Persimmon accelerates dividend payment as profit rises 44%

UK housebuilder brings forward dividend payment

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Persimmon brought forward its dividend and pledged to increase building volumes after strong demand for new houses boosted its annual results, shrugging off fears of a slowing UK market.

The UK’s biggest listed housebuilder posted better than expected pre-tax profit of £475m in the year to December, a surge of 44 per cent. Revenue rose 23 per cent to £2.6bn, buoyed by a gradual improvement in the UK economy and increased mortgage lending, the company said on Tuesday.

Persimmon said that legal completions increased 17 per cent to 13,509, and the average selling price increased by 5.3 per cent to £190,533. This has pushed the rise in completions over the past two years to 36 per cent.

Investors, however, shrugged off the news, and shares were down 3.6 per cent at £16.49 by lunchtime on Tuesday.

Persimmon, which focuses predominantly on homes for first-time buyers and young families, said in January that about 40 per cent of 2014 sales had used the government’s Help to Buy guarantee scheme over the course of the year.

Seeking to allay fears of a UK housing sector slowdown, group chairman Nicholas Wrigley spoke of “a supportive backdrop for the new homes market” despite some uncertainty arising around the general election.

“We have had an encouraging start to 2015 and experienced a solid opening period to the spring season with current total forward sales of £1.49m, 5 per cent ahead of the previous year,” he said.

Mr Wrigley added that the government’s overhaul of stamp duty to a progressive tax last year is also “supporting sentiment and reducing costs for potential housebuyers”.

Persimmon acquired 26,822 plots of land in 2014, double the level of last year’s completions, with 9,386 plots successfully converted from the group’s strategic land portfolio.

The group brought forward a dividend payment of 95 pence per share for investors due on July 6 to April 2. To date, the company has returned £442m to shareholders, or 145p per share, since implementing a 10-year growth programme in 2012.

“As we meet market demand, get a lead on completions and build on newer land with better margins our return on capital has increased significantly, even after investing strongly in land,” said chief executive Jeff Fairburn. “We’re in a great position to give back.”

The group’s performance echoed that of rival Bovis on Monday, which doubled its dividend after a 69 per cent increase in pre-tax profit. The positive results season to date appeared to have encouraged City analysts, despite talk of a cooling market earlier this year.

Robin Hardy of Shore Capital said earlier this week that recent updates from the sector have exceeded expectations.

“A relatively benign housing market with low house price inflation remains the best climate for the housebuilders,” he said. “This kind of environment is more likely to deter significant levels of new competition, help keep a lid on build-cost inflation and remove any temptation to begin making inflationary assumptions when buying new land.”

Stephen Rawlinson, an analyst for Whitman Howard, said: “It’s far too early to sell in our view. The well rehearsed factors of rising real incomes, low interest rates, demographic changes and supply shortage are not going away any time soon. And the quoted housebuilders now have strong balance sheets, good land supply and concerns about build costs seem to have reduced.”

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