21st Aug 2018 11:47
LONDON (Alliance News) - Housebuilder Persimmon PLC said Tuesday it has continued to deliver on its long-term strategy, as it recorded a rise in first half profit and revenue.
Shares in the company were trading 0.2% higher at 2,448.0 pence on Tuesday morning.
"Conditions in the group's regional housing markets continue to be supportive, with resilient consumer confidence benefiting from strong employment levels, low interest rates, and a competitive mortgage market. We expect to experience the normal seasonal increase in customer interest as the summer holiday season draws to a close in early September," said Chairman Roger Devlin.
For the six months to the end of June, pretax profit totalled GBP516.5 million, up 13% from GBP457.4 million the year before, with total gross margin improving by 190 basis points to 30.8% from 28.9%.
Revenue grew 5.0% to GBP1.84 billion from GBP1.75 billion, as new housing revenue increased by 5.0% to GBP1.74 billion from GBP1.66 billion. Housing sales volumes rose by 3.6% to 8,072 new home legal completions.
Persimmon said it sold 8,402 homes during the period, up from 7,794 the prior year, with the average selling price of those homes standing at GBP215,813, up 1.2% from GBP213,262.
The group said it secured 11,072 plots of new land during the period, bringing its consented land bank to 101,445 plots, and added that its current forward sales position is at GBP2.12 billion, 6.0% ahead of the year before.
Persimmon returned 118.2 pence per share in the first half as part of an ongoing capital return programme, down from 126.5 pence per share distributed in the same period a year ago. The next capital return of 125 pence per share is slated for April 2019.
The group said that current trading is in line with expectations since July 1, as the average weekly private sales rate per site for the year to date is 0.76. For the six months period, this was at 0.78, in line with the year before.
The company has forward sold 6,258 new homes in the private sale market with an average selling price of GBP235,800. Current forward sales are 6.0% ahead at GBP2.12 billion from GBP2.01 billion the prior year.
Although customer activity and lower levels of cancellations are encouraging and pricing has remained firm, supply chain pressures and tight availability of traditional skilled trades have continued, and Persimmon have sought to alleviate this by using its standard house types and in-house manufactured brick, Persimmon said.
In terms of the market, Persimmon said that the development of government policy and its effect on the UK economy and more directly the housing market will determine future market conditions that will allow for an increased delivery of newly built homes.
Analysts gave off a positive opinion on Persimmon's interim performance.
"While already flagged to investors, the improvement in margins at Persimmon is likely somewhat better than expectations. The year has progressed well to date, and we see small upside risks to earnings for the full year," said Davy.
Peel Hunt, meanwhile, said the figures from Persimmon confirm that market conditions remain robust.
"Sales rates over the traditionally quieter summer months have held up, as have prices, while management remains confident about cost control," the broker said.
Peel Hunt said it sees forecasts nudging up, by around 3% to 5%, given the confident outlook and Persimmon's forward sales position being 6% ahead of a year before at GBP2.12 billion.
While the broker said it continues to see better value elsewhere in the housebuilding sector, Persimmon is undervalued in a market context given its "rock solid" dividend yield of 9.5%.
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