Persimmon builds up interim profits

Housebuilder Persimmon hails consumer confidence but analysts remain bearish. Picture: Andy Laithwaite/pictures365

The Charles Church group said it had seen “encouraging” trading through the quieter summer months, with demand continuing to be supported by healthy employment trends and low interest rates.

This comes despite the Bank of England’s move to hike interest rates from 0.5 per cent to 0.75 per cent earlier this month - the highest level for nearly ten years.

Persimmon reported pre-tax profits of £516.3 million for the six months to 30 June, up from £457.4m a year earlier.

Chief executive Jeff Fairburn – who has come under heavy fire over his pay package in recent months – said the group is also set to deliver further “high-quality, sustainable growth”.

He said: “We have continued to experience good levels of customer interest in our housing development sites as we trade through the quieter summer season.

“Customers are continuing to benefit from a competitive mortgage market and confidence remains resilient based on healthy employment trends and low interest rates.”

Persimmon also said it had taken advantage of the prolonged hot summer weather to push on with its build plans and make up for delays caused by the snow and freezing conditions earlier this year.

“As a result, the group is now in a stronger position to offer a good range of house types for customers to choose from and which are available for delivery on appropriate timescales,” it said.

Persimmon said group revenues lifted 5 per cent year on year to £1.84 billion in the first half of the year, with house sales by volume up 3.6 per cent to 8,072.

Its group-wide average sale price lifted 1.2 per cent to £215,813, which marked a slowdown on the 4 per cent growth seen a year ago.

Forward sales since 1 July are 6 per cent higher at £2.12bn, with 6,528 new homes forward-sold in the private market at an average selling price of about £235,800.

But the firm continues to be dogged by controversy over excessive pay for top bosses.

Earlier this month, Fairburn was named top of a High Pay Centre list of the ten highest-paid bosses in 2017.

His £47m salary is around 3,000 times more than Persimmon’s lowest paid worker.

The company has also been criticised for agreeing pay deals for a string of top bosses worth more than £100m.

The group saw 48.5 per cent of investors vote against the pay plans in April as they vented anger over a £75m payout for Mr Fairburn.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Things are still heading in the right direction at Persimmon, but the pace of progress is slowing from the breakneck speed attained last year. This is a pretty healthy set of results by anyone’s standards, but clearly presents a backward look at performance.”

Alasdair Ronald, senior investment manager at Brewin Dolphin in Scotland, said: “Investors will be well rewarded with large dividend payments for the next three years, which will underpin shareholder returns; but prospects of capital growth are looking somewhat more limited.”

And Shore Capital analyst Robin Hardy While we may have to nudge up our forecasts for the current year, we still believe that profits in FY2019 and FY2020 will be flat at best and most likely in shallow decline as margins fall.