Persimmon reports 8% rise in revenues

But analyst warns Brexit vote remains a ‘signification thorn’ in the firm’s side.

 

Rise in private sector housebuilding boosts construction activity

Persimmon has reported revenues for 2016 of £3.14bn – 8% higher than the 2015 total of £2.9bn.

Legal completion volumes increased by 599 new homes to 15,171 (2015: 14,572) while the group’s average selling price rose 4% to £206,700 (2015: £199,127).

“Sales reservations through the Autumn season were strong with healthy customer demand for new homes” the company said in a statement.

“Buying a new-build home remains a compelling choice supported by competitive mortgage offers which continue to make a new home purchase very affordable.”

 

The group’s private sales rate for the second half of the year was 15% ahead of the prior year and second half legal completion volumes of 7,933 were 695 stronger than for the first half of the year (7,238).

This, the group says, reflects a continued focus on “disciplined high quality growth” to achieve sustainable market share in our regional markets.

Two new housebuilding businesses opened at the start of 2016 based in Perth, Scotland and Launceston, Cornwall are reported to have made “good progress” delivering over 650 new homes in their first year of operation.

This week, the group launched a further new business based in Mansfield to support the delivery of increased volumes of new homes in this regional market.

Last month, the value of forward sales was £1,230m – 12% ahead of the previous year (2015: £1,103m).

The group successfully opened 255 new development sites across the UK during the year, and is building on all sites which have an implementable planning consent.

Gross margin in the second half is expected to improve further due to a combination of the continued reduction in land cost recoveries associated with opening new sites, and continued strong control over development costs.

During the year, the group acquired 18,700 plots of new land in 83 locations with good deferred terms.

And the group is confident of opportunities to acquire additional land whilst “remaining mindful” of the risks associated with the uncertainty of Brexit.

The group held cash balances of £913m as of December (2015: £570m).

As a follow-up, a further update on the group’s assessment of the housing market is expected next month with the announcement of full year-end results.

Responding to the Persimmon figures, Joshua Raymond, market analyst at XTB.com, said the group’s share prices still remain 13% below pre-Brexit highs, but had done well to recover since the vote to leave triggered a dramatic 38% fall.

“Since then, investor confidence has needed to have been rebuilt. The firm expects gross margins to improve in the second half of the year and forward sales remains strong at new land sites, which will help maintain that restoration of confidence.

“Nevertheless, the Brexit vote remains a signification thorn in the firm’s side and continues to hold the share price back at a time when UK stock indices are hitting record highs,” he said.

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