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Persimmon sees profits and revenues rise thanks to a strong UK housing market

18th August 2015 Print

As Persimmon reports its H1 results Helal Miah, investment research analyst at The Share Centre, explains what they mean for investors.

The house builder’s forward sales are at £1.7bn, up 12% year on year

Persimmon benefits from increase in legal completions and average selling prices

“Persimmon is amongst a long list of house builders reporting a strong set of half year results. This morning, the York based company said its revenues were up 11% to £1.33bn, while profit before tax jumped by 33% to £272.8m. Just like others in the sector, these numbers were driven by a 7% increase in legal completions and average selling prices rising by 4% to £194,378. Investors should be encouraged in the performance of the business as the underlying operating margin increased to 20.5% from 17.7% in the same period last year.

“Furthermore, these figures reflect the robust conditions in the UK house building sector where there is a clear supply demand imbalance and we believe that there is still some time to go before we reach equilibrium. Demand will remain strong as employment levels and wages rise, mortgage rates remain low and consumer confidence remains robust. Persimmon’s management, like most in the sector, also take this view and investors should acknowledge that it is continuing to acquire land and plots, and securing planning consent for development.

“We currently list Persimmon as a ‘hold’ but would not discourage investors from acquiring this stock as we are keen on the sector, and recognise that it will return capital to shareholders. For investors interested in the house builders, we would highlight Taylor Wimpey and Berkeley Group as our preferred stocks in the sector.”