Persimmon raises profit expectations with ‘strong’ trading performance

Housebuilder Persimmon has said that its profits will be “moderately ahead” of forecasts as the firm continues to grow despite a boardroom bonus controversy.

In a trading update today, Persimmon said its full results next month will show revenue growth to £3.74 billion and pre-tax profits ahead of market expectations.

Persimmon raises profit expectations with ‘strong’ trading performance

New housing revenues increased by 4% to £3.55bn (2017: £3.42bn) while legal completion volumes increased by 406 new homes, a 3% increase, to 16,449 (2017: 16,043), including private sales of 13,341 new homes (2017: 13,274). The average selling price of c. £215,560 was 1% higher than last year (2017: £213,321).

Persimmon announced the departure of its chief executive Jeff Fairburn in November amid the long-running controversy over his £75 million bonus package.

In a withering attack on the pay award, Edinburgh-based financial giant Aberdeen Standard Investments led a shareholder revolt and stated that the role of a chief executive “requires motivation that goes beyond simply amassing a fortune”.

However the firm said today it continues to benefit from increased confidence and customer demand.

In today’s trading update the board said: “As we look forward to the 2019 spring season Persimmon is in an excellent market position. Whilst the future performance of the UK economy is currently subject to increased levels of uncertainty the group is well positioned with its strong outlet network together with the availability of a range of attractive house types at affordable prices across the regions of the UK, supported by a high quality land bank and conservative financial structure.”

The business now has 31 housebuilding businesses across the UK, having opened seven new ones over the last four years. The group is currently building new homes on 365 active developments.

Alasdair Ronald, senior investment manager at financial analysts Brewin Dolphin Scotland, said: “It’s another good set of figures from Persimmon, which has confirmed expectations of increased revenues – profits are also expected to be ahead of previous consensus. The company’s order book remains reasonably robust, 3% ahead of last year, and average selling prices have held up well; despite uncertainty in the UK economy.

“While margins are believed to be close to the top, they remain healthy – Persimmon is able to maintain them by increasing the use of materials produced by its subsidiaries and directly employing labour. The business continues to offer some of the highest returns in the sector and remains the blue chip option among housebuilders.”

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