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04 March 2021

Keep on Building post-COVID-19

York-based British housebuilder Persimmon reported resilient earnings on Wednesday morning, especially considering the unfavourable outlook which has loomed over the house building industry since March last year.

Results for the full-year were in line with the broader market’s expectations, as revenue for 2020 fell by 6% to £3.3bn while underlying profit before tax decreased by 18% to £863m due to a decline in housing margins from 30.3% to 27.6%. Average sale prices increased by 7% to £230,534, however, reflective of a general rise in UK house prices. Although, this provided little consolation for the disruption to construction services seen throughout lockdown periods, which would have significantly increased overhead costs for housebuilders.

Persimmon’s forward sales position and post-COVID-19 outlook have been the silver lining in the results. Forward sales are 15% higher than last year at £2.3bn with the low-interest rate environment and good mortgage availability helping to prop up demand for housing across the UK. In addition, a number of government policies announced in Wednesday’s Budget, including the extension of the stamp duty holiday and the introduction a 95% Help to Buy mortgage scheme, are shaping a positive backdrop for a strong UK housing market over the next few years. The future potential for Persimmon is therefore not to be overlooked despite some short-term uncertainty. With the housebuilder maintaining building rates throughout the year and expressing a focus on improving quality and service in the future, it is clear the company has remained competitive against its sector peers and is poised to take advantage of government plans to increase home ownership.

Despite the decline in revenue and profit, net cash ended the year at £1,234m, c.£400m ahead of 2019 figures, with a dividend of 110p also announced. The share price reacted positively to the earnings and the future expectations for the UK housing market, up 5.22% since the market opened Wednesday morning. 

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
 
Keep on Building post-COVID-19
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