15th Jan 2019 10:37
LONDON (Alliance News) - Persimmon PLC on Tuesday said it expects profit for 2018 will be slightly ahead of consensus forecasts as the housebuilder continues to battle with uncertainty ahead of the UK's fast-approaching withdrawal date from the EU.
Shares in the FTSE 100-listed housebuilder were down 0.4% at 2,200.00 pence on Tuesday.
Persimmon expects total revenue for 2018 to come in at GBP3.74 billion, up 3.9% from GBP3.60 billion a year ago.
New housing revenue is predicted to rise by 4% to GBP3.55 billion from GBP3.24 billion, with the company's legal completions increasing by 406 new homes, or 3%, to 16,449 from 16.043.
The average selling price in 2018 increased by 1% year-on-year to GBP215,560 from GBP213,321.
As a result, Persimmon now expects 2018 pretax profit to be "modestly ahead of current market consensus" after benefitting from new developments opened during the year.
During the year, Persimmon said that the UK housing market benefitted from robust employment levels, low interest rates and a competitive mortgage market, supporting customer demand in all regions.
Since launching its new strategy in 2012 to increase new home construction to meet market demand, Persimmon has opened 1,370 new selling outlets and delivered 91,975 new homes, increasing the group's annual production by over 75%.
Persimmon now has 31 housebuilding businesses in the UK, and is looking for further regional expansion opportunities to support further growth.
Looking ahead, the firm said it remains "committed" to increasing levels of new home construction in order to meet market demand. At the end of 2018, forward sales were ahead 3% on the prior year, standing at GBP1.39 billion.
"As we look forward to the 2019 spring season Persimmon is in an excellent market position. Whilst the future performance of the UK economy is currently subject to increased levels of uncertainty, the group is well positioned with its strong outlet network together with the availability of a range of attractive house types at affordable prices across the regions of the UK, supported by a high quality land bank and conservative financial structure," the company added.
Despite the strong performance, there are some clouds on the horizon for the blue-chip housebuilder.
"Persimmon is still selling more homes at higher prices, but the rate of growth is slowing. That's to be expected in a cooling property market and following on from a pretty good run which has seen the housebuilder return prodigious amounts of cash to shareholders," said Laith Khalaf, senior analyst at Hargreaves Lansdown.
"Of course, plans do go awry, and Persimmon is searching for a new CEO following the departure of Jeff Fairburn at the end of last year, which adds a quantum of uncertainty to proceedings. That is of course dwarfed by Brexit, which looms large over the housebuilding sector, because a disorderly withdrawal from the EU would impact the UK housing market," Khalaf added.
"That's particularly the case if the Bank of England felt it had to raise interest rates to defend sterling, which would increase mortgage rates and make buying a property even less affordable, without an adjustment to house prices."
One source of uncertainty comes as Persimmon searches for a new boss. Former chief executive Jeff Fairburn departed at the end of 2018 following criticism over the company's long-term incentive plan scheme.
In February 2018, Fairburn, current interim Chief Executive Jenkinson, and Chief Financial Officer Mike Killoran decided to reduce their overall share entitlement to half of which they would become eligible for on a second vesting following criticism from UK media and politicians.
Then there is Brexit, which has continued to cast a shadow over London-listed housebuilders as the sector is highly exposed to the domestic housing market and thus sensitive to a disorderly withdrawal from the EU.
Persimmon's update on Tuesday comes as MPs prepare to vote on UK Prime Minister Theresa May's withdrawal agreement this evening, though it is widely expected the deal will be rejected by parliament.
The housebuilder will publish its annual results on February 26.
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