Leading house builders set to keep mood upbeat with profit rises

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Two of the UK’s biggest house builders, Taylor Wimpey and Persimmon, are due to shrug off the gloom surrounding the property market this week with significant increases in profits expected.

Both housebuilders have provided bullish trading updates in recent months and are expected to report strong performances in the second half of 2010 despite the Comprehensive Spending Review in the autumn which deterred buyers and the snow in December which disrupted sales and building work.

Rivals Barratt Developments and Redrow have both posted upbeat results in recent weeks after they built more family homes rather than flats to reduce their exposure to first time buyers struggling to get mortgages.

York-based Persimmon, headed by chief executive Mike Farley, is tomorrow expected to report pre-exceptional pre-tax profits of £88m, up from £7m in the previous year.

In January it said it had achieved a significant increase in underlying profits for 2010 after turnover lifted by 10 per cent to around £1.57bn.

This followed the completion of 9,384 sales in the year at an average price of £167,000, itself an improvement of six per cent.

The house builder has doubled its margin to eight per cent over the past year, helped by building more family sized homes and less apartments.

Persimmon announced the end of a two year dividend drought in August when it reported improved trading in the first half of 2010.

The former FTSE 100 company restored its dividend with a pay-out of 3p a share – the first such award since it offered 5p a share in August 2008.

The move followed underlying profits of £39.4m the six months to June 30, which compared with losses of £16.7m last time.

Revenues lifted 27 per cent to £776.6m in the first half on the back of a 16 per cent increase in new home completions and a rise of 8.6 per cent in average selling prices.

Taylor Wimpey is forecast to post pre-exceptional pre-tax profits of £51.2m in 2010 on Thursday, compared with losses of £96.1m the previous year, as it cuts costs in the UK and sees strong sales growth in the US. Revenues are expected to be flat at £2.6bn.

Taylor, which trades as Bryant Homes, Laing Homes and George Wimpey, returned to profit in its half-year results as it focused on margins rather than sales growth and its average sale price increased by 10 per cent as it built less flats.

The group, which builds houses in the UK, US and Spain and Gibraltar, recently said it has driven more cost savings than it expected. In the UK, it slashed build costs by 10 per cent in the first half of the year and is now expecting to beat targets for 2011 after driving further savings in the second half.

It may also give an update on recent buy-out approaches for its North American arm, Taylor Morrison.