Persimmon share price falls despite profits jumping 44 per cent

Jessica Morris
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The figures

Persimmon, the UK's biggest listed housebuilder, said underlying pre-tax profit jumped 44 per cent to £475m for the fiscal year 2014, up from £330m a year earlier. Full-year revenue rose 44 per cent to £475m, up from £330m in 2013. Completions - the number of homes built - rose 17 per cent to 13,509 while the average selling price increased 5.3 per cent to £190,533. The company also bought forward the dividend of 95p from July to April.

Persimmon's share price fell as much as 5.6 per cent today, before recovering slightly, and was trading down 3.2 per cent at 1.665 pence in mid-morning trade.

Why it's interesting

Last year, the property market boomed throughout spring and summer, and some even argued a bubble was forming. However, after stricter mortgage lending rules were introduced by the Bank of England, the market's meteoric growth finally started to slow. Figures from the Official of National Statistics showed house prices rose 9.8 per cent in the year to December, or slightly down from November's 9.9 per cent.

As expected, Persimmon's trading was in line with this, as the surge at the start of the year abated somewhat.

"Activity levels in the spring had been particularly strong. Mortgage lenders' support for Help to Buy, together with robust customer interest resulted in a significant uplift in customer enquirers. We experienced a return to more balanced market conditions in the autumn," Nicholas Wrigley, Group Chairman of Persimmon, said.

Interestingly Persimmon said so far, this year's sales have outperformed last year's by about five per cent, with the home builder remaining upbeat outlook for the rest of 2015.

"The reduction of stamp duty on house purchases for the majority of home buyers introduced in the Autumn Statement last year is supporting sentiment and reducing costs for potential house buyers," Wrigley said.

However, despite the outlook being largely positive, it warned over the impact of the general election in May.

"The typical seasonality of trading in the industry may be disturbed this year with sales rates picking up into the autumn depending upon the implications of the result of the General Election," it said.

What Persimmon said

Nicholas Wrigley, group chairman of Persimmon, said:

Persimmon delivered a strong and well balanced performance in 2014.

We have undertaken disciplined investment to support sustainable growth in volume, increasing the number of completions by 17% in the year, bringing the increase in the number of new Persimmon homes completed over the last two years to 36%.

We have had an encouraging start to 2015 and experienced a solid opening period to the spring season with current total forward sales of £1,490m, 5% ahead of the previous year. Despite some uncertainty arising from the General Election in May, the ongoing gradual improvement in the UK economy and increasing mortgage lender support provides a supportive backdrop for the new homes market.

In short

Persimmon shrugged off a slowing housing market to deliver strong full-year sales, and issue an upbeat outlook for 2015. However, the company's share price fell today, suggesting investors are not completely convinced.

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