What's new:
■ Operating margins reach 10 per cent
■ 60 new outlets to open in the first half
■ Strong order book
Persimmon expects underlying pre-tax profits for 2011 to rise by around 50 per cent to reach the upper end of analysts' expectations, which range from £130m to £148m. In a trading statement this week, the housebuilder confirmed that completions for the year totalled 9,360 homes, little changed from 9,384 a year earlier, while underlying operating margins for the financial year will approach 10 per cent after reaching 10.5 per cent in the second half.
And, in anticipation of the all-important spring selling season, the group opened around 25 new sites in the final quarter of last year and has plans to open a further 60 sites in the first six months of 2012. Legal completions in the second half rose by 4 per cent to 4,921 units, while average selling prices were 2 per cent lower at £164,000, which reflects the greater number of starter homes built as a result of greater demand through the government's FirstBuy scheme.
Persimmon continues to generate decent cash flow and debt has been eliminated to leave the group with around £40m in cash, despite having added 7,000 building plots in the second half to boost the consented land bank from 58,862 to 63,500 plots.
Northland Capital Partners says...
Buy. With a strong order book of £615m, up 8.8 per cent on 2010, higher margins and a better pool of land, Persimmon is clearly delivering strong growth. Cash generation is impressive and further cash should come through from the forward sales at higher margins, helping to finance a further expansion in land purchases. A 5.2 per cent return on equity is being achieved in the current stable market, and we expect this to almost double to 9.9 per cent even before any significant recovery in the housing market. Expect 2012 adjusted pre-tax profits of £144m and EPS of 35.2p.
Deutsche Bank says...
Buy. Persimmon has reported an encouraging level of visitors, resilient sales reservations, low cancellations and stable prices, all of which point to a positive tone for the coming year. The group has managed to pay back debt, but still has cash in hand, despite buying 7,000 plots - well above the replacement level. The shares are trading 20 per cent below 2013 estimated net tangible asset value (NAV) and with a long consented land bank and significant cash flow potential, we view them as undervalued. For 2012, expect pre-tax profits of £169m and EPS of 41.2p.
