Resilient trading and profit up for builder
HOUSEBUILDING GIANT Persimmon brushed aside concerns over the impact of the recent interest rate hike as it posted a 13 per cent leap in profits and said customer demand remained resilient.
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 10 years.
Persimmon reported pretax profits of £516.3m for the six months to June 30, 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 £1.84bn 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.
Its average private sale price for the Persimmon brand rose 4.4 per cent to £223,308 and the sales price for Charles Church increased by 2.2 per cent to £355,574. Forward sales since July 1 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 around £235,800, according to Persimmon. Earlier this month, Mr Fairburn appeared at the top of a High Pay Centre list of the 10 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, a 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. The future is not looking quite as rosy as the recent past however, with house price growth moderating and sales not as buoyant as they were.
“A further worry is the Help to Buy scheme, which has been a lynchpin in the UK housing market. While this still has three years left to run, all eyes will be on the Budget this autumn to see if the Chancellor intends to extend the scheme in some way.
“The housebuilders have certainly had a good innings, and conditions are still fair with low unemployment, affordable borrowing costs, and the Help to Buy scheme continuing to support demand for now. However there is a growing sense we are getting to the tail end of the housebuilding boom.”