Persimmon share price rockets as it sells more homes at higher prices
Shares in housebuilder Persimmon jumped more than 13 per cent in early trading, after it unveiled a rise in profits and sales in 2017.
The figures
Pre-tax profits rose 25 per cent to £977.1m in the year to the end of December, while revenues rose nine per cent to £3.42bn.
It sold 16,043 homes, up 5.7 per cent on the previous year’s figure, while the average selling price rose 3.2 per cent to £213,321.
Forward sales rose 7.5 per cent to £2bn, while its operating margin rose to 28.2 per cent, from 24.8 per cent in 2016. Post tax return on equity rose to 26.5 per cent.
The company said it will deliver interim and final dividends of 125p and 110p per share respectively – pushing shares up 13.1 per cent to 2,816p, its highest since October last year.
Read more: Persimmon’s profits to jump to £1bn as firm moves past pay controversy
Why it’s interesting
Persimmon may have had a blip just after the Brexit vote, but since then it has continued to surpass expectations, with more sales at higher prices than analysts expect.
Although the UK’s housing market has struggled in recent months (lest we forget, last month Hometrack officially declared the capital a buyer’s market), Persimmon and its housebuilding peers have been propped up by the government’s Help to Buy scheme, which provides first time buyers with government support to buy new build homes.
But Persimmon has had its problems: the company’s share price fell at the end of last year, as investors called it out over the size of it’s chief executive’s £100m bonus.
In December, Persimmon’s chairman, Nicholas Wrigley, and Jonathan Davie, the head of its remuneration committee, announced their intentions to step down over the controversy. Today the company said it had appointed non-exec director Nigel Mills as acting chairman until a replacement for Wrigley can be found.
Still: as long as homes are being sold, investors are happy.
“The housebuilder is doing so well it’s sending a wall of cash back to shareholders in the form of special dividends, with £2.35 per share being paid in the next five months alone,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.
“No surprise then to see the market roar its approval in early morning trading.”
Read more: Persimmon slashes controversial bonuses by £51m
What Persimmon said
Mills said:
The start to the spring sales season in 2018 has been encouraging with the group’s private sales rate per site being seven per cent higher than last year at this point. The further increase in the capital return plan demonstrates the board’s confidence in the group’s prospects.
In short
Forget bonus disputes: more sales, higher prices, happy shareholders.
Read more: Persimmon’s boss has bowed to shareholder pressure over his £100m bonus