies mostly serve to drive up prices, benefiting house builders like Persimmon.”

Others evinced a more-skeptical take on Persimmon’s positive take on its results. Steve Clayton, fund manager for HL Select, said: “There are challenges ahead. Stamp Duty is coming back, and can Persimmon actually maintain production at the levels currently demanded? Persimmon’s earlier caution means it faces pressure to lift the rate of new site openings. Adding 6,000 new land plots in the quarter is a good start here, but buying land is not the same as building on it. The group are taking a cautious approach, suggesting that build rates will only match the 2019 level for the rest of the year, so analysts will be wary of pushing forecasts too far forwards at this stage. But with over £900m of cash in the bank, Persimmon faces its challenges from a position of huge strength.”