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Persimmon has promising outlook despite uncertainty

2nd Mar 2022 17:48

(Alliance News) - Persimmon PLC's outlook is positive, analysts said on Wednesday, despite a wave of uncertainty in the UK housebuilding sector.

Shares in the company rose 3.0% to 2,392.14 pence each in London on Wednesday.

The York, England-based housebuilder brought in total revenue for 2021 of GBP3.61 billion, up 8.4% year-on-year from GBP3.33 billion. This was only 1.4% short of pre-pandemic revenue of GBP3.66 billion in 2019.

Pretax profit grew 23% to GBP966.8 million from GBP783.8 million.

Hargreaves Lansdown analyst Steve Clayton commented: "Persimmon have set a lot of concerns to rest with these numbers. Fears that volumes would be held back in 2022 are eased by news that the group has upped its rate of land-buying significantly in the latter part of 2021 and will now see a large number of new sites opening in the first half of the year. Margins pushed ahead, despite cost pressures and the group are indicating that the higher margins will remain.

"This is all solid stuff from Persimmon, but in truth, much was already known and a lot of the rest was expected. What the group have done is to soothe concerns, but they have not pulled a rabbit from the hat. But if Persimmon can keep grinding out numbers like these, year after year, then shareholders will be amply rewarded through dividends."

Investor interest was on Persimmon's outlook for 2022, with several headwinds on the horizon including the prospect of rising interest rates and new cladding costs.

Developers in the UK must agree a GBP4 billion plan to fix dangerous cladding on low-rise flats by early March or risk new laws forcing them to act, Housing Secretary Michael Gove said in January.

The Cabinet minister threatened that he is "prepared to take all steps necessary" to fix the "broken system".

Interactive Investor analyst Richard Hunter commented: "It remains to be seen whether this performance from Persimmon is a sufficient response to the housebuilding naysayers. Its shares, which have fallen by 15% over the last year as compared to a gain of 11% for the wider FTSE100 have been tarred by the same brush which is currently affecting most of the sector. Even so, the market consensus of the shares as a buy suggests that there may be better times to come."

Persimmon proposed a 125 pence dividend per share of surplus capital as an interim dividend for 2021 to be paid in April, and 110p to be paid in July. This would bring the total for the year to 235p, unchanged from 2020.

Looking ahead to 2022, despite uncertainty around inflation, interest rates and the global geopolitical situation, demand has stayed strong and interest rates favourable, leaving Persimmon in a strong position, the company said. It expects completions to be weighted towards its second half, as trading patterns normalise.

Analysts at Davy commented: "It expects to deliver full year volume growth of 4-7% and to maintain the group’s industry leading margins. We believe this guidance would suggest an upgrade of 2-3% at an operating profit level for FY22."

By Eric Cunha; ericcunha@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.


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