Persimmon profits soar but shares dip on slowdown in sales growth

THE biggest housebuilder in Scotland posted a two-thirds leap in halftime profits on Tuesday, but its shares fell due to faltering sales growth since the period-end and profit-taking after the stock’s good run.

Persimmon, which has big operations in Hamilton and Bathgate, revealed underlying pre-tax profits rose to £98.7 million in the six months to end-June from £59.7m. Revenues lifted 13 per cent to £806.7m.

Persimmon, whose main brands are Westbury and the more upmarket Charles Church, said profit margins had risen 3 percentage points to 12.2 per cent as it shrugged off tough mortgage lending conditions by building more family homes in affluent areas.

That is still some way off the 17 and 18 per cent margins the housebuilding industry enjoyed before the credit crunch of 2007 and subsequent chronic economic downturn.

The company’s shares fell 8p to 697p, as it revealed private reservations had slowed from 18 per cent growth in the first six months of 2012 to 5 per cent since the start of July.

City analysts also pointed out that Persimmon’s shares have leapt nearly 90 per cent in the past year, during which period the wider FTSE 250 index has added 18 per cent.

Persimmon said legal completions of homes rose 6 per cent to 4,712 and that average selling price lifted to £171,206 from £160,583.

The company’s northern division volumes, including Scotland, were up 21 per cent at 1,080 homes. New developments are to open over the coming months, including Dumfries, Dundee, Dalkeith and Paisley.

Nicholas Wrigley, group chairman, reined in excessive expectations, saying: “We expect conditions in the UK housing market to remain challenging reflecting the wider issues within the economy.”

Wrigley said he expected firm underlying demand for new homes, but that this would be offset by the “low level of mortgage availability”.

Richard Hunter, head of equities at Hargreaves Lansdowne Stockbrokers, said: “Persimmon continues to strive to regain its former glories.

“The key metrics are impressive, with noticeable gains in revenues, legal completions, operating margins and cash generation.”

That stronger cash generation in a gradually recovering housing market saw Persimmon earlier this year pledge to return £1.9 billion to shareholders over the next nine years to 2021. The company said it remained on track to make the first renewed dividend payment of 75p per share in June 2013.

Analysts said housebuilders had boosted their financial position by snapping up cheaper development land during the extended financial and economic downturn. The group’s had net cash of £135.2m at 30 June against borrowings of over £15m a year earlier.

Persimmon said it had acquired 5,779 new plots on 50 sites in the first half. Its total landbank represents well over six years of supply at current sales levels, it said.

Wrigley said he believed that, overall, the group had made an excellent start to the year, and that in current trading selling prices have remained stable.