Stimulus schemes see profits at builder soar 52pc

The builder said pre-tax profits increased 52 per cent to £225.1m in 2012, with margins, output and prices all rising.

Forward sales topped the £1bn mark at the start of the year, up nine per cent on a year earlier.

York-based Persimmon said it is on course to pay out £227m in dividends, worth 75p per share, in June. That will be the first tranche of its plan to return £1.9bn of ‘surplus capital’ to shareholders by 2021.

Operating margins surged to 13 per cent from 10 per cent a year ago, as the builder benefits from building on land acquired cheaply during the downturn, erecting more family homes and driving a hard bargain on costs.

Persimmon threw off £179m of cash during the year.

It expects margins to hit 15-17 per cent in the next 12-18 months. However, that remains short of its 2007 operating margin of almost 22 per cent.

“We are encouraged by the start we’ve had to this year but conditions remain pretty similar,” said chief executive designate Jeff Fairburn.

“There are some small improvements in the mortgage market. We’re pleased with what we’ve seen so far, but it’s largely driven by mortgage availability and (improving) rates.”

The housing market is being propped up by Government schemes including the NewBuy mortgage indemnity incentive, FirstBuy, which shares the equity burden with new buyers, and Funding for Lending, where lenders get subsidised loans from the state.

NewBuy, where builders and the state underwrite the risk for banks and building societies, comprised four per cent of its private sales for 2012.

Persimmon took a slice of the equity in 26 per cent of its sales during 2012. Of these, FirstBuy, which supports first-time buyers, comprised 16 per cent of its completions.

Persimmon now has £203m of shared equity on its balance sheet, up from £164m in 2011. Redemptions are coming through as these buyers sell on, and Mr Fairburn said bad debts are low.

“The Government schemes have been good for us and we are very pleased with the support we’ve had but it’s some time really before we could leave these schemes behind,” said Mr Fairburn, who replaces outgoing CEO Mike Farley in April.

“We’re pleased with what the Government has done to support the industry and stimulate the housing market, because it’s an important driver of the economy.”

Figures from the British Bankers’ Association yesterday showed mortgage approvals dipped 14 per cent year-on-year in January, as heavy snowfall hit sales.

But Persimmon said it has made a “strong” start to the year. Its weekly private sales rate is three per cent ahead of last year so far in 2013, while visitor traffic is four per cent higher.

Revenues rose 12 per cent to £1.72bn in 2012, while average selling prices increased six per cent to £175,640.

Chief executive Mike Farley said: “We expect trading conditions in the UK housing market to remain challenging but believe that the group is in a robust position to continue its progress.”

Persimmon sold 9,903 homes over 2012, up six per cent from 9,360 the year before.

It has already opened 45 of the 90 sites planned for the first half of 2013 and anticipates it will have 390 by the summer, an increase of five per cent.

Mr Farley said Persimmon plans to continue growing to an “optimal larger scale”, and has scope to grow to 14,000 annual completions from its 24 UK offices.

But Mr Fairburn said while the group hopes output to be ahead of last year, the exact target “remains to be seen”. “The economy is still pretty fragile,” he said. “We are hoping to build through to that as an optimum size, but that’s going to take some time. We will wait for the market to produce more volume.”

It acquired 14,800 plots during the year. Of this, 38 per cent was progressed through its strategic land bank – where it owns or controls a stake on land with the intention of securing planning permission.

That took its forward land bank to 68,200 plots, providing almost seven years’ supply at current levels. It plans to reduce its land bank to an ‘optimal’ level of five years’ supply.

Mr Farley added Persimmon is able to “stand back” from the land market if it overheats.

Shares in the company shed 11p to close at 898.5p.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “Persimmon has delivered strong progress, with the performance underwritten by highly-supportive Government measures.

“Initiatives to encourage first-time buyers are clearly playing their part, whilst the Government’s Funding for Lending scheme does appear to be easing the problem of mortgage availability.

“Group self-help initiatives are also contributing, while the company’s better health coming into the credit crisis has helped it formulate a previously announced long-term strategy for cash returns to shareholders.”

Bovis beats forecasts

Bovis Homes reported 2012 pre-tax profits of £54.1m, up 69 per cent on 2011.

That beat the 60 per cent rise expected by a consensus of 15 analysts. Sales rose 15 per cent to 2,355 completions and revenues climbed 17 per cent to £425.5m.

Operating margins surged to 13.4 per cent from 10 per cent a year earlier. The housebuilder’s average prices rose five per cent to £170,700.

Chief executive David Ritchie said: “These improve-ments have been achieved through the compound positive effect of increased volumes, improved sales prices and stronger margins.”

Its total dividend surged 80 per cent to 9p per share.