Persimmon: ‘A note of caution, but £1.2bn in the bank’

Persimmon plc, one of the UK’s leading housebuilders today updated the market on its 2020 trading performance.

Like other housebuilders Persimmon saw sales interrupted by the pandemic, followed by a strong bounce-back once sites were able to reopen on a covid-safe basis.

The group saw selling prices to private buyers rise by 3.7% over the year, with the group average sold price rising by 7%, reflecting a reduced proportion of lower-priced social housing in the mix.

Overall Persimmon sold 13,575 homes (2019: 15,855), a decline of 14%, but sales to private buyers were only reduced by 9%. The group’s forward sales position at year end rose by 25% to £1.7bn, backed by £1.2bn of cash in the bank (2019: £1.4bn). The group sounded a note of caution in its outlook, referring to a lower pace of activity in recent weeks, in part due to a December change in the government’s Help to Buy scheme.

Commenting on the results, Steve Clayton, Manager of the HL Select UK Income Shares fund, which holds a position in Persimmon said: “Persimmon enjoyed a strong bounce-back when pandemic-driven restrictions on trading were lifted mid-year. Since then it has bolstered its balance sheet through robust cash generation and a forward sales position of roughly half a year’s expected revenues.

“At this stage, with the end of the stamp duty holiday in sight, taking a cautious view of the immediate outlook is the right approach, but we have seen more bullish outlooks from some of the group’s rivals. Persimmon have also left investors waiting until their full year results in early March for news on the group’s dividend intentions. So perhaps no surprise then to see the shares a little weaker in early trading”.