What housing crisis? Persimmon shares rise as profit jumps by a third

 
Emma Haslett
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UK's Biggest Housebuilder Postpones Start On New Homes As Sales Slump
Persimmon is still reliant on Help to Buy (Source: Getty)

Shares in housebuilder Persimmon rose in morning trading after the housebuilder defied the market by posting a jump in profits.

The figures

Pre-tax profits at the UK's biggest housebuilder rose 30 per cent to £457.4m in the year to the end of June, from £352.3m the year before. Revenues rose 12 per cent to £1.66bn, while legal completions rose eight per cent to 7,794.

The average price it sold its homes at climbed four per cent to £213,262, while it boosted its land bank by 9,319 plots, giving it a total of 98,712 plots. Forward sales climbed 15 per cent to £2bn.

It returned £77.1m to shareholders at the end of March in the form of a 25p per share capital return plan, in addition to the 110p per share - or £339.5m - it paid in July. It still plans to return 110p per share to shareholders each July until 2021.

Shares climbed 2.6 per cent to 2,622p in early trading.

Read more: Housebuilders are hooked on help to buy

Why it's interesting

You'd have thought housebuilders would have taken a beating from the Treasury's stamp duty hike on second homes in April last year, but it seems to be estate agents who have shouldered most of the burden. The likes of Persimmon have escaped relatively unscathed: indeed, shares are up by almost a quarter since then.

The only danger to the company is the end of Help to Buy: the Department for Communities and Local Government has said it will withdraw support by 2021, although reports at the beginning of this month suggested it has already asked a team from the London School of Economics to evaluate it. Among the housebuilders, Persimmon is the second-most reliant on the scheme, with around 55 per cent of its completions coming under Help to Buy, according to Liberum.

Still, the only gripe from analysts today seemed to be around its dividend.

"While net cash improved to £1.1bn management continue to stick with the 110p per annum capital return," said analysts at Peel Hunt

"Material share buy backs and/or an increase to the capital return have got to be forthcoming... we think others offer slightly better value in the shorter term."

Read more: Help to buy has built up housebuilders - but it can break them down, too

What Persimmon said

Chief executive Jeff Fairburn said:

The market remains confident. Customer interest in our developments remains strong with encouraging levels of interest through both our websites and our sales outlets as we trade through the quieter summer weeks.

Our private reservation rate over recent weeks is circa two per cent ahead year on year. While we remain vigilant to changes in market conditions we also recognise we are in a strong position to take advantage of opportunities that arise. We are looking forward to a good autumn sales season.

Read more: UK housing market may be hit by uncertainty after the election, here's why

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