Revenues climbed by 12% to £1.66bn pushing profits up 30% for first six months. The company’s CEO described sentiment as resilient as he reassured investors that interest in properties remains strong with forward sales 15% ahead of 2016.
As Persimmon updates the market Graham Spooner, investment research analyst at The Share Centre, explains what it means for investors.
First half results from Persimmon, the UK’s second largest housebuilder, helped push its share price up by around 3% in early trading to an all-time high. As we anticipated, revenues for the company climbed by double percentage points (12%) to £1.66bn over the period which helped the group post a 30% rise in profit to £457.4m on the back of increased completions and slightly higher average house prices. Indeed, the company managed to sell a greater number of houses at higher prices, in total 7,794, in the first 6 months of this year.
Jeff Fairburn, Persimmon’s Chief Executive, was keen to reassure investors today that the group’s focus on meeting market demand to deliver high quality sustainable growth in each of its 29 regional businesses is delivering excellent outcomes for customers, shareholders, and stakeholders. Moreover, Fairburn stated that interest in Persimmon’s properties remains strong, indeed interest investors may want to note that current forward sales for the housebuilder are 15% ahead of 2016. Consumer sentiment is described as resilient and management believe the group is in a strong position for future success courtesy of a high quality land bank and strong balance sheet.
The numbers produced today suggest that all is still well with Persimmon and the house building market and the sector's share price recovery since the EU referendum reflects that. However, we are of the view that shares in the sector are fairly valued, taking into account the buoyant demand for new homes. Given the strong recovery and recent signs of a moderating housing market, and the very cyclical nature of the sector, we continue to recommend Persimmon as a ‘hold’ for investors willing to accept a medium to higher level of risk.