Persimmon suffers ‘material’ slowdown in sales during lockdown

Housebuilder Persimmon has got back to work on its construction sites this week, amid a ‘phased process’ of reopening.

The group, which is holding its annual general meeting today, said customer inquiries had remained at ‘good levels’, even during the lockdown period. 

But, after a ‘robust’ start to the year, the company admitted that social distancing and heightened economic uncertainty had triggered a ‘material’ slowdown in the company’s sales in recent weeks. 

In the past year, over half of the group’s sales stemmed from first-time buyers, with Government Help to Buy schemes continuing to help bolster sales across the housebuilding market.

During the last year, Persimmon’s forward sales have fallen by 11 per cent from £2.7billion to £2.4billion.

In the six weeks to 26 April, Persimmon made 962 gross private reservations and 948 completions. 

William Ryder, an equity analyst at Hargreaves Lansdown, said: ‘The big question is, which side of the equation moves in the next few months. 

‘Persimmon will be hoping that sales volumes rebound, but if we enter a recession demand could take some time to recover. In this case, volumes may fail to recover or house prices may fall – either option is unpleasant.’  

While sales may have temporarily fallen, the average price of a Persimmon new-build is on the up.

Homeowners having a Persimmon home built can now expect to pay around £244,500, up from £237,850, or £6,650, more than a year ago. 

Persimmon said the new higher average price remains around 17 per cent below the national average.

The housebuilder, which like others in the market, has leaned heavily on Government Help to Buy Schemes to help strengthen its sales in the last few years, said over half of its new private homes built in the last year had been sold to first-time buyers.

Over 20 per cent of homes sold over the period came from its ‘Partnerships business’, which, it claims, ‘serves those on lower incomes.’

In the past five years, the group also said it had provided over £1.6billion worth of social housing ‘to support the creation of inclusive and sustainable communities across the UK.’ 

Persimmon, which has not furloughed any of its workforce during the crisis, has a £600million cash stash and a further £300million in undrawn credit.  

While its dividend payments have been suspended for the moment, this policy will be reassessed later this year.

The company’s executives have given up cash bonuses and taken a temporary 20 per cent base salary cut.

In response to the Covid-19 pandemic and Government interventions, workers at Persimmon’s construction sites downed tools last month, but a gradual reopening of the sites is now underway. 

Scheduled works for existing Persimmon homeowners will begin ‘as soon as restrictions on home visits are relaxed’, the group said. 

Dave Jenkinson, the company’s chief executive, said: ‘Persimmon is responding to the crisis from a position of strength, to the benefit of all its stakeholders; our long-term strategy and business model recognises the cyclical nature of the housing market, minimises financial risk through the cycle, and provides the flexibility needed to manage effectively through this difficult period.’

He added: ‘The Government has been clear that it wants the UK’s housebuilders to get back to building and this week we have started the phased process of getting back to work safely on site in order to deliver the new homes the country needs.’

In its stock market update today, Persimmon said it recognised the ‘important contribution’ it made ‘to the economy and wider society.’ 

Persimmon’s share has price performed strongly today and at the time of writing was up 3.98 per cent or 88p to 2,298p. 

A year ago, the group’s shares stood at around the 2,269p mark. By February this year, the share price had swelled to over 3,260p, but dropped sharply as the pandemic took hold.