York-based house building giant Persimmon plc reported higher revenue for the first half of the financial year and forecast full-year completions at the top end of estimates, but its profit remained flat due to an increase in building costs.
The company reported total revenue of £1.32 billion for the latest six-month period, up from £1.19 billion last year. New homes completed rose 5% to 4,445, at an average selling price of £263,288, up 3% year on year.
“Private average selling prices on reservations were up 6% in the period compared to the second half last year and we are encouraged by the levels of demand across the country,” the company said.
Persimmon said the relatively low level of house price increases was more than offset by embedded build cost inflation, which combined with higher incentives, hurt its bottom line, reporting underlying operating profit of £152.3 million, flat from a year ago.
“We are encouraged by the early announcements of the new government, particularly around planning,” the company said in a statement. “Consumer confidence continues to improve, leading to a strong pick up in enquiries and visitors, which will be further supported by the recent cut to the Bank of England base rate.”
It said it had good confidence it could deliver 10,500 homes for the full year, at the top end of previous guidance.
Dean Finch, Group Chief Executive, said: “The first half of the year has been strong with improved sales rates and robust average selling prices, despite ongoing affordability challenges. Strengthening consumer sentiment, improving macro-economic conditions and the government’s welcome and ambitious planning reforms that demand more of the high quality, affordable homes that are Persimmon’s core strength, are all supportive of our ambition to grow this year and in the future.”
Charlie Huggins, Manager of the ‘Quality Shares Portfolio’ at Wealth Club, said: “There are signs that confidence is returning to the housing market. Interest rates have finally started to be cut, mortgage rates are coming down and a landslide Labour victory provides further fuel for optimism, particularly given their pro-housing agenda.”
“The wild card is the global economy. Fears of a global recession intensified at the start of this week. On the one hand this might be a good thing for housebuilders, accelerating the pace of rate reductions. But if the economy weakens too much, banks might curtail mortgage lending, which would be far from ideal. Time will tell. For now, there are more green shoots than at any time in the last two years. Further interest rate cuts in the months ahead could lay the foundations for a sustained recovery.”