Help to Buy lifts half-year sales at Persimmon

Kasmira Jefford
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PERSIMMON, Britain’s largest housebuilder, said government schemes to help struggling home buyers and increased access to mortgages helped lift reservation rates by almost a third in the first half of the year.

The company, which rejoined the FTSE 100 index last month after being relegated in 2008, said reservation rates had risen by 30 per cent since the government launched its Help to Buy Scheme in March, with 1,124 private homes secured so far.

That compares with a rise of 12 per cent for the total first half of the year to 30 June compared with the same period last year.

Total revenues for the first half rose 12 per cent to £900m and the average selling price also increased by five per cent to £179,200 as the group sold a greater proportion of family homes.

Persimmon completed 5,022 homes, a seven per cent rise, and said it now expects underlying operating margin to rise to 15 per cent in the first half, a year earlier than previously forecast.

Housebuilders have seen their margins improve thanks to buying land cheaply during the financial crisis and focusing on building in London and south east England where prices have stayed strong.

Analyst Views | What is your reaction to persimmon's first half trading update?

While volumes have continued to move higher, aided by help to buy and other measures, the immediate good news was on margins, which are six to 12 months ahead of schedule. Shares have had a great run, but we expect the positive newsflow to continue into 2014 and so stick with our “buy” recommendation.

Persimmon has published a positive trading statement as the first half comes to a close. Volumes have made a stepped improvement thanks to government stimulus and this is helping free cash flow and earnings per share. We are upgrading our forecasts for the years ending 2013, 2014 and 2015.

Persimmon and the housebuilding industry continue to make progress. Earlier government desires to rebalance the economy now look to have been overtaken by the need to generate growth, even if that growth again potentially builds on previous foundations. For now analyst opinion continues to denote a “buy”.