Persimmon profits surge as demand returns to pre-Covid levels
Interim profits at house builder Persimmon surged on the back of increased demand and government support measures as Covid curbs were eased, the company reported on Wednesday.
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Pre-tax profit for the six months to June 30 rose to £480.1m from £292.4m on revenue of £1.84bn compared with £1.19bn a year earlier. The dividend was lifted to 110p a share from 70p.
Forward sales were currently at £2.23bn, including legal completions in the second half so far, up 9% on the pre-pandemic trading year of 2019. Homeworking and government support like the stamp duty holiday during the pandemic has created a boom in demand for houses, driving buyers to seek larger properties in suburbs and out-of-town locations
New home completions rose 51% to 7,406, as the average selling price rose 4.9% to £236,199, offsetting a 5% rise in build costs. Its forward order book includes about 6,500 homes to private owners at an average selling price of about £253,000.
Building costs had risen 5% due to supply-chain disruptions and labour shortages, Persimmon said.
Persimmon said it would revert to the pre-Covid profile of capital return of two payments a year, with the payment of the regular annual distribution of 125p per share being made in early July 2022.
The company reaffirmed guidance for around 10% growth in sales completions this year. Last year it sold 13,575 homes.
“The fundamentals of the housing market continue to remain positive with improving consumer confidence, low interest rates, and mortgage lenders that are keen to support customers to buy a home of their own,” said chief executive Dean Finch.
“We expect a more normal seasonal trading pattern to reassert itself through this year compared with 2020, which was disrupted significantly by the pandemic.”
AJ Bell investment director Russ Mould said the rise in building costs was "a big clanging alarm bell" amid solid results.
“Issues like availability of labour and rising raw material costs are currently being drowned out by a buoyant housing market which is keeping pace with the associated increase in costs.
“However, the risk for Persimmon and its peer group is that a softening in house prices, with the government set to scale back its support for the market fairly imminently and demand pent up during the pandemic likely to ease at some point, leaves them exposed to margin pressure."