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Persimmon reports healthy demand from homebuyers

Building work continues at the Portland site of house builder Persimmon in Ashington, Northumberland, after it was announced that it had cut 1,100 jobs so far this year.   (Photo by Owen Humphreys - PA Images/PA Images via Getty Images)
The company said reservations on its building sites were 16% ahead of 2019 levels, and that it expected to deliver a 10% increase in sale completions next year. Photo: Owen Humphreys - PA Images/PA Images via Getty Images (Owen Humphreys - PA Images via Getty Images)

Housebuilder Persimmon (PSN.L) has managed to shrug off the damage caused by the pandemic and the ongoing supply chain disruptions, securing £1.15bn ($1.6bn) of forward sales in the four months to 8 November.

This was up from the £950m in the same period in 2019 thanks to “healthy” demand.

The company said reservations on its building sites were 16% ahead of 2019 levels, and that it expected to deliver a 10% increase in sale completions next year.

It said selling price increases and build cost efficiencies in their offsite manufacturing operations are mitigating broader cost pressures, and that it expects to maintain profit margins at industry leading levels.

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Persimmon spent £380m on land in the year to date and posted a strong financial position, with a cash balance of £895m at the end of October.

It hopes sales will return to pre-pandemic levels next year despite COVID-19, supply chain disruptions, labour shortages, and pressures on the economy after Brexit. It added that demand from house buyers came despite the end of the stamp duty holiday.

However its shares fell 3.3% in London.

Read more: European stock markets subdued despite Wall Street highs

“Persimmon continued to perform well through the period against a backdrop of healthy demand, with private sales reservation rates per site remaining well ahead of 2019, as sales followed a more normal seasonal pattern as expected when compared to 2020,” Dean Finch, group chief executive, said.

“While the industry continues to face challenges in the UK planning system, we are successfully bringing new land into construction and growing our already strong UK wide outlet network.”

It came as house builder Visty (VTY.L) also said it was on track to build about 11,000 houses this year and that it expects to make pre-tax profit of around £345m.

It added that price pressure on materials will reduce over the coming months, however, it is forecasting that labour, including bricklayers and roof tilers, will remain expensive.

Steve Clayton, HL Select fund manager said: “Overall, it’s a positive picture that Persimmon is painting. Cash generation should be strong in these market conditions, which bodes well for dividends.

“Like all home builders, Persimmon will be hoping that whatever course of action the Bank of England takes with interest rates, it does nothing to knock the housing market off balance. But with no news of any significant changes in Persimmon’s own story, it’s unsurprising to see the stock edging a few pence lower in early trading”.

Watch: How much money do I need to buy a house?