Persimmon reports ‘robust trading’ and hails UK’s resilient housing market
Persimmon, the UK’s biggest housebuilder, said the country’s property market had remained “resilient” despite the impact of the coronavirus pandemic.
The FTSE 100 firm reported that trading was “robust” in 2020, although revenue and new home competitions dipped due to the closure of the housing market in the first UK-wide lockdown.
New home competitions reached 13,575 last year, down from 15,885 in 2019, and total group revenues fell from £3.65bn to £3.33bn.
Persimmon said it has £1.23bn in cash, up from £844m the previous year, and a current forward sales position of £1.68bn, compared to £1.35bn in 2019.
Demand for new homes was resilient during the second half of the year, with Persimmon’s average weekly sales rate per site jumping 39 per cent higher than the second half of the previous year.
This was supported by the government’s decision to grant homebuyers a stamp duty holiday, the York-based developer said.
Persimmon chief executive Dean Finch said: “Against the backdrop of the unprecedented challenges of 2020, Persimmon produced a robust performance for the year, as we continued to deliver the new homes the country needs.
“The group’s strong second half completions were supported by its advanced build coming into the year, an agile and effective response to the Covid-19 pandemic and resilient customer demand.”
He added: “Recent events have served to further demonstrate the continuing near term uncertainties arising from the Covid-19 pandemic.
“However, we believe that the longer term fundamentals of the UK housing market remain resilient and I am confident Persimmon will continue to deliver superior long term value for all of its stakeholders.”
However the company’s share price dipped five per cent as investors feared the potential impact of the current coronavirus restrictions.
Russ Mould, investment director at AJ Bell, said: “Persimmon’s shares are sagging slightly after the company’s trading update, even though there are no great surprises in there either way.
“The slide probably reflects investors’ concerns over the current state of the pandemic and how it could impact near-term demand, the fast-approaching expiry of the Government’s stamp duty holiday and – just as importantly – the valuation of the stock.”
Steve Clayton, Manager of the Hargreaves Lansdown Select UK Income Shares fund, which holds a position in Persimmon, said the firm is taking a cautious approach due to the upcoming end of the stamp duty holiday.
“Persimmon enjoyed a strong bounce-back when pandemic-driven restrictions on trading were lifted mid-year,” Clayton said.
“Since then it has bolstered its balance sheet through robust cash generation and a forward sales position of roughly half a year’s expected revenues.
“At this stage, with the end of the stamp duty holiday in sight, taking a cautious view of the immediate outlook is the right approach, but we have seen more bullish outlooks from some of the group’s rivals.
“Persimmon have also left investors waiting until their full year results in early March for news on the group’s dividend intentions. So perhaps no surprise then to see the shares a little weaker in early trading”.