York-based house building giant Persimmon plc said on Tuesday it has £1.15 billion of forward sales reserved beyond the current year (2019: £0.95bn) and that it expects to deliver a 10% increase in 2021 legal completions.
In a trading statement for the period from July 1 to November 8, 2021, Persimmon said it brought over 16,200 new plots into the business and its land spend for the year to date is £380 million.
Persimmon said it held £895 million of cash at October 31, 2021 and it has an undrawn £300 million revolving credit facility.
In its outlook, Persimmon said: “The fundamentals of the UK housing market remain strong with good levels of consumer demand and confidence, mortgage availability and low interest rates.
“… both average private sales reservation rates and forward sales reserved beyond 2021 remain healthy. As expected, we are on track to grow our new home sale completions by c. 10% this year (2020: 13,575 new homes) and we are targeting a return to 2019 volume levels in 2022.
“We continue to manage the inflationary pressures in the industry well and anticipate that margins will remain resilient.
“The group has a strong network of developments across the UK, with good visibility over its future pipeline and whilst delays in the planning system are frustrating for the industry, we anticipate our future sales releases will be well received.
“As we approach the quieter trading weeks of December and the Christmas holiday period, we are looking forward to being able to take advantage of the traditionally strong spring selling season in the new year.
“The group is advancing its build programmes effectively to provide a healthy work in progress platform in support of next year’s sales.
“Persimmon remains in a strong position whilst remaining mindful of the evolving challenges as a consequence of Brexit and the continuing concerns relating to the pandemic on cost inflation and the supply chain and their impact on interest rates, consumer confidence and the UK economy.
“The execution of the group’s well established strategy of maintaining financial flexibility, minimising financial risk, and deploying capital at the right time in the housing cycle, will enable it to successfully manage these uncertainties.”
Persimmon CEO Dean Finch said: “Persimmon continued to perform well through the period against a backdrop of healthy demand, with private sales reservation rates per site remaining well ahead of 2019, as sales followed a more normal seasonal pattern as expected when compared to 2020.
“As previously reported, we anticipate growth in new home sale completions for the full year will be c. 10% over last year, our customer satisfaction score continues to track ahead of the five star threshold and healthy selling prices and our off-site manufacturing capabilities are mitigating inflationary pressures, to support our industry leading margins.
“While the industry continues to face challenges in the UK planning system, we are successfully bringing new land into construction and growing our already strong UK wide outlet network.
“With £1.15bn of forward sales reserved beyond the current year and a quality pipeline of new developments coming on stream, Persimmon has a robust platform to support its continued high quality growth and the delivery of superior long-term sustainable returns for the benefit of all stakeholders.”
Hargreaves Lansdown fund manager Steve Clayton said: “This is a broadly reassuring statement, but it does not really move the dial one way or the other, compared to what investors were already expecting to hear from Persimmon.
“The group are in Goldilocks territory, with enough stuff going in their direction, house prices in particular, to offset challenges like wage inflation and materials shortages, to leave Persimmon in a very comfortable financial position.
“Consumers want to buy, and the group has a £1.15bn forward sales position, well ahead of the level a year ago.
“Historic quality issues look to be behind the group, which is now getting five star scores for customer satisfaction.
“Persimmon’s geographic balance, selling in the towns and the shires, but not inner London, has left it largely immune to the cladding issues currently dogging the industry.
“Even with reduced levels of Government support for homebuyers, reservation rates are running 16% ahead, although this strong sales rate is obliging the group to up the level of land buying.
“Overall, it’s a positive picture that Persimmon is painting.
“Cash generation should be strong in these market conditions, which bodes well for dividends.
“Like all home builders, Persimmon will be hoping that whatever course of action the Bank of England takes with interest rates, it does nothing to knock the housing market off balance.
“But with no news of any significant changes in Persimmon’s own story, it’s unsurprising to see the stock edging a few pence lower in early trading”.