Persimmon expects higher profits as help-to-buy props up prices

Housebuilder is one of the biggest beneficiaries of the taxpayer-funded scheme

Persimmon has upgraded its profit forecast after building more homes and increasing its prices, with the support of the government’s help-to-buy scheme.

Britain’s second-biggest housebuilder reported a 4% rise in revenues to £3.74bn in 2018, after completing 406 more homes than a year earlier, increasing the total by 3% to 16,449. Its average selling price rose by 1% to £215,560. The company said the housing market was underpinned by robust employment levels, low interest rates and competitive mortgages.

Persimmon said annual profits would be “modestly” ahead of market forecasts. Analysts have been forecasting pretax profits of £1.07bn to £1.08bn for 2018, against £966m the previous year.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: “Persimmon is still selling more homes at higher prices, but the rate of growth is slowing. That’s to be expected in a cooling property market and following on from a pretty good run which has seen the housebuilder return prodigious amounts of cash to shareholders.”

It is the housebuilder’s first trading update since it ousted its chief executive, Jeff Fairburn in November, four months after he collected a £75m bonus. The huge payout made him the best-paid FTSE 100 boss and sparked a public outcry over boardroom excess. Persimmon asked Fairburn to resign because the controversy was having a “negative impact on the reputation of the business”.

David Jenkinson, who is running the company until a permanent successor is found, collected a payout worth £40.5m from the same bonus scheme, which paid out £500m worth of shares to 150 senior staff.

Persimmon is one of the main beneficiaries of the taxpayer-funded help-to-buy scheme, first launched by George Osborne in 2013. When the scheme was extended in 2017, a report by Morgan Stanley found that the £10bn of taxpayers’ cash had mainly benefited housebuilders, rather than buyers, by pushing up prices.

Persimmon said it was in an “excellent market position” ahead of the key spring selling season, despite “increased levels of uncertainty” due to Brexit. It had £1.39bn of forward sales reserved at the end of last year, up 3%. Rival Taylor Wimpey was also upbeat about its outlook last week.

Both housebuilders are more cautious when it comes to buying land. Persimmon said it was taking a “selective approach” and Taylor Wimpey revealed that it had walked away from or was trying to renegotiate 2,000 plot purchases – amounting to about 11% of the total land it bought last year.

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