ONE of the UK’s largest housebuilders has lifted its forecasts for the year amid improving consumer confidence and summer optimism following planning reforms announced by the new UK Government after Labour’s victory in last month’s General Election.

Persimmon, unveiling its half-year results for the six months ended June 30, 2024, pointed to “improved sales rates and robust average selling prices, despite ongoing affordability challenges” as it revealed its current private forward order book is up 28% year on year to £1.12 billion.

Housebuilder Persimmon reports improved performance

The York-based company, which is building at locations across Scotland from the Galashiels in the Borders to Carnoustie in Angus, said half-year revenue rose 10.9% to £1.3bn, driven by 4,445 new home completions, up 5%, including a 14% increase in private completions to 3,742 homes with the averaging selling price £263,288, up from £256,445 a year ago.

Underlying operating profit was broadly flat at £152 million, reflecting the slightly lower margins on prior orders due to build-cost inflation and increased use of incentives, while pre-tax profit fell by 3% to £146.3m, although this was ahead of the expected £129m. Persimmon also noted it was on track for completions of about 10,500 for the full year, at the top end of previous guidance.

Welcoming a pledge by Sir Keir Starmer’s government to streamline the planning system – even though planning is devolved in Scotland – the builder said it was “encouraged” by the early announcements of the new government, “particularly around planning”. It added: “Consumer confidence continues to improve leading to a strong pick-up in enquiries and visitors, which will be further supported by the recent cut to the Bank of England base rate.”

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Dean Finch, group chief executive, said: “Persimmon is a growing company with growing opportunities. The first half of the year has been strong with improved sales rates and robust average selling prices, despite ongoing affordability challenges.

“Strengthening consumer sentiment, improving macro-economic conditions and the government’s welcome and ambitious planning reforms that demand more of the high-quality, affordable homes that are Persimmon’s core strength are all supportive of our ambition to grow this year and in the future.”

He noted that the builder is opening more sites this year and will do the same next year, “demonstrating the benefit of our continued land investment in recent year”, adding: “This growing and strong platform means we are ready to deliver more of the homes our country requires while securing industry-leading returns over the medium-term.”

Persimmon, an Official Partner of Team GB for Paris 2024, recently secured planning permission from Perth and Kinross Council for 209 energy-efficient new homes in Crieff which forms part of a strong landbank “with 81,545 plots owned and under control, of which 38,067 are owned with detailed planning, supporting our ambition to grow outlets”.

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The company noted: “Our recent successes on planning, combined with our continued activity in the land market over the past 12 months, has further strengthened our landbank and provides us with confidence for further growth of outlets and volume into 2025.

“Although we recognise that the government’s welcome planning reforms will take some time to come through, our ambition remains to grow our outlet base to over 300 in the medium-term.”

At Hargreaves Lansdown, equity analyst Aarin Chiekrie spoke about Persimmon’s “great first half to the year”, noting: “Revenue growth came from a healthy mix of both higher sales rates and average selling prices.

Given Persimmon’s houses are typically cheaper than the UK average, its selling prices were always likely to prove more resilient than other names in the sector during tough times.”

Using a “getting stronger brick by brick” analogy, Mr Chiekrie added: “Persimmon’s on track for completions to come in at the top end of guidance, which calls for around 10,500 new homes over the full year. That target looks achievable and would lay some solid foundations for growth heading into 2025.”

However, Oli Creasey, a property analyst at Quilter Cheviot, cautioned that while the results are “encouraging, particularly growing volumes and revenues, it is notable that it has not yet translated into increased profits”.

He said: “Operating margins are still well below long-term averages, even if there is a recovery in H2 as management expects, and it will be a long road back to the sort of margins experienced pre-2022.”