Persimmon tells AGM forward sales £2.8bn

York-based house building giant Persimmon plc said on Wednesday its current forward sales position is £2.8 billion and the average selling price in the forward order book is up 5.5% at £266,000.

Persimmon said that after returning £399 million to shareholders on April 1, 2022, and investing £314 million in land opportunities at “industry-leading embedded margins” the group held £446 million of cash at April 22 with deferred land commitments of £160 million to the end of the current year.

Persimmon also has an undrawn £300 million revolving credit facility, which has a four year term to March 31, 2026.

The details came in an update on trading for the period from January 1, 2022, to date, ahead of its Annual General Meeting.

Persimmon CEO Dean Finch said: “Persimmon continues to perform well.

“We are currently trading in line with expectations, demand remains strong, our private average sales rates are c. 2% higher year on year and we have a robust forward order book of c. £2.8bn.

“As expected, reflecting the profile of outlet openings, we anticipate that completions this year will be weighted towards the second half, with first half completions being lower than those delivered in the first half of 2021.”

In its outlook, Persimmon said: “Persimmon remains well-positioned in its markets. By offering high quality homes at attractive prices we are widening the opportunity of home ownership to customers who otherwise may not be able to afford it.

“The group’s forward sales position is robust and as announced in March 2022, we expect to deliver volume growth of 4-7% for the full year 2022 from 2021 levels, whilst maintaining the group’s industry-leading margins.

“Reflecting the outlet growth profile of the business and resulting build progress, we anticipate that our first half completions will be lower than those delivered in the first half of 2021 but given the encouraging start to the year, we expect our first half result to fall only modestly short of that delivered to June 2021.

“We anticipate a greater proportion of completions in the second half of 2022 as our outlet numbers increase.”

Interactive Investor investment analyst Keith Bowman said: “This latest trading update from the housebuilding sector continues to defy investor worries about a tougher backdrop, with private average sales up 2% year-over-year.

“Trading remains in line with management expectations, with build completions expected to accelerate during the second half.

“This contrasts with a near one-quarter fall in the share price year-to-date, a decline broadly in line with sector rivals.

“Forward sales and cash held of £2.8 billion and £446 million respectively offer reassurance, while the average selling price is up 5.5% to £266,000 and Persimmon continues to find land buying opportunities.

“Rising UK interest rates to battle an inflation surge and a cost-of-living crisis for consumers are a concern.

“A price to net asset value ratio at close to two times for Persimmon is also comfortably above rivals such as Barratts and Bellway at under one, suggesting the shares are not obviously cheap.

“That said, demand for new homes appears robust, house price increases are helping counter rising build costs and a prior £75 million provision to cover cladding costs has already been taken.

“For now, and with the shares offering an estimated dividend yield of over 10%, analyst consensus opinion continues to point towards a buy.”