Persimmon’s cool down continues as the group revealed a mixed set of first-half numbers. Despite reports that house prices are falling in some pockets of the country, Persimmon’s average selling price was £216,942, which was a 0.53% increase on the year.
New houses sold dipped by 6.04% to 7,584, and revenue for the six month period dropped by 4.4% to £1.754 billion. Underlying operating profit edged lower by 1.6%. The group’s forward sales ticked lower, and to make matters worse, cost inflation is tipped to be roughly 4%. With figures like these it is no wonder that Persimmon’s share price (LON:PSN) has retreated from the all-time high that was achieved in June 2018.
It is clear the days of monster profits in the housing sector are over, but it is worth remembering how far the company has travelled, as net income might have slid on the year, but it is still more than double than the 2014 level.
The stock took a knock in February when it was revealed that it might lose it ‘help to buy’ status. The government scheme is aimed at helping first-time buyers onto the property ladder, and the initiative greatly helped the group. A series of complaints about the quality of the homes prompted the government to consider revoking Persimmon’s right to buy persimmons, and there is possibility the firm might not be able to take part in the scheme beyond 2021.
Last month, the group stated it is more focused on quality over quantity, and it seems like it was a reaction to the complaints it received. It is in their interest to remain a part to help to buy scheme so the group needs to regain its respectable reputation, and at the same time the boom times are over in house building sector for now, so a slight taper-off in the number of properties build wouldn’t be a terrible thing. The trading statement in early July was varied, as average selling price edged up, and legal completions, and revenue slipped. The group said it expects full-year operating margin to 30.8%.
There is some evidence that UK house prices across the board are cooling, and that is partially because the market was overstretched to begin with, and the uncertainty in relation to Brexit has compounded the issue too as some people are playing the wait and see game. Prices in some parts of the country might be drifting, but materials and labour costs remain high and that is a concern for the industry too.
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