Strong home buyer demand boosts Persimmon as it snaps up 10,000 plots of land in six months and brings dividend payment forward
Jane Denton www.thisismoney.co.uk
- Housebuilder Persimmon’s revenue increased to £1.84bn in the first half
- The FTSE 100-listed group has snapped up 10,000 plots of land in six months
Published: 10:30, 8 July 2021 | Updated: 10:36, 8 July 2021
Strong demand from buyers and rising property prices helped housebuilder Persimmon bolster its bottom line in the first six months of this year.
Revenues swelled to £1.84billion in the first half, up from £1.75billion over the same timeframe pre-Covid in 2019.
The group snapped up 10,000 new plots of land at 48 sites over the period and had a forward order book at the end of June totalling £1.82billion.
With sales on the up and mass land buying in full swing, Persimmon revealed it will be doling out cash to shareholders sooner than expected.
The group, which has £1.3billion worth of cash stashed away, is bringing its next scheduled 110p a share dividend payment forward to 13 August. For the full year, shareholders will be receiving 235p a share payouts.
Persimmon is the latest in a string of housebuilders to post strong figures covering the last few months. On Wednesday, Redrow and Vistry both announced robust sales amid high demand from buyers.
Steve Clayton, fund manager of the Hargreaves Lansdown Select UK Income Shares fund, which has a holding in Persimmon, said: ‘These are good times for housebuilders.
‘The customers want to buy and financing is easy, with mortgage availability improving, at rock bottom rates.
‘The challenge is to keep all the ducks in a row, because cost pressures are bubbling away, staff are hard to find and the government can change the degree of market support provided to homebuyers when it chooses.’
Dean Finch, Persimmon’s chief executive, said: ‘Customer demand for our new homes has been strong right across the UK with healthy sales reservation rates through the period.’
The York-based company delivered 7,406 new homes in the first half, up from 4,900 in 2020, but down slightly from 7,584 over the same period in 2020.
The group, which is Britain’s second biggest homebuilder, said it expected to operate on around 300 sales outlets on average throughout the year.
The FTSE 100 company said the average selling price of new homes forward sold to owner occupiers was £250,350 in the first half, marking an increase of 3.3 per cent on the year before, when the average price tag was £242,400.
Shares in Persimmon dropped this morning and are currently down 2.87 per cent or 88p to 2,982.00p. A year ago the share price was 2,433.00p, meaning it has risen by over 23 per cent in the last year.
Steve Clayton adds: ‘Persimmon is performing well and throwing off increasing amounts of cash.
‘Sales rates per site are running 20 per cent ahead of pre-pandemic levels and prices are rising by almost 5 per cent per annum.
‘That’s enough to offset the cost pressures unfolding across the construction sector. The group has upped its rate of land buying in the face of strong customer demand for new homes.
‘The cash is building up, with the group now sitting on £1.3billion of funds, with only £100million of land purchase obligations to meet.’
He added: ‘That’s an increase of half a billion pounds over the last year and the group are accelerating their cash returns to shareholders, bringing the next scheduled 110p per share payment forward to August.
‘With Persimmon now paying a total of 235p per share, that puts the stock on a yield of 7.5 per cent, backed by a business that is performing strongly with cash in the bank.’
Richard Hunter, head of markets at Interactive Investor, said: ‘The withdrawal of the stamp duty holiday and other government assistance schemes have yet to fully wash through to the wider economy, and could yet stymie the nascent recovery in terms of unemployment and general consumer confidence.
‘By the same token, Persimmon is confident of the long term prospects for a housing market which is still undersupplied and where low interest rates and mortgage availability are notable tailwinds.
‘With accompanying comments also upbeat on trading conditions generally, Persimmon is set fair to push further ahead.’
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