Persimmon's first half profits exceed expectations

Persimmon reported a better-than-expected jump in first half pre-tax profit on Tuesday as the housebuilder shrugged off Brexit uncertainty.

Pre-tax profit rose 29% to £352.3m in the six months to 30 June on a 12% increase in revenue to £1.49bn. Analysts at Deutsche Bank had anticipated a 26% increase in pre-tax profits to £345m.

Legal completions increased 6% to 7,238 new homes sold while the average selling price grew 6% to an average of £205,762.

The underlying operating margin improved 330 basis points to 23.8%.

Return on average capital employed surged 29% to 35.6%.

Net cash came to £462.0m at the end of the period, up from £278m the prior year.

"While the result of the EU Referendum has created increased economic uncertainty, customer interest since then has been robust with visitor numbers to our sites around 20% ahead year on year,” said chief executive Jeff Fairburn.

“Our private sale reservation rate since 1 July is currently 17% ahead of the same period last year. The group is now trading through the traditionally slower summer weeks but customer demand remains encouraging and we anticipate a good autumn sales season."

The company said it remains "cautious" with respect to new land investment in the wake of Brexit but will "continue to proceed with attractive opportunities on a selective basis". During the first half, the group bought 7,108 new plots of land across 38 sites.

"By investing in high quality new land at the right time in the housing cycle superior shareholder value will be sustained," said chairman Nicholas Wrigley.

"It is likely that uncertainty around the potential impact of the EU Referendum result on the UK economy will persist for some time."

In the current trading period, the order book since 1 July is 2% stronger than the same point a year ago at £1.75bn. The company has 5,836 new homes sold forward into the private sale market, compared to 6,149 in 2015, with an average selling price of £224,200, up from £213,000 last year.

Shore Capital said: "Clearly in the still relatively short period since the referendum, demand and pricing have been robust but we still think that it is too early to be too definitive about what lies ahead for the wider economy and for housing."

"However, for the remainder of this financial year (thanks to strong forward sales carries the business now into first half of fiscal year 2017) it appears likely that current forecasts will be exceeded – we currently have a pre-tax profit of £726m (broadly in line with consensus) but with gross margins so strong in the first half this is likely to increase to above £740m."