7th Jul 2022 11:09
(Alliance News) - A warning from Persimmon PLC on lower half-year revenue and completions did little to put the UK housebuilding sector back in favour with investors on Thursday.
Even strong house price data reported by Halifax failed to impress investors. UK housebuilding bellwethers were all lower in morning trade.
Persimmon was down 5.1% at 1,770.50 pence, Barratt Developments PLC fell 0.2% to 458.70p and housebuilder and land investor MJ Gleeson PLC fell 2.8% to 515.00p.
"Despite the unquestionable progress, the sector remains deeply out of favour with a gaping disconnect between actual trading performance and share price performance," Interactive Investor analyst Richard Hunter commented.
Share prices have been hit by worries related to cladding, as well as the end of the stamp duty holiday. The latter had contributed to a bounce in housing market activity following the easing of the spring 2020 Covid-19 lockdown.
Recent house price surveys have offered mixed messages, meanwhile.
UK house price growth accelerated in June, defying expectations that the market will cool as consumers face pressure from rampant inflation, figures from Halifax showed.
According to Halifax, UK house prices rose 13% yearly in June, the strongest growth since late 2004, accelerating from an 11% rise in May.
Monthly, prices rose 1.8%, hitting GBP294,845, another record high. House prices have now risen for 12 months on-the-bounce, Halifax noted. In May, house prices had risen 1.2%.
Halifax's figures slightly contrast to those reported from mortgage lender Nationwide last week.
Last week Thursday, Nationwide said UK house prices set another record high in June, although growth slowed amid tentative signs of a cooldown in the housing market.
On an annual basis, the Nationwide house price index rose by 10.7% in June, slowing from the 11.2% climb in May. The print also was just shy of the market forecast of 10.8%.
Capital Economics analyst Andrew Wishart commented: "The substantial rise in the Halifax house price index in June was surprising given the softening in the Nationwide figures in the same month."
Persimmon's half-year figures also offered slightly mixed signals.
It said its half-year revenue and legal completions were lower, though forward sales are on the up and it expects to report an improved gross margin for the six months to June 30. Its operating margin will take a hit, however.
Revenue was down 8.2% to GBP1.69 billion in the first half of 2022 from GBP1.84 billion a year earlier. Completions have fallen to 6,652 from 7,406.
Completions were below expectations due to "further delays in the planning system and material and labour shortages". However, the average selling price was 4.0% higher at GBP245,600.
Forward sales were 2.7% higher at GBP1.87 billion from GBP1.82 billion.
Analysts at UBS said: "The bigger picture here is that Persimmon had seen a decline in sales outlets for a number of years which stood at around 290 during the first half versus for instance 346 in 2019. High sales rates have in general made it challenging to rebuild this but more recently planning delays and other administrative matters have intensified this. For instance, Persimmon mentioned 1,500 plots - due to be delivered over 5 years - are impacted by nutrient neutrality guidance.
"Consumer demand remains strong with a sales rates of 0.9 per site per week in the first half and no discernable signs of slowing over recent weeks."
Hargreaves Lansdown analyst Laura Hoy also noted the strong demand, but added that investors are worried this will soon wane.
Hoy commented: "The market wasn't overly impressed though, likely reflecting worries that this red-hot demand won't last forever as the cost of living crisis continues to grow."
By Eric Cunha; [email protected]
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