East Anglia: Help to Buy contributes to 49% rise in annual profits at Persimmon
PUBLISHED: 11:45 25 February 2014 | UPDATED: 15:32 26 February 2014
Housebuilder Persimmon today reported a near-50% surge in profits for 2013 and said this year had got off to a strong start, with the Government’s Help to Buy scheme continuing to send buyers flocking to developments.
Persimmon, which also includes the Charles Church and Westbury Partnerships brands, said the property market revival sent underlying pre-tax profits up by a better-than-expected 49% to £330million in 2013, spurred on by initiatives to boost mortgage lending and Britain’s burgeoning recovery.
It now aims to speed up payments to shareholders under a planned £1.9billion programme to return cash to investors following the bumper year.
Persimmon’s profits hike comes after revenues rose by more than a fifth (21%) to £2.1bn and legal completions rose 16% to 11,528 in 2013.
Average selling prices rose 4% to £181,861, driven by an increase in the number of large family homes sold by the group.
Its private home sales rate was 39% higher over the second half of the year after the first phase of Help to Buy launched last April 1, offering equity loans on new builds to help buyers secure properties with a 5% deposit.
Persimmon has ramped up construction efforts to meet the demand, opening 90 new sites in the first half of 2013 and starting work on another 40 of 90 planned for the first six months of 2014.
The group said the Help to Buy boost had continued into 2014, with more than a third of sales reservations made with mortgages linked to the equity loan scheme.
It said the early spring selling season had been “encouraging” so far as weekly private home sales rates rose 22% year-on-year in the first eight weeks.
The group’s forward order book is 41% higher at £1.4bn for 2014, although it signalled a slight easing in wider property market conditions as it said it expected a “more modest” year of progress.
Andrew Fuller, managing director of Persimmon Homes Anglia, said: “Customer demand has certainly increased in the region and I’m extremely proud of the team for rising to the challenge and helping to deliver today’s excellent results.”
Locally, the business has increased its build rate, opening new developments in Hoveton, Ipswich, Norwich and Harleston. In 2014, it has already launched new developments in Diss and Brundall and plans to open a further three in Suffolk at Clare, Exning and Framlingham.
“We have built our success on responding to local demand and delivering the types of houses needed to meet the requirements of local people,” added Mr Fuller.
“The purchase of land is key to our future success and as a business we acquired 17,735 plots of new land across 130 high quality locations during 2013. We continue to work closely with local authorities to gain planning within the region to ensure we continue to meet the high demand from potential buyers.
“Help to Buy, the Government’s equity loan scheme, has undoubtedly helped some people get onto the property ladder or simply move up quicker than they anticipated and it’s our job to deliver houses to anyone who is looking for a brand new home.”
Persimmon’s results came as bank lending figures showed the number of mortgage approvals granted to home buyers continued to run at a six-year high in January.
The British Bankers’ Association (BBA) said 49,972 approvals for house purchases worth £8bn got the go-ahead last month - up 6% on December and 57% higher than a year earlier.
The Government ended the mortgage element of its Funding for Lending scheme offering banks cheap access to finance at the start of this year, but the market has remained buoyant amid ongoing cheer on the economy and after the launch of the UK-wide Help to Buy mortgage guarantee scheme last October, offering state-backed mortgages to credit-worthy first-time buyers and home movers with only a 5% deposit saved.
Analyst Mark Hughes at Panmure Gordon hailed Persimmon’s figures as a “strong set of results” and said the acceleration of shareholder payments was “good news” for investors.
Persimmon announced its nine-and-a-half-year capital return programme in February 2012 and has already paid out £228m, but will now bring forward dividends under the scheme, raising this year’s payout from 10p to 70p.