- Persimmon plc (LON:PSN) is performing well and throwing off increasing amounts of cash.
- Sales rates per site are running 20% ahead of pre-pandemic levels and prices are rising by almost 5% p.a.
- The group has upped its rate of land buying in the face of strong customer demand for new homes.
Persimmon Is Accelerating Their Cash Returns To Shareholders
Commenting on today’s trading update from Persimmon, Steve Clayton, fund manager of the HL Select UK Income Shares fund, which has a holding in the company said:
“Persimmon is performing well and throwing off increasing amounts of cash. Sales rates per site are running 20% ahead of pre-pandemic levels and prices are rising by almost 5% p.a. That’s enough to offset the cost pressures unfolding across the construction sector. The group has upped its rate of land buying in the face of strong customer demand for new homes.
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The cash is building up, with the group now sitting on £1.3bn of funds, with only £100m of land purchase obligations to meet. That’s an increase of half a billion pounds over the last year and the group are accelerating their cash returns to shareholders, bringing the next scheduled 110p per share payment forward to August. With Persimmon now paying a total of 235p per share, that puts the stock on a yield of 7.5%, backed by a business that is performing strongly with cash in the bank.
These are good times for housebuilders. The customers want to buy and financing is easy, with mortgage availability improving, at rock bottom rates. The challenge is to keep all the ducks in a row, because cost pressures are bubbling away, staff are hard to find and the government can change the degree of market support provided to homebuyers when it chooses. The market is choosing to fret about these risks today, with the shares dipping by a percent or so in reaction to the statement.”
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