Persimmon shares rise as Numis lifts rating to 'add'

6th Jan 2017 09:45

(ShareCast News) - Persimmon's shares advanced on Friday as Numis upgraded its rating on the housebuilder to 'add' from 'hold' and reiterated its target price of 2,200p following a positive trading update.The FTSE 100 company on Thursday said its 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, Persimmon 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."Persimmon's update was strong and all key metrics exceeded expectations," said Numis."We have increased 2016 and 2017 pre-tax profit estimates by 7% and 9% respectively and think that the risk to these forecasts remains on the upside."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 from a previous £343m.Numis said the net cash beat its forecast of £670m, supported by more cautious land investment with 2016 total spend falling £150m year-on-year, higher profits and tight control of working capital.With a "strong" cash balance and tight control of working capital, Persimmon has opened up the possibility for its current cash return to be enhanced in 2017, the broker added."In our view Persimmon continues to be one of the best operators in the market and its cash performance is exemplary."However, Numis said it "continues to see superior value and growth elsewhere in the sector" and noted that growth in Persimmon's profit was largely due to improving margin trends. Shares rose 1.13% to 1,962p at 0958 GMT.