Sector in good shape
Persimmon sees 8% boost from ‘healthy demand’
The company said revenue came in at £3.14 billion against £2.9bn last year with legal completion volumes increasing by 599 homes to 15,171 (2015: 14,572).
The group’s average selling price increased by 4% to c. £206,700 (2015: £199,127).
“Sales reservations through the autumn season were strong with healthy customer demand for new homes,” it said in an update.
“Buying a new-build home remains a compelling choice supported by competitive mortgage offers which continue to make a new home purchase very affordable.”
The group’s private sales rate for the second half of the year was 15% ahead of the prior year and second half legal completion volumes of 7,933 were 695 stronger than for the first half of the year (H1: 7,238).
“We have continued to focus on disciplined high quality growth to achieve sustainable market share in our regional markets.”
The company said housebuilding businesses opened at the start of 2016 in Perth and Launceston in Cornwall have made “good progress” delivering more than 650 homes.
This week it launched a business in Mansfield, to support the delivery of increased volumes of new homes in this regional market. The value of our forward sales at 31 December 2016 of c. £1.230bn is 12% ahead of the prior year (2015: £1.103bn).
The group opened 255 development sites across the UK during the year and is building on all sites which have an implementable planning consent.
“We expect our gross margin in the second half will have improved further due to a combination of the continued reduction in our land cost recoveries associated with opening new sites, and the continued strong control over development costs.”
The company acquired c.18,700 plots of new land in 83 locations with good deferred terms.
“We continue to see good opportunities to acquire additional land whilst remaining mindful of the risks associated with the uncertainty arising from the UK’s decision to leave the EU.
“We continue to work hard to bring forward opportunities from the group’s strategic land portfolio which will add to the quality of the group’s asset platform. We expect local authorities to continue to progress their plans to support growth in housing delivery in line with the National Planning Policy Framework.”
The group held cash balances of c.£913m at 31 December 2016 (2015: £570m).
It will give a further update on its assessment of the housing market ahead of its results for the year ended 31 December 2016 which will be announced on 27 February.
Barratt Developments and Taylor Woodrow will issue trading updates next week.
Russ Mould, investment director at AJ Bell, said: “Bovis’ post-Christmas profit warning may have rocked the house builders’ sector but Persimmon’s trading statement today offers some reassurance, especially as it comes quickly on the heels of yesterday’s strong construction purchasing managers’ index reading and an eight-month high in the Bank of England’s mortgage approvals data.
“Volumes remain below the 2006 peak although prices set a new high, to suggest that demand continues to outstrip supply, especially as mortgage approvals have bounced back from their pre- and post-EU referendum lull.”
“Persimmon flagged a 4% rise in legal completions and a 4% rise in average selling prices and – perhaps most encouragingly – a 12% jump in its forward sales book to £1.2 billion, enough to put the stock at the top of the FTSE 100 leader board in early trading, with a 3.3% gain.