Strong start to the year for Persimmon plc as customer confidence grows with improving economy

Housebuilder sees rises in sales, new homes and site openings, but experiences problems in securing planning consents as election approaches

Persimmon chief executive Jeff Fairburn
Persimmon chief executive Jeff Fairburn

North East housebuilder Persimmon plc has made an encouraging start to the year, with total forward sales revenue in the first 15 weeks, including legal completions, hitting £2bn, a 7% rise compared to the same period last year.

A trading update covering from January 1, 2015, to date, also showed the company’s weekly private sales rate per site had increased 6%.

The group now has 7,375 new homes sold forward into the private sales market for 2015 with an average selling price of around £207,900, 4% higher than last year.

During the period, the number of people visiting Persimmon’s home-finder wesbites rose 20%, customers visiting development sites remained in line with last year’s strong performance and cancellation rates continued to run at historically low levels.

Persimmon has now opened 85 of the 120 new sites planned for the first half of the year and is currently developing 385 active outlets across the UK.

According to the trading update, customer confidence was being supported by the ongoing improvement in the UK’s economic performance, while customers continued to be able to access mortgage credit on “very attractive” terms.

Chairman Nicholas Wrigley said: “We continue to work hard to increase further the number of homes we are building to drive our current year legal completion volumes ahead of the previous year’s total of 13,509 new homes.

“To help address the challenges of securing the appropriate level of high quality tradespeople on each of our sites we launched our Combat to Construction training scheme in September last year.

“This scheme provides the opportunity for leavers from the UK Armed Forces to master the trade skills that are key to the house building process.

“At the end of March we had over 80 trainees registered on the scheme and we expect to recruit over 300 trainees during 2015.

“The planned increase in the number of skilled tradespeople employed directly by the group will support improved productivity and the potential for further growth in legal completion volumes in the future.”

The land market, meanwhile, had continued to provide good opportunities for new investment at attractive returns and Persimmon remains confident it will have around 400 active outlets open by the middle of the year.

“As anticipated, in line with past experience, it has become increasingly difficult to secure planning consents for sites as May’s General Election approaches,” Mr Wrigley said.

“While we would expect such delays to be short term in nature, they are hindering the expansion in the number of active outlets required by the housebuilding industry to support an increase in the volume of newly built homes delivered to the market.”

Persimmon is current three years into a new business strategy focussed on exercising capital discipline through the cycle while growing as market conditions allow.

Mr Wrigley added: “A key feature of this capital discipline is management’s commitment to return around £1.9bn of surplus capital to shareholders over the ten year period to 2021.

“The third payment of the Capital Return Plan of £291m, or 95p per share, was approved by shareholders at a General Meeting held on March 19, 2015.

“This return of capital was paid on April 2, 2015, by way of a B / C share proposal.

“Having delivered a 44% increase in new homes built and sold since the launch of the new strategy, a total of £733m of surplus capital has been returned to shareholders under the Capital Return Plan, over £500m higher than was originally planned at this stage.

“We remain confident of making further good progress over future periods.”

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