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Persimmon predicts profit increase despite lower turnover

Persimmon has seen a “fairly stable” start to the year despite a slight drop in sales, chief executive Mike Farley said today.

Posting an update to the Stock Exchange for the first six months of 2011, the biggest house builder by volume said sales are down from 4,657 in the period last year to 4,439 this time, although Mr Farley said he expects to see an increase to 5,000 in the second half. The average selling price has been £162,000, down from £168,936 in 2010.

The company’s order book at 30 June is ahead of the same point last year, with forward sales at £725m. Turnover for the first six months was £715m, down on the same period last year (£785m).

But the company anticipates underlying operating margins will hit 9 per cent (up from 8 per cent).

Mr Farley told CN that pre tax profits are estimated to reach about £132m, which would be a 35 per cent hike on last year’s £95m total, which was itself up from £7m in 2009. Stressing a focus on margin, he added: “We are seeing good demand across the country, whether it be in Scotland, the Midlands or South east.”

The nationwide housebuilder welcomed its £35m of the Government’s FirstBuy scheme – the largest slice of the funding – reducing deposits for first time buyers. It will reach 290 sites where 2,100 new homes have been allocated support.

But the company added: “Any meaningful increase in industry output will only occur with a significant improvement in the currently constrained mortgage lending conditions.”

During the last six months, the company has acquired 7,500 plots of land, including 800 plots at Gatwick and 200 plots at Whinmoor in Leeds.

Robin Hardy, analyst at Peel Hunt, said he had expected sales and prices to move ahead, although margins are better than forecast at 9 per cent.
He added:  “We remain concerned about the group’s high regional exposure, the high use of shared equity and in common with its peers we see inadequate returns.”

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