Listed builders report slump in housing completions

Persimmon is among a slew of listed housebuilders that have today reported sharp falls in revenue caused by the covid-19 crisis in a raft of trading updates to the City.

The UK’s most profitable housebuilder said completed sales for the first six months of the financial year to June 30 had fallen by more than a third, from 7,584 to 4,900, while its revenue fell by 32% to £1.19bn.

However, the firm said it had seen strong reservations of new homes since the market re-opened on May 13, with average weekly reservations in the last six weeks running 30% ahead of the same period in 2019.

Group chief executive Dave Jenkinson said the firm’s build programmes had now returned to normal levels of productivity, and that the firm was in a strong financial position, with £830m of cash in the bank. While he said the longer term outlook for market remained uncertain, he said: “Persimmon is in robust health, and fully able to play its part in delivering the new homes the country needs to support the UK’s recovery”

At the same time Vistry, formed at the start of the year from the merger of Bovis Homes with Linden Homes and Galliford Try Partnerships, said that private completions for the first six months of the year – also to June 30 – fell by two thirds, from 3,371 to 1,235. Within this, the sale of homes to affordable housing providers fell even more sharply, dropping by nearly 80%.

However, the firm’s partnerships business performed much more strongly, with its mixed tenure business seeing completions dropping by just 15%, and its contracting business actually delivering an increase in units completed compared the to same period last year.

Combined, revenue from the two businesses fell by 46% to hit £641m, with the firm saying it expected the drop in workload to impact margin. However, the firm said site productivity had now increased to 90%, and that sales had picked up to 0.62 per site per week since lockdown restrictions on the market had been lifted. Chief executive Greg Fitzgerald said the partnerships business had demonstrated its market resilience and had quickly accelerated productivity as lockdown restrictions eased.

He said: “This high growth, counter cyclical part of the business is a significant differentiator for the Group,” adding that “We have seen an ongoing pick up in sales over the past eight weeks with prices remaining firm, giving us a strong forward order book and confidence for the second half.”

Meanwhile an end of financial year trading update for housebuilder and land trading firm MJ Gleeson reported the firm had seen a 29% fall in completions over the 12 months, down to 1,072. However, it said the business had now seen demand return to around 80% of pre-covid levels and that the business still planned to open 25 new sites over the next 12 months, bringing its total to at least 80.

The firm said its site productivity was running at just 60%, but that this was expected to increase to 80% by September.

James Thomson, chief executive of Gleeson, said the impact of Covid-19 on the FY2020 results was “as expected”. He said: “What is pleasing is that the business has demonstrated its underlying resilience in the face of enormous challenges and we are starting the new financial year in a strong position.”

Earlier this week housebuilder Barratt said it saw completions in the first six months of the year fall by around 30%, while Redrow last week reported a drop in completions of 37%. The Construction Product Association has estimated that housebuilding output in the UK will drop by 42% in 2020, with housing starts down around 60%.

David O’Brien, equity analyst at Goodbody said Persimmon’s figures indicated a “very strong performance” in the circumstances. He said: “The context is similar to peers in that pricing is firm, sales rates have rebounded strongly and build capacity is increasing. However, completions are stronger and on build rates, Persimmon is well ahead of its competition.”