Further evidence, if any were needed, that the UK's housebuilding sector remains in robust health was provided by the latest trading update from east London-focused builder Telford Homes (TEF). Targeted sales for the year to March 2015 are virtually secured already, with over 70 per cent for the following year and over a quarter for 2017 also in the bag.
Operating margins in the current year are expected to jump from 9.7 per cent in 2013 to over 15 per cent, while profits for the year just completed to March are expected to have doubled. And profits are expected to double again over the next four years. The group is also well placed to meet continued demand for accommodation close to London, and currently has no debt.
Meanwhile, Persimmon (PSON), the largest UK housebuilder by market capitalisation, revealed that visitor levels so far this year are up 10 per cent from a year earlier, and cancellation rates have fallen to a historic low of 14 per cent. Weekly private sales rates are up 25 per cent, and current forward sales are now worth £1.87bn, up 35 per cent from a year ago. The company also confirmed that it remains on target to return £1.9bn to shareholders by 2021. This style of generous payout has also been adopted by Berkeley Group (BKG), another London-focused builder, and other builders may soon be adopting the same stance as more capital becomes available. Surplus funds are likely to grow as builders ease back on their aggressive land acquisitions. And while margin growth generated by greater use of cheaper land and a switch to family homes in the south-east and away from apartments will at some point come to an end, housebuilders will look to boost profits by increasing the number of sales outlets and maintaining rather than building their land holdings.
