Persimmon enjoys strong third quarter to the year
In a trading update covering the period from July 1 to November 3, 2015, the company said customer activity strengthened in line with the traditional seasonality of the market.
Private sales rate in the period since it reported half year results on 18 August 2015 was 12 per cent ahead of last year, building on the 5 per cent stronger sales rate through the summer weeks.
Persimmon said the level of customer interest in sites had been “encouraging” with visitor numbers running 5 per cent ahead of last year while pricing remained robust across its regional markets.
The update said: “Mortgage approval volumes have continued the positive trend established since the start of the second quarter with approvals for house purchase in September 13 per cent ahead year on year. Mortgage interest rates have remained at attractive levels. With the introduction of improved regulation and Bank of England oversight measures mortgage lenders are required to remain disciplined credit providers. These structural improvements in the mortgage market will, we believe, support a more stable and sustainable outlook for the housing market in the UK in the future.”
The group said it expected to continue to generate strong growth, having successfully opened 105 new housing developments in the second half to date, with around 20 new sites set to open in the remaining weeks of the year.
Growth had also been supported by the opening of new businesses at Stockton in Teesside and at Castle Bromwich, both of which were trading well.
“The group’s drive to capture productivity improvements will support further increases in the number of new homes built, resulting in higher returns on the capital employed in the business being sustained over the long-term,” the update continued.
“Our Space4 insulated panel manufacturing facility will generate increasing efficiency gains with the planned further increases in output.
“We anticipate that this approach, together with the disciplined deployment of capital within the business, will achieve further improvement in the group’s return on capital employed from 27.5 per cent reported at the half year.
“The lower land cost recoveries on legal completions taken from our newly opened sites and the additional cost efficiencies captured from increased production will benefit the second half out-turn.
“Our operating margin continues to move forward and we expect further progress in the second half of the year from 20.5 per cent achieved in the first six months.
“We are now fully sold up for the current year and have around £780m of forward sales reserved beyond 2015, an increase of 12 per cent on the same point last year.”
Land availability, the company said, was improving as a result of the consistent application of the National Planning Policy Framework, with Local Plans identifying sustainable locations for residential development in increasing numbers.
“We remain focussed on investing in high quality land at this point in the cycle to provide a platform for the group to deliver superior returns and cash generation over the longer term,” it said.
“To date the group has acquired over 16,000 plots of new land during the current year.
“Looking ahead, we anticipate further good success in converting our strategic land into land with residential consent and have delivered around 25 per cent of the replacement land acquired so far this year from our strategic land portfolio.”
The group is likely to hold increased cash balances at the year end, subject to the timing of further land investment.
A further update will be given on January 7, 2016.