Persimmon profit jumps as UK housing market booms
Persimmon (PSN.L), one of the UK’s top house building groups, reported interim profits of £480m ($660m), an increase of 64% year-on-year, for the first half of the year.
This comes as the government said UK house prices increased by 13.2% in the year to June 2021, up from 9.8% in May 2021.
The FTSE 100 (^FTSE) company completed 7,406 home sales at an average price of £236,199, with sales volumes jumping almost 50% compared to last year when the housing market was mostly shut due to the pandemic.
Total group revenues increased to £1.84bn from last year's £1.19bn.
Back in 2019, before the pandemic, it posted a profit of £509.3m for the first half of the year, and sold 7,584 for an average price of £216,942.
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The group managed cost pressures in a way that saw margins rise by a full percentage point.
“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,” said CEO Dean Finch.
The company expects 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.”
However, its share price ticked roughly 2% lower on Wednesday morning.
Persimmon also said it made good progress in the land market, bringing over 10,000 plots of high quality land into the business, achieving good visibility of new outlet openings and providing momentum for future growth.
“Land-buying is a key strength for the group,” said Steve Clayton, fund manager at Hargreaves Lansdown Select.
“Maintaining the built-in profitability of the landbank is probably the group’s number one challenge longer term,” he added.
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Meanwhile, Finch said the firm was managing the balance of inflationary pressures well and expects the industry will remain resilient.
“Cost inflation remains notable at a 4.55% to 5% annual growth rate, but is not currently a concern, with sales prices increasing in-line with these costs at present,” said Oli Creasey, property research analyst at Quilter Cheviot.
The firm has paid a dividend to shareholders of 235p per share in respect of the year ended 31 December 2020.
Clayton said “we hold Persimmon in our HL Select UK Income Shares fund because of its strong cash generation abilities that leave it well placed to pay dividends back to shareholders.”
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