Persimmon cheers investors with sales and dividend rise

The housebuilder, whose brands include Charles Church and Westbury, said sales had climbed 4% over the last eight weeks while its order book is 10% ahead of last year at £1bn

Britain's second-largest housebuilder Persimmon has seen a bounceback in summer sales, driven by the north, after a dip in the first half of the year. Shares in the York-based company climbed 3.4% to 396p, as it cheered investors by raising its dividend to 4p from 3p.

"The sales momentum in the northern business has been maintained – normally we see a slowdown in the summer months," said Mike Farley, the chief executive. "We have seen some slowdown in the south and central [England]," after the south saw better sales rates in the first half.

"We need to see what happens in the autumn period when a pick-up usually takes place." The autumn selling season should kick off from the second week in September.

"We're not getting carried away, but the market is stable which is down to mortgage availability. Mortgage rates are very low, and low interest rates will be here for a while. We don't see problems with affordability, it's that lack of deposit." But he noted that the average loan-to-value ratio [LTV] is 80%, against 75% a year ago, which means there are more deals that require smaller deposits from buyers.

The housebuilder, whose brands include Charles Church and Westbury, said sales had climbed 4% over the last eight weeks while its order book worth £1bn is 10% ahead of last year. This comes after a 5% dip in the first six months of the year, when Persimmon completed 4,439 homes, compared with 4,657 a year ago. It expects sales volumes to be flat over the year as a whole. The group made an underlying profit before tax of £59.7m in the first half, up 52%.

Shrugging off the gloomy economic news and financial market turmoil over the past few weeks, Farley said: "People would rather buy their own homes than rent – it's cheaper to buy than to rent." He said first-time buyers usually made up 15% of Persimmon's visitors on site, but that number had risen to 23% thanks to the government's First Buy scheme. Having secured a fifth of available funding (£35m), Persimmon has earmarked 2,100 properties on 290 sites around the country for sale with First Buy funds.

Paul Connolly, a director at project and at construction consultancy Turner & Townsend, said: "Housebuilders are in a more robust position than a year ago and continue to move in the right direction, but further challenges lie ahead. People buy houses when they feel confident and confidence is in short supply at present given rising living costs and the ever-present threat of unemployment. The fact that house prices are falling in most areas of the country also hits confidence and may even see people delay committing to a purchase in the hope of getting property at a lower price further down the line.

"On a positive note, there is increased competition among the lenders with some exceptional mortgage rates available at present, even at higher LTVs. While criteria remain tough, this will add to demand and drive transactions."

The average price of a home sold by Persimmon in the first half fell nearly 4% to £162,647 because the builder sold more affordable homes, with an average price of £100,000, and more smaller houses with two bedrooms. This will reverse in the second half, as it has taken more orders for larger homes with three or four bedrooms, with an average price of £205,000.

Killian Murphy at Davy Research said: "Amongst the UK housebuilders, Persimmon is considerably better placed than its peers, with 43% of the landbank acquired following the downturn and only 13% impaired, and is virtually debt-free."

Persimmon had reduced its debt to £15m from £51m at the end of 2010.


Julia Kollewe

The GuardianTramp

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