Housebuilder Persimmon shrugs off Brexit vote but says it’s staying cautious
Housebuilders' shares were among the hardest hit after the Brexit vote – but it seems investors may have been over-cautious, after Persimmon reported a 19 per cent jump in sales.
The figures
In a trading statement this morning Persimmon, the UK's biggest housebuilder, said since it reported its half-year results at the end of August, sales have been 19 per cent up on last year.
In fact, it's fully sold up for the current year and has £757m of forward sales reserved beyond this year, up four per cent on last year's £726m.
It's looking ahead, but cautiously (more on which later): it said it had spent £116m on 7,580 new plots.
Despite that caution though, the company said it reckons its operating margin will improve in the second half of the year from the 23.8 per cent it achieved in the first six months, with cash balances likely to rise from the £570.4m it had at the end of 2015.
Shares were down 0.5 per cent at 1,729p in early trading.
Read more: No Brexit blues for upbeat housebuilders
Why it's interesting
In the days following the EU referendum, Persimmon's share price (and those of its rivals) fell almost 40 per cent as investors panicked over what the effect of Brexit would be on the UK's housebuilders.
But it seems rumours of the sector's demise were greatly exaggerated. Today it said the Bank of England's interest rate cut, which came shortly after the referendum, had been good for it, creating "more attractive mortgage products and further supporting affordability" – with first time buyers using the Help to Buy shared equity scheme particularly attracted to its homes.
A £5bn housebuilding stimulus package announced by the chancellor last month, which included a £3bn fund to help build 25,000 homes this parliament, probably didn't hurt either.
But Persimmon said despite its strong performance in recent weeks, it expects uncertainty around the referendum to continue for some time, and is therefore remaining cautious with respect to new land investment. Don't expect it to be the only one taking the softly, softly approach…
What Persimmon said
Trading over the summer weeks immediately following the EU Referendum was encouraging, with the number of customers visiting our sites remaining well ahead of last year. Thereafter, with the start of the autumn selling season, customer activity strengthened in line with the traditional seasonality of the market.
What analysts said
Anthony Codling, equity analyst at Jefferies International, said:
Persimmon issued a strong trading update this morning in contrast its rather subdued share price performance of late. We remain positive on the outlook for Persimmon and the wider UK housebuilding sector. We are not building enough houses to fully address the structural imbalance between housing demand and supply and for as long as this situation continues we expect the UK housebuilders to perform very strongly.
In short
What a difference half a year makes…