Persimmon outperforms market with Help to Buy boost
Bucking the wider trend of a slowing UK housing market, the firm unveiled pre-tax profits of £516 million for the six months to 30 June, up from £457m.
Britain’s second biggest housebuilder, which has been one of the biggest beneficiaries of the government’s Help to Buy programme, sold 8,072 new homes in the first half of the year, up 4%. The average selling price increased by 1%, to £215,813.
Persimmon said it was well positioned to deliver further growth in the second half of the year
Jeff Fairburn, group chief executive, said: “These strong results reflect the continued successful delivery of the group’s long term strategy and our commitment to meeting customer demand in each of our 30 regional markets across the UK.
“We have continued to experience good levels of customer interest in our housing development sites as we trade through the quieter summer season. Customers are continuing to benefit from a competitive mortgage market and confidence remains resilient based on healthy employment trends and low interest rates. Our forward sales are 6% ahead of last year at £2.12bn which places the group in a strong position for the second half of the year.
“The group continues to invest in the business to improve operational capacity. The increased utilisation of the group’s standard house types and the greater use of the group’s offsite manufacturing capability will support the group’s aim to deliver further increases in new home volumes.
“The group has a robust platform to continue to deliver successful outcomes based on its high quality land bank, strong forward sales, excellent financial position, and experienced management team. We believe we are well positioned to deliver further high quality, sustainable growth.”
Alasdair Ronald, a senior investment manager at Brewin Dolphin in Scotland, said: “Revenue growth of 5% had been flagged last month, boosted by volume growth and higher average sales prices, and this helped drive a 13% increase in pre-tax profit in the first six months of 2018. It’s good to see positive movement in Persimmon’s underlying operating profit, which rose by 13% to £518.2m, and also further margin growth, rising to 30.8%.
“This is probably towards the top end of what can be achieved; although margins are being helped by the increasing use of materials that are produced by group subsidiaries (bricks and timber-frame units) and Persimmon is also looking to employ its workforce directly, rather than using subcontracted labour. The company is seen as the ‘blue chip’ in the sector and this is now reflected in the premium rating of the shares. Investors will be well rewarded with large dividend payments for the next three years, which will underpin shareholder returns; but prospects of capital growth are looking somewhat more limited.”