Bloomberg News

Persimmon’s 2012 Profit Rises, Beating Estimates

February 25, 2013

Persimmon Plc (PSN), the U.K.’s largest homebuilder by market value, said annual profit rose 56 percent as the company sold more homes at higher prices.

Net income increased to 170.2 million pounds ($258 million), or 55.7 pence a share, from 109 million pounds, or 35.9 pence, a year ago, the company said today in a statement. Analysts expected earnings of about 52 pence a share, the average of five estimates compiled by Bloomberg.

“It’s all about mortgages and I’m encouraged to see the improvement that there’s been,” Chief Executive Officer Mike Farley said in an interview. The Bank of England’s Funding for Lending Scheme has helped and “we’re seeing lower rates as a result. There is a greater appetite from lenders,” he said.

Farley, who has been chief executive of the York, England- based company for seven years, is stepping down after leading Persimmon through a housing-market collapse in 2008 that prompted companies to reduce costs and write down land values as property demand slumped. The homebuilder is widening margins and last year said it would return 1.9 billion pounds to shareholders by 2021.

Home completions climbed to 9,903 from 9,360 a year ago and the average selling price of Persimmon’s properties rose about 6 percent to 175,640 pounds. Revenue rose 12 percent to 1.72 billion pounds.

Persimmon fell 1.2 percent, or 11 pence, to 898.5 pence in London trading, giving the company a market value of 2.7 billion pounds. The shares earlier climbed as much as 2.5 percent to 932 pence in London trading, the highest since November 2007.

Operating Margin

While the operating margin, excluding exceptional items and goodwill impairments, widened to 13 percent from 10 percent, margin growth is likely to slow, according to Farley.

“Last year, we made good strides with a 3 percent increase in the operating margin,” he said by phone. “It’s not going to be possible to repeat that again because as you get closer and closer to those targets, you’re getting to the natural run rate of the business.”

Persimmon said it expects its underlying operating margin to reach as much as 17 percent within the next 18 months. Forward sales increased 9 percent to 1.01 billion pounds.

The company has about 16,100 acres (6,515 hectares) in its land bank and around 59 percent of that is in the southern England. Jeff Fairburn will replace Farley, the company said last month.

Bovis Homes Group Plc (BVS), another U.K. homebuilder, said net income rose 75 percent to 40.9 million pounds last year. The company’s revenue gained 17 percent to about 426 million pounds.

To contact the reporter on this story: Chris Spillane in London at cspillane3@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net


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