BOE's move to reduce base rates in August helped keep pricing firm, say Persimmon
Companies: Persimmon Plc
UK housebuilder Persimmon put out a positive trading update this morning saying performance immediately following the EU Referendum had been "encouraging", and that customer activity in the autumn selling season had strengthened in line with the traditional seasonality of the market.
The firm said sales were 19% ahead of last year, and that resilient consumer confidence and strong lender support had benefited the market.
"Our private sales rate in the period since we reported our half year results on 23 August 2016 has been 19% ahead of last year, representing a continuation of the stronger sales rate experienced through the summer weeks. We are now fully sold up for the current year and have c. £757 million of forward sales reserved beyond 2016, an increase of 4% on the same point last year (2015: £726 million)."
The BOE's move to reduce base interest rates in August has made mortgage products more attractive, especially for first-time buyers, and according to Persimmon, this has kept pricing firm.
The company's share price rose 2% in early trading and currently trades on a multiple of 9.84.
Despite the company not seeing an immediate impact from Brexit, management said uncertainty surrounding the potential impact of the EU Referendum on the UK economy would continue "for some time", and that the company remained cautious in its new land investment strategy:
"We acquired 7,580 new plots of land, and spent £116 million, including payment of deferred land creditors, during the period. To complement land acquired in the open market we expect continued success in converting our strategic land into land with residential consent. We have delivered c. 55% of the replacement land we have acquired so far this year from our strategic land portfolio."
The group has strong cash generation, central to its long-term strategy, and is likely to have increased cash balances by the end of the year (£570m 2015).
