Persimmon profits leap as pandemic housing demand continues: reaction

Housebuilder Persimmon has hailed a "robust" performance over the first half of the year as profits were buoyed by a surge in activity in the housing market.

The FTSE 100 firm revealed that pre-tax profits increased by 64 per cent to £480.1 million for the six months to the end of June.

Its average private sales rate was around 30 per cent higher than the same period a year earlier, when trading had been impacted from site shutdowns during the pandemic.

The group said it expects to achieve roughly 10 per cent growth in sale completions for the whole of 2021.

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

Bosses expect the fundamentals of the UK housing market to remain positive amid "improving consumer confidence, low interest rates, and mortgage lenders that are keen to support customers to buy a home of their own".

Some 50 per cent of agreements with owner-occupiers were with first-time buyers, many of whom have been boosted by increased savings during the pandemic.

Persimmon also hailed forward sales for around 6,500 homes to private homeowners, at an average selling price of approximately £253,000.

However, the housebuilder said it has "experienced increased cost inflation related to certain components of our supply chain".

Group chief executive Dean Finch said: "Persimmon's first-half performance has been robust. In particular, I am pleased we have delivered strong growth in legal completions whilst also achieving higher levels of build quality and customer satisfaction

“We made good progress in the land market in the period, bringing over 10,000 plots of high quality land into the business, achieving good visibility of new outlet openings and providing momentum for our future growth.

"We're managing the balance of inflationary pressures well and currently anticipate that our industry leading returns will remain resilient. Our forward sales position is circa 9 per cent ahead of the same point in 2019, with our cumulative private sales rate over 20 per cent above that of 2019 for the year to date.”

Adam Vettese, an analyst at investment platform eToro, said: “While some firms are still wearing the scars of the pandemic, Persimmon’s half-year results suggests the housebuilder has staged a total recovery.

“However, looking long-term, there are signs that activity in the property market has cooled slightly since the [UK] government’s decision to start tapering its stamp duty holiday.

“Surveyors are reporting a slight dip in new buyer enquiries – a sign of waning demand – although it’s perhaps too early to say with certainty if this will become a long-term trend.”

John Moore, senior investment manager at Brewin Dolphin, noted: “Persimmon has delivered another strong set of results as the company – and housebuilders more generally – return to pre-pandemic levels of performance.

“Strong sales, good margins, and excess cash on its balance sheet are backed up by a solid pipeline of future sales, all of which underpin the business’s ability to deliver for shareholders.

“Housebuilding is among the top sectors contributing to the return of dividends, but with around half of its homes sold to first-time buyers and nervousness about the price of land and raw materials, there are potential challenges on the horizon.”

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