Tuesday preview: Persimmon to report strong first half results

Persimmon is expected to shrug off Brexit uncertainty with a jump in profits in its first half results, due on Tuesday.

In an update on 5 July, the housebuilder said trading during the first half of the year has been “strong” with a 6% year-on-year increase in the number of completions to 7,238 new homes and a 6% rise in the average selling price to £205,500.

The group reported a 12% increase in total revenue to £1.49bn, saying low borrowing costs and a healthy labour market supported consumer confidence.

Persimmon’s net cash was £462m at the end of June.

“With its pre-close on 5 July reporting first half revenues +12%, we forecast the group to report 26% growth in earnings before interest and tax (EBIT) for the first half,” Deutsche Bank said.

“However while there is no doubt this would be a strong results we believe the market focus will centre on trading for the group post the Brexit vote, management guidance and the commitment to dividends.”

Deutsche Bank said it sees “many attractions” in Persimmon as it has one of the biggest return on capital employed in the sector along with a growing net cash balance, and high dividend yield versus peers.

The results come amid warnings that the housing market will slow down following Britain’s vote to leave the European Union on 23 June.

Countrywide on Monday released a report estimating that UK house prices will fall by 1% in 2017 due to Brexit uncertainty. Prices are expected to increase 2% this year, marking a rapid slowdown from last year’s 6.5% growth and 2014’s 8.5% increase.

Countrywide said prices are likely to recover in 2018 but at a modest 2%.

“Forecasts in the current environment are trickier than ever as the vote to leave the EU has thrown up many risks,” said Fionnuala Earley, Countrywide’s chief economist.

“Our central view is that the economy will avoid a hard landing. However, the weaker prospects for confidence, household incomes and the labour market mean that we do expect some modest falls in house prices.”

Tuesday August 23

INTERIMS
Cape, Eurocell , Hostelworld Group , Persimmon

INTERIM DIVIDEND PAYMENT DATE
Dewhurst

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Durable Goods Orders (US) (13:30)
New Homes Sales (US) (15:00)

Q2
Hostelworld Group

FINALS
Rank Group

AGMS
Northern Bear, Redt Energy

UK ECONOMIC ANNOUNCEMENTS
BBA Mortgage Lending Figures (09:30)

FINAL DIVIDEND PAYMENT DATE
Blue Planet Investment Trust