'Uncertainty' has been the buzzword in commentary about the prospects for housebuilders post-referendum. While it may be early days, Persimmon (PSN) is doing a good job of allaying fears of a drop-off in housing demand related to the referendum and its outcome. Since the start of July, private sale reservation rates are up 17 per cent year on year. However, chief financial officer Mike Killoran says the group is still taking a cautious approach. "This may mean a little less land investment in the second half," he explains.
Prudent investment in land is one lever management operates to maintain strong cash generation; vital for maintaining its pledge to pay annual dividends totalling 110p a share until 2021. During the first half of the year, Persimmon acquired 7,108 plots across 38 sites, including almost 3,000 converted from its strategic land bank.
However, management purchased a smaller amount of land than it sold during the first half. The group owned 93,519 plots in its consented land bank at the end of June, a slight reduction on the 93,649 held at the end of December 2015. Between 2012 and 2015 the housebuilder replenished its land bank at a rate of around 1.7 times the plots it has sold, Mr Killoran says.
Sales held up well, with volumes and average selling price both up 6 per cent, the latter breaking the £200,000 mark. For premium brand Charles Church, that average price increased 16 per cent to almost £320,000.
The group has added 845 new sites since the start of 2012, 108 of which were opened during the first half of 2016. This growing scale has allowed the group to improve its build efficiencies, which helped boost gross margins to 26.9 per cent, compared with 24 per cent in the previous comparable period.
Analysts at Peel Hunt expect adjusted pre-tax profits of £736m for the year to December 2016 and EPS of 192p (from £638m and 173p in 2015).
PERSIMMON (PSN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,878p | MARKET VALUE: | £5.79bn | |
| TOUCH: | 1,877-1,879p | 12-MONTH HIGH: | 2,255p | LOW: 1,170p |
| DIVIDEND YIELD: | NA | PE RATIO: | 10 | |
| NET ASSET VALUE: | 760p | NET CASH: | £462m | |
| Half-year to 30 June | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p)* |
|---|---|---|---|---|
| 2015 | 1.33 | 273 | 77.3 | na |
| 2016 | 1.49 | 352 | 92.0 | na |
| % change | +12 | +29 | +19 | - |
Ex-div: na Payment: na *Persimmon made its fourth capital repayment of 110p a share on 1 April 2016, after 95p in April 2015, 70p in July 2014 and 75p in June 2013. | ||||
