Persimmon powers ahead on the back of recovery

Persimmon, Scotland’s largest housebuilder, unveiled a 57 per cent jump in first-half profits yesterday as it rode the wave of a gathering economic recovery “supporting increased confidence in our regional markets”.

Persimmon's underlying pre-tax profits rose to 212.9 million in the first six months of 2014. Picture: Cate Gillon

Despite the summer months traditionally heralding a slowdown, chief executive Jeff Fairburn said the firm, which has big operations in Bathgate and Hamilton, has forward sales from 1 July running at £1.53 billion, a rise of 22 per cent compared with last year.

“Persimmon has produced another strong performance in the first half of 2014, taking advantage of the current market conditions to deliver growth whilst strengthening the financial position of the business,” Fairburn said.

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He said visitor levels to its sites this summer were up 6 per cent and that this, allied with the forward sales book, “gives us good visibility to press on with the build”.

The company’s underlying pre-tax profits rose to £212.9 million in the first six months of 2014, compared with £135.3m in the same period of 2013.

Profit margins rose 2.6 percentage points to 17.7 per cent. They are now at levels that were enjoyed by leading players in the housebuilding industry before the credit crunch of 2007 and subsequent chronic economic downturn sent sector margins well below 10 per cent.

The company said it had net cash of £326.3m at the end of the period, compared with £48m last year, while underlying earnings per share were up 61 per cent at 54.8p.

Persimmon’s robust performance came the day after rival Bovis Homes posted a 166 per cent rise in interim profits, although Nationwide said this week that quarterly gross mortgage lending had fallen amid signs of cooling in the housing market.

The results cover a period when new rules for lenders checking whether borrowers can afford their loan – the mortgage market review – have come into force. Nationwide said these had had some impact as its lending fell.

But Nicholas Wrigley, Persimmon’s chairman, said: “We welcome the continued discipline of mortgage lenders against the backdrop of the ongoing improvement in the UK’s wider economic performance which is supporting increased confidence in our regional markets.

“Disciplined lending in support of a keen appetite to purchase newly built homes from both first time buyers and existing home owners provides the opportunity for the housebuilding industry to increase activity.”

He added that, while the company “remains vigilant about the continued challenges facing our markets emanating from events both at home and abroad, I remain confident of Persimmon’s continued successful development”.

One analyst commented: “It’s a decent performance from Persimmon against a reasonably buoyant backcloth for tightly run housebuilders that have a clear strategy. I think both it and Bovis will be the subject of buy notes from brokers.”