Investing.com — Shares of Persimmon (LON:PSN) jumped over 5% on Tuesday after it reported a 7% increase in home completions for 2024, surpassing market expectations.
The UK-based housebuilder delivered 10,664 homes in total, beating consensus of 10,511 and guidance of around 10,500, with the private home sector showing particularly strong growth.
“This chimes with what we are seeing on the ground that the housing market is performing better than the share prices so far this year suggests,” said analysts at RBC Capital Markets in a note.
Private home completions rose by 18%, amounting to 9,075 homes, while partnership homes saw a decline, falling to 1,589 from 2,241 in 2023.
The increase in completions was driven by a mix of higher demand and strategic investments.
The company’s private average selling price edged slightly higher to approximately £287,150, up from £285,774 the previous year.
This price growth was supported by an improving market environment and a favorable mix of homes sold.
On the other hand, partnership homes saw a more substantial price increase of 6%, bringing the ASP to £161,900.
As a result, the blended ASP for all homes stood at £268,500, a 5% increase year-on-year.
Persimmon’s strong performance also extended to its sales rates, with net private sales per outlet per week climbing by 21% to 0.70, compared to 0.58 in 2023.
The company also increased the number of outlets it operated, opening approximately 100 new sales locations over the course of the year, bringing the total to 270 outlets by December, up 5% from 2023.
In terms of financial performance, the company expects its full-year underlying profit before tax to fall at the higher end of market expectations, within a range of £349 million to £390 million.
The company’s forward sales position saw an 8% increase, rising to £1.15 billion, driven by a 31% jump in private forward sales. The private ASP in forward sales was also higher, at around £276,850, reflecting a 4% year-on-year increase.
Persimmon’s balance sheet remained strong, with net cash of £260 million at year-end, although this marked a decline from £420 million at the close of 2023.
The company attributed the drop in cash to its ongoing investments, including £60 million spent on building safety remediation, bringing the total to £120 million.
These efforts are part of Persimmon’s commitment to ensuring the safety of its developments, with remediation works completed or underway on over 70% of known affected sites.
Going forward, Persimmon remains cautious about the potential challenges posed by macroeconomic and geopolitical uncertainties, including changes to interest rates. Despite these concerns, the company is confident in its ability to manage costs, due to its land investments and vertical integration model.
With an improved forward order book and a strong land bank, Persimmon is poised to continue its growth in 2025, with the aim of expanding its outlet base to over 300 locations in the medium term.
“On a longer-term view – Persimmon trades at a 22% premium to the sector, and we continue to expect it to under perform its peers in the year ahead,” RBC added.
