Builder’s revenues soar as market recovers

HOUSEBUILDER Persimmon reported a strong finish to 2013 and said it has high hopes for further growth in 2014 as demand picks up pace.

Jeff Fairburn of Persimmon

The York-based firm reported a 21 per cent leap in 2013 revenues, at the top end of analyst expectations, helped by higher selling prices and strong customer demand.

The country’s largest housebuilder by market value said revenues for the year to the end of December stood at £2.1bn.

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The group, one of the YPQuoted winners of 2013 following a 47 per cent leap in share price, said its average selling price rose four per cent to £180,900, helped by a move to build more lucrative and popular traditional family homes.

Chief executive Jeff Fairburn said there has been a shift towards a larger range of properties.

“It’s still first-time buyers, but we’re also selling larger properties as people trade up,” he said.

The group has sold a number of large four-bed Charles Church properties as Government initiatives to spur the first-time buyer market have encouraged people further up the chain to trade up.

The housebuilding sector was given a boost last year when the Government announced measures to help struggling buyers purchase properties with small deposits. This raised demand and improved market sentiment.

However, the Government was later criticised by economists for extending its Help to Buy scheme in October to make it easier for homebuyers to get mortgages with a five per cent deposit.

To counteract this, the Bank of England announced in November it would scrap the aspect of its Funding for Lending Scheme that offered banks cheap finance if they increased mortgage lending.

This raised concerns that the market could dip again if such support was removed, but Mr Fairburn dismissed such claims.

“We’re not one year in to the three years of Help To Buy. It’s still got a long way to run,” he said.

He added that as the market picks up, more new mortgage products are coming out.

“Already lenders are willing to lend at 95 per cent mortgages outside Help to Buy. The banking sector is willing to lend money. We’ll see other products come available that will enable Help To Buy to run its course,” he said.

He said that if there was another clampdown on lending, Persimmon could always reintroduce its own shared-equity products.

“If we needed to re-introduce them we’d do so,” he said. “We used them very effectively before Help To Buy from 2008 to last year.”

The group opened 85 sites in the second half of 2013 and entered the new year with 390 active sites across the UK.

It anticipates opening another 90 sites in the first half of 2014, including a number in York- shire.

“Our two businesses in Yorkshire are in a great position. I’m really pleased,” said Mr Fairburn.

“We have some great sites. In Leeds and York the local authorities are getting to grips with housing targets to provide family housing so people don’t have to move out of the city.”

Wayne Gradwell, managing director of Persimmon Homes West Yorkshire, said: “We have a significant number of new outlets and we are certainly entering an exciting period of growth in West Yorkshire.

“We have recently commenced construction works on new developments in Bradford, Rotherham, Morley and Leeds.

“Both Daisy Hill at Morley and Whinmoor, Leeds were brought through from strategic land that we have been able to secure planning through Leeds City Council and the two developments combined total approximately 300 homes.”

The company is responding to market demand by increasing its construction activity across the country.

Mr Fairburn said the group could increase volumes by a further 12-15 per cent in 2014 based on current reservation rates.

Persimmon delivered 11,528 new homes in 2013.

The group said it expects to deliver strong underlying pre-tax profit growth in 2013 when it published its full 2013 results next month.

Analysts are expected to raise their forecasts from the current £293m-£323m range.

What the analysts say

Analysts gave Persimmon’s trading update the thumbs up and said it bodes well for the rest of the housing sector.

Anthony Codling, at Jefferies, said: “Persimmon was the first UK housebuilder to report in 2014 and it set the scene for another year of threefold growth: of volumes, selling prices and operating margins. It is likely that the first quarter of 2014 will be a strong one for the UK housebuilding sector.”

Analyst Gavin Jago, at Shore Capital, said: “This is a strong statement driven by private sales rates in the second half that showed continued growth. The company enters 2014 with a healthy forward order book.”