Persimmon declares dividend as forward sales rise
House builder Persimmon on Tuesday declared a second dividend of 70p a share as it reported a rise in forward sales driven by strong demand and selling prices.
The company said forward sales were up 43% year on year to £1.36bn after positive summer trading. Restrictions in the housing market were lifted in May and builders have benefited from pent up demand and a stamp duty holiday that was launched in July.
Buyers are also looking to move into bigger properties as Britons reassess housing needs at a time when a majority of them are working from home due to the coronavirus crisis.
Average private weekly sales for the three months to November 9 rose 38% driven by strong gross sales levels, as the wider housebuilding industry returned to greater activity after Coronavirus lockdowns were eased.
On Monday sector peer Taylor Wimpey lifted its 2021 profit guidance and said the recovery of the housing market in the second half had been better than expected.
Persimmon said it was confident that second-half legal completions would be at least in line with the second half of 2019, supported by robust build rates subject to no significant disruption to the construction industry due to additional coronavirus measures introduced to control the pandemic.
“We believe the longer term fundamentals of the UK housing market remain favourable. However uncertainties remain including those posed by further Covid-19 disruption, rising unemployment and the potential impact of the outcome of trade negotiations with the European Union and the rest of the world,” the company said.
It also remained cautious in its assessment of potential land opportunities bringing 1,700 new plots of land into the business and spent £260m in the 10 months to October 31.
The group held £960m of cash at the end of October with deferred land commitments of around £325m.
Steve Clayton, a fund manager at Hargreaves Lansdown, which has a position in Persimmon, said the firm was well placed to keep paying dividends".
"Earlier generous capital return programmes were put on hold when everyone had to down tools back in the spring, but Persimmon has bounced back and it is clear their confidence is building. Cash levels are way ahead of where they were a year ago, which bodes well for future cash returns to shareholders."
Interactive investors analyst Richard Hunter said in normal times the company would see a clear pathway ahead, but the effects of the second lockdown cannot yet be quantified "either in terms of the medium term impact on unemployment".
"In addition, dependant on the outcome of the UK’s (Brexit) negotiations with the EU, there could be other implications for the economy as a whole including, in Persimmon’s case, disruption to its supply chain."
"Even so, the share price has also improved considerably, latterly due to the strong mark-up of prices across the board yesterday. Having jumped by 80% since the March low, the shares now stand up by 3.5% in the year to date. Over the last 12 months, the price has considerably outperformed the wider index, with a rise of 18% comparing to a decline of 16% for the FTSE100."
Hunter added that Persimmon was well positioned and the market consensus of the shares as a strong 'buy' reflected the high regard in which the company is generally held by investors.