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Builder still thriving in tough times
Written by yorkguides.co.uk   
Interest cut helps to
create record profits
Ros Snowdon
Deputy City Editor (Yorkshire Post)
THE UK's biggest housebuilder Persimmon reported record profits yesterday despite one of the toughest periods in the UK housing sector.
The York based company said there had been a definite slowdown in consumer confidence earlier this year, but trade had picked up following the Bank of England's decision to cut interest rates earlier this month.
"The downward change in interest rates has definitely helped us," said chief executive John White.
"Sentiment has changed and we have seen a pick up in reservations," he said.
He added that over the past few weeks the group has sold 8 per cent more in volumes. Added to that the cancellation rate was some 24 per cent six months ago, but this has now slowed down to 20 per cent.
Persimmon reported a seven per cent increase in half-year profits to £235m, but this was only won after it decided to splash cash on buyer incentives.
These included an increase in the number of part exchanges and other perks such as paying stamp duty, legal fees or other freebies such as carpets.
Mr White said the group had tailored the incentives to suit individual sites and plots.
During the six months to June 30, the group sold 5,954 homes, down on the previous 6,058 units. However average selling prices rose to £183,581 compared with £171,082 in the previous half year.
In the group's Yorkshire heartland house prices rose by three per cent to £173,305. Mr White said the group had seen a definite move upwards in Yorkshire.
"Following the decrease in interest rates we have detected a strengthening in the Yorkshire market. We are seeing early signs that confidence is strengthening."
He said that the group has recently won planning permission for some 450 units in Fulford near York as well as permission for 1,200 units near Selby.
Persimmon said it was well placed for the full year with sales of £980m already booked for its second half, a similar level to last year.
The group refused to be drawn on whether it was stealing market share from rivals, although it did admit that it is in a better position than some of its competitors who focus more on urban sites.
"We are building fewer inner city apartments than our rivals and that has given us an advantage," said Mr White.
Asked whether another acquisition was on the cards Mr White said that the group had plenty of organic growth ahead with lots of potential for its upmarket Charles Church brand.
"We have stacks of opportunity and we won't overpay," he said. However he did admit that he thought there would be more consolidation in the market.
Persimmon's wide geographic spread and range of house types has helped to protect it against the recent consumer downturn.
The decision to spend more money on special buyer incentives and extra marketing has been counterbalanced by minimising other cost increases, such as direct build costs which have been kept down to a four per cent increase.
The interim dividend rose by 32 per cent to 12p and the group said the payout for the full year would not be less than 30.4p, up from 27.5p.
Analysts said they thought Persimmon's results would be one of the strongest in the housing sector.
 
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