Persimmon sales rate remains robust as margins build

5th Jan 2017 07:02

(ShareCast News) - Persimmon's sales rate remained solid in the second half of the year despite previous worries about Brexit, with the housebuilder also assuring profit margins were on the up.Ahead of full year results due on 27 February, the FTSE 100 group revealed its revenues for calendar 2016 of £3.14bn were 8% ahead of the previous year, down from the 12% growth in the first half of the year, with the average selling price of a home climbing 4% to £206,700.Forward sales at the end of the year stood close to £1,230m, which was 12% ahead of the prior year, while the coffers bulged with £913m cash.A slight blip was that Persimmon's rate of annual sales growth for the second half slowed to 15% from the 19% announced in early November and 17% in the first half.However management's focus remained on "high quality growth" and gross margin is expected to have "improved further" thanks to well controlled development costs and land cost recoveries on new sites.Over the year, the company opened 255 new development sites across the UK and, with criticism ringing in builders ears about the country's housing shortage, Persimmon assured that it was "building on all sites which have an implementable planning consent".During the year it acquired roughly 18,700 plots of new land in 83 locations and said it continued to see good opportunities to acquire additional land though stressed that it remained "mindful of the risks associated with the uncertainty arising from the UK's decision to leave the EU".Shares in the company climbed nearly 5% in early trading, dragging the rest of the sector higher for another day following the gains sparked by a bullish Deutsche Bank note on Wednesday.Broker Canaccord Genuity said while no comment was made on the 2017 outlook, the group was "clearly in a strong position" with a good order book and balance sheet against an uncertain macro background for 2017."Shares look well supported with a solid circa-6% dividend yield. All eyes are now on the spring selling season. While 2017 consensus estimates remain within a wide range, the good momentum from H2 2016 into 2017 may encourage some of the lower end to revise numbers up."Analyst George Salmon at Hargreaves Lansdown said the trading update confirmed the improving trend in sales and margins from the first half of the year to the second, with the solid increases in average selling prices and completions flying in the face of uncertainty around the UK's impending exit from the EU."In fact, with margins and completions on an improving trend in recent months, many would argue that this is more than just a resilient update. Forward sales are some 12% higher than at this time last year. With a healthy balance sheet, demand outstripping supply and no sign of borrowing costs rising in the foreseeable future, Persimmon looks in a strong position," he said."Despite this, it's hard to say that the housing market is unsinkable. The threat from Brexit is by no means passed, and with the average household budget set to be squeezed even further, the longer-term worry about what happens when interest rates rise lingers."Neil Wilson at ETX Capital said these were "exciting times" for the sector, with accommodative environment - rising demand, undersupply of new homes, ultra-low interest rates and good mortgage availability."The Conservative government is eyeing further planning reforms that could free up builders to create new homes more easily and cheaply, although this looks like it may run into a rebellion from Tory MPs."And it comes at a time when housebuilding has reached its highest level of activity in eight years, as the number of new homes constructed in 2015-16 hit 189,000. Yesterday's construction PMI was more good news as residential housing activity registered its fastest expansion since January."