House builder reports surge in profits
Persimmon has reported a surge in pretax profit due to better margins on newly opened sites and control of development costs.
The house builder, in its results for the six months to 30 June, reported underlying pre-tax profit of £59.7 million - up 52 per cent from £39.4 million the previous year. Its operating margin increased from eight per cent to nine per cent, while turnover fell from £776.6 million to £712.8 million.
Its order book stands at slightly more than £1 billion - up by 10 per cent from £912 million.
Affordable housing made up 19 per cent of the company’s sales - up from 18 per cent. Persimmon has sold 3,000 homes to housing associations for this year and next and has also secured £21 million from the Homes and Communities Agency for 2,000 homes in 2013 to 2015.
Persimmon has also been granted £35 million under the government’s Firstbuy shared equity scheme, which will help it build 2,100 new homes.
Nicholas Wrigley, chairman of Persimmon, said: ‘We remain committed to our strategic objectives of margin improvement and cash generation.
‘As a consequence our teams across the country remain focussed on the basics of house building in their local markets which I am confident will deliver future success for the group.’
The results were welcomed but a warning was issued for the sector saying that there were challenging times ahead.
Paul Connolly, a director at project and construction consultancy, Turner & Townsend, said: ‘Overall, a good set of numbers for Persimmon, which is a barometer for the housing market as a whole.
‘Persimmon, it’s clear, have focused on getting fit for the future and are structuring their business to be able to thrive in a more adverse economic environment.
‘House builders generally are in a more robust position than a year ago and continue to move in the right direction, but further challenges lie ahead.
‘People buy houses when they feel confident and confidence is in short supply at present given rising living costs and the ever-present threat of unemployment.
‘The fact that house prices are falling in most areas of the country also hits confidence and may even see people delay committing to a purchase in the hope of getting property at a lower price further down the line.
‘On a positive note, there is increased competition among the lenders with some exceptional mortgage rates available at present, even at higher LTVs. While criteria remain tough, this will add to demand and drive transactions.
‘Interest rates also now look to be set in stone for at least another year, which will provide a degree of support to the property market moving forward.’