Persimmon is fully back on track

Most metrics improving to above pre-pandemic levels.

Article updated: 8 July 2021 8:30am Author: Richard Hunter

The one area which Persimmon had previously flagged as unlikely to recover before 2022, namely legal completions, is getting extremely close. Against an easy comparative in 2020, completions have risen by 51% and against 2019 are just 2% shy of a true return to form.

Elsewhere, such comparisons are even more promising. Revenues are up by 55% against 2020, and 5% ahead of 2019, with the average weekly sales rate also ahead by 30% and 20% respectively.

Meanwhile, the company continues to invest in the future, having spent £200 million on 10000 plots over the period, underpinned by an extremely healthy cash balance of £1.3 billion and an additional undrawn credit facility of £300 million.

The strength of the economic recovery globally has resulted in a demand and supply imbalance in certain areas, including raw materials. In the case of Persimmon, these additional costs have been offset by the strength of the housing market, where the average selling price of homes has increased by 4.9% year-on-year.

With a forward order book of £1.8 billion and a balance sheet awash with cash, the group has also returned to pre-pandemic levels of dividend payments to an audience which had otherwise been income-starved. The current yield of 7.7% is punchy by any standards but is also reflective of management prospects in the new environment.

The withdrawal of the stamp duty holiday and other government assistance schemes have yet to fully wash through to the wider economy, and could yet stymie the nascent recovery in terms of unemployment and general consumer confidence. By the same token, Persimmon is confident of the long term prospects for a housing market which is still undersupplied and where low interest rates and mortgage availability are notable tailwinds.

With accompanying comments also upbeat on trading conditions generally, Persimmon is set fair to push further ahead. The share price has risen by 27% over the last year, as compared to a gain of 16% for the wider FTSE100, and investors are equally impressed by its compelling prospects, with the market consensus of the shares as a strong buy marking Persimmon as the preferred play in the sector.

More from Richard Hunter: read more articles directly on the interactive investor website.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Richard Hunter

Head of Markets, interactive investor

Richard has over 30 years of stockmarket experience and is one of the UK’s foremost commentators on market matters and a regular contributor for the BBC (BBC News Channel, Wake Up to Money and the Today Programme), CNBC and Bloomberg. Richard’s expert commentary also appears across the national and specialist press. He previously held senior positions at Hargreaves Lansdown and NatWest Stockbrokers.

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