United Kingdom

Cost of a new Persimmon home jumps to over £230k

The average cost of a new Persimmon home increased by 6.9 per cent to £230,534 in the past year, the group said today.  

But, the company saw its annual profit fall by a quarter to £783.8million as the pandemic affected the number of new houses it could build.

Persimmon built 13,575 homes last year, down by around 2,300 from 2019, and contributing to a near 9 per cent drop in revenue to £3.33billion. 

After paying a 110p a share dividend for 2020 the company said it planned to pay a total return of 235p per share to shareholders this year, which is the same amount it paid in 2019.

While the business took a hit as a result of the pandemic, it said it remained 'resilient' throughout, adding that the year ahead looked to be fruitful.  

Its build rate has been at pre-Covid levels since July, while forward sales are up 15 per cent on a year ago, while private weekly sales were 7 per cent higher in the first two months of this year.

Over the past year, the company has also upped its cash reserves from £844million to £1.2billion.   

The company's operations were knocked off course by the first Covid-19 national lockdown, which halted building and most sales for five weeks to the end of April. 

The FTSE 100-listed group then bounced back after the lockdown ended and said forward sales were supported by low interest rates, good mortgage availability and government support for the housing market.

In today's Budget, Chancellor Rishi Sunak is expected to announce further measures that could boost the housing sector, including a new Government-backed mortgage guarantee scheme to help buyers get on the property ladder. 

Chairman Roger Devlin said: 'Whilst recognising the disruption caused during the first national lockdown, Persimmon delivered a robust trading performance for the year.'

He added: 'The strength of underlying housing demand across the UK is reflected in the group's sales rates continuing to surpass historical normal seasonal trends throughout the remainder of the year.'

Mr Devlin said Persimmon would continue its bid to 'strengthen' the build quality of its homes and independent inspection regime. Persimmon has previously faced complaints about construction quality and bonus payments.   

Last month Persimmon confirmed it had set aside £75million to address cladding safety issues in some of the developments it has previously worked on. 

Richard Hunter, head of markets at Interactive Investor, said: 'There are several tailwinds working in the company's favour, such as low interest rates, mortgage availability and a general housing shortage all providing opportunities. 

'Any further schemes emanating from the Budget could also pave the way to enhanced returns and, in any event, the sector as a whole learned the painful lessons of the great financial crisis of over a decade ago and has come into the latest challenges in much better shape.'

But, Mr Hunter thinks the company could face a tougher time once the true scale of the fallout from the end of furlough emerges and unemployment rises. He also thinks the company still has some way to go to before consumer confidence in the company's reputation is fully restored.

Shares in Persimmon are up 1.14 per cent or 75.46 per cent to 6,689.21p this morning. A year ago the share price was 6,815.59p.

Mr Hunter said: 'The share price has had a rollercoaster year. Despite a spike of 75 per cent since the March lows of 2020 as the pandemic kicked in, the shares remain down by 5 per cent down over the last year, as compared to a decline of 1.5 per cent for the wider FTSE 100. 

'However, immediate comparisons with the previous year will become easier and there is little question that Persimmon is seeing the benefit of continued momentum from a strong end to 2020. 

'As such, the market consensus of the shares as a strong buy is likely to remain in place, having also recently strengthened to make Persimmon as the preferred play in the sector.' 

On Tuesday, rival Taylor Wimpey revealed that it would reinstate its dividend after a year in which profit before tax at the firm fell 68 per cent.

Having cut its dividend when the coronavirus forced it into site closures in the second quarter, the FTSE 100 company said it would pay out a final dividend of 4.14p a share.

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