Profits expected to fall at Persimmon after house completions hit by pandemic

Housebuilder Persimmon is set to post lower profits and housing revenues after completions tumbled due to the coronavirus pandemic.

The company said last month that sales were impacted over the first six months of the year but shareholders are now awaiting the resulting damage to the firm’s profitability.

Persimmon will reveal how the virus, which resulted in the closure of construction sites and sales offices, weighed down on profits during the period when it announces its latest figures on Tuesday August 18.

Analysts have predicted “a drop in profits of some 30%”, according to Russ Mould, investment director at AJ Bell.

It will leave recently appointed chief, Dean Finch, with a major challenge as he looks to put the company back on the path to profit growth.

In July, it said housing revenues for the year were expected to have fallen by 33% to £1.1 billion for the year to June 30.

It said this will have been driven by a slump in completions caused by the virus, as it completed 4,900 sales, compared with 7,584 in the same period in 2019.

The group’s outlook and update on trading since the end of June will also be important for investors keen to understand the current fast-moving environment.

William Ryder, equity analyst at Hargreaves Lansdown, said the Nationwide and Halifax house price indices both reported rising prices in July, “which bodes well” for Persimmon.

He said: “We’ve said for some time that the housebuilding sector will stand or fall with the economy and so far the sector has held up, but the next few months will be crucial.

“The recovery could be beset by a second wave of coronavirus infections, the end of the furlough scheme or some other unfortunate development.”

The update will also come two weeks after the Housing Secretary unveiled sweeping reforms to the current planning system.

The new process will involve quicker development on land which has been designated “for renewal”, with a “permission in principle” approach that the Ministry of Housing, Communities and Local Government (MHCLG) said will balance the need for proper checks with a speedier way of working.

It is expected to bolster housebuilders by speeding up the current planning process.