Housebuilding giant Persimmon eyes boost from government support schemes and record-low rates

Housebuilding giant Persimmon has kicked off 2021 on a better footing than last year as government and Bank of England policies helped boost the group.

Persimmon is one of the biggest housebuilders in the UK with a string of completed projects and development schemes in Scotland. Picture: Kimberley Powell
Persimmon is one of the biggest housebuilders in the UK with a string of completed projects and development schemes in Scotland. Picture: Kimberley Powell

The business, which revealed that pre-tax profits were down by a quarter to £783.8 million in 2020, said its average private weekly sales rates so far are 7 per cent above last year’s levels.

Meanwhile, forward sales are at £2.3 billion, up 15 per cent year on year, due to low interest rates, the availability of mortgages and government support.

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The Bank of England’s base rate was slashed to a record low of 0.1 per cent last year in response to the pandemic. This filtered through to the interest rates being offered by high street banks, making home loans cheaper.

Persimmon also benefited from the Covid-19 stamp duty holiday, which has seen thousands of pounds of tax burden lifted from house-buyers.

But while the future might look brighter, the group revealed a bruising set of financial results for last year.

Profit fell by 25 per cent, while the number of new homes that it built dropped by almost 2,300 to 13,575. Revenue, meanwhile, fell 9 per cent to just over £3.3bn.

Shareholders were made to feel the pain, with the level of dividend paid out last year more than halving from 235p to 110p.

Chief executive Dean Finch told investors: “Persimmon delivered a robust performance in 2020 despite the challenges presented by the pandemic.

“I would like to commend our workforce for the effective way Covid-secure operating protocols have been adopted, protecting our customers, local communities and colleagues alike whilst maintaining effective on-site operations.

“Persimmon is a company of many strengths with great opportunities ahead. Combining the business’ entrepreneurial spirit and astute land buying with enhanced quality, efficiency and service standards will drive superior, sustainable value creation for our shareholders and broader stakeholders alike.”

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Freetrade’s senior analyst Dan Lane said: “A solid forward sales book will be a shining light for shareholders wincing at the damage 2020 has done to Persimmon’s balance sheet. But even then the company can’t avoid mentioning the ‘government support measures’ propping up the orders.

“A positive note was the guidance around dividends and the company’s commitment to its income-seekers throughout 2021. It’s been a tough year for yield hunters and seeing that commitment rather than a tentative return to payouts, as we’ve seen with other firms, is likely to settle a few nerves.”

Rob Murphy, managing director at Edison Group, noted: “Looking ahead, the company has around ten sites under construction awaiting their first sales release and it plans to open another 50 or so new sites in the first half of the year.

“It should be in a good position to capitalise on loosening restrictions, too, ending the year with an increase in its cash position to £1.2bn as well as a rise in its forward sales position to £2.3bn, 15 per cent ahead of last year. It also has reduced land creditors of £329mn at the end of the year.”

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