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Shares buoyant despite profits fall

FINANCE - House builders optimistic that planning breakthrough will offset falling prices - Persimmon breaks into FTSE 100

CONCERNS persist over the housing market and profits fell at half the listed home builders in the recent results season.

Yet shares in most companies remain close to record highs.

This suggests that house builders can conquer the perennial planning problems and build more homes to beat the adverse effect of falling prices.

Peter Johnson, who leaves his post as Wimpey's chief executive after five years in June, said: 'We have taken the necessary actions to address the areas of weakness in our UK business.

We have sound businesses that are now well-placed to deliver our strategy of growth.' Wimpey's UK performance has been disappointing and profits are down, in contrast to its two biggest rivals.

Barratt's sale of its US arm looks well-timed as UK profits held up, while Persimmon's £643 million takeover of Wes tbu ry in Janua ry c rea ted the sector's biggest player and the first house builder to enter the FTSE 100.

Persimmon chief executive John White said: ''The Westbury business will be integrated quickly into our existing regions and businesses and elevates the output of our Charles Church brand.' That integration quickly saw a large swathe of job cuts as Persimmon tried to maintain margins in the face of pressure on selling prices.

The average selling price among the 20 listed house builders to post results ? Oakdene and Swan Hill's owner Raven Mount have yet to declare ? is £173,590, with an average margin of 17.5 per cent.

That ASP ranges from £125,000 at the newest listed entrant to the housing fraternity, Cheshire contractor Pochin, to £292,000 at London-focused Berkeley.

Berkeley is focusing on urban regeneration, an area that analysts expect to create increased opportunities as more contracting groups ? from Pochin to privately-owned Laing O'Rourke ? look to this area for growth.

Consultant AMA Research said: 'Major construction companies such as Kier have increased their focus on the house building sector in recent years following the growth of mixeduse developments. The affordable housing sector represents a prime area of growth.'