Persimmon, the UK’s second-largest housebuilder, has posted a 13 per cent rise in profits for the first half of 2018 as the government’s Help to Buy scheme and low interest rates continue to support demand.
The company reported pre-tax profits of £513.8m for the first six months of the year, up from £459.4m over the same period last year, and group revenues of £1.84bn, a 5 per cent increase on last year. It had already reported revenues from new houses of £1.74bn for the period.
The government’s Help to Buy equity loan scheme, which is due to end in 2021, allows people to buy a new home with a deposit of just 5 per cent of the cost and a low-interest equity loan from the government.
According to data from Liberum, the investment bank, 60 per cent of Persimmon’s private housing completions use the Help to Buy scheme, the second-highest percentage among UK housebuilders.
Jeff Fairburn, chief executive, said the company had “continued to experience good levels of customer interest”, even through the “quieter summer season”.
“Customers are continuing to benefit from a competitive mortgage market and confidence remains resilient based on healthy employment trends and low interest rates,” said Mr Fairburn.
“We’ve seen a strong demand and good interest but we’re in that first-time buyer, first-time mover bracket, so we are providing houses at the lower end of the market,” he added.
The average selling price of a Persimmon home rose by 1.2 per cent to £215,800, while forward sales of new housing over the six-month period was 6 per cent higher than the first half of 2017 at £2.12bn.
Persimmon has found itself at the centre of a noisy row over pay for FTSE 100 bosses after it emerged its share price-linked bonus scheme put Mr Fairburn in line for a payout of about £110m.
The company drew sharp criticism from politicians for paying large bonuses while benefiting from Help to Buy, while one large shareholder called the level of pay “preposterous”.
Anthony Codling, analyst at Jefferies, said the results were “strong”. “Persimmon continues to supply the homes the country needs at a price they can afford,” he added.
Robin Hardy, analyst at Shore Capital, was less optimistic, and said that as housebuilders faced rising costs and slowing house price growth, the sector was close to “peak” margins.
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