Persimmon posts 57 per cent profit rise

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HOUSEBUILDER Persimmon posted a 57 per cent profit rise and said it was trading ahead of last year in the traditionally slower summer period, having seen little evidence so far of a recently flagged slowdown in the housing market.

Its shares jumped to a five-month high in early morning trading before giving up early gains to trade up 0.9 per cent at 1,348p at 3.55pm.

York-based Persimmon, whose lime green logo sprouts from some 400 developments across Britain, is among major housebuilders to have benefited from Government schemes such as “Help to Buy”, which enables buyers with small deposits to get a mortgage.

Chief executive Jeff Fairburn said the group had worked hard to increase volume to meet demand, encouraged by Government measures to underpin the housing market and help stimulate broader economic growth.

Persimmon sold 6,408 new homes in the six months to end-June, up 28 per cent on the year before and reflecting the same trend as benefited rival Bovis Homes, which on Monday posted a 150 per cent profit jump thanks to a record number of completions.

Help to Buy, under which the Government offers a guarantee for any mortgage borrowing above 80 per cent of a property’s value up to a maximum 95 per cent, along with the growing availability of mortgage financing, have been instrumental in the market’s upturn.

Property prices recorded their biggest annual rise last month since the start of the financial crisis, according to Yorkshire-based mortgage lender Halifax.

However, there are signs that rises might be starting to moderate, with a survey on Monday showing asking prices falling in August at the sharpest rate on record for that month.

Mr Fairburn said Persimmon was seeing a “little bit more seasonality” but visitor levels to its sites this year were still up about 6 per cent on the year before.

“We are pleased with the rate we are seeing,” he said. “We have good forward sales (of properties reserved or bought but not yet completed), up 22 per cent at £1.5bn, which gives us good visibility to press on with the build.”

Sales reservations in the traditionally slower summer months were ahead of last year, up 9 per cent in the period since July 9, he added.

Persimmon, which flagged last month that revenue had risen by a third to £1.2bn, reported a first-half underlying pre-tax profit of £212.9m.

Analyst Clyde Lewis at brokerage Peel Hunt, who has a “hold” rating on the stock with a price target of 1,455 pence, said Persimmon had made excellent progress in the first half.

“Recent trading has held up well, despite tougher comps,” he said, referring to comparisons with last year’s numbers.

“Management expects to see first-half volumes account for 48 per cent of full-year figures; this implies a small upgrade to our estimates, along with a slight tickle on our average selling price assumption.”

Analysts are predicting that the builder will post a full-year pre-tax profit of £439.2m.

Yorkshire market is ‘sound and stable’

The average selling price of a Persimmon home in Yorkshire was just over £150,000 in the first half of 2014.

The York-based company sold just over 350 units during the period. It hopes to sell between 700-800 in the second half of the year.

Mike Killoran, finance director, told The Yorkshire Post that the region’s market is “sound and stable”.

Persimmon operates across the UK but has no exposure to the London housing market.

Mr Killoran said: “Out in the regions, where we are, the further away you travel, it is a steady and sustainable market in our opinion.”