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Persimmon expects 2018 profits to be modestly ahead of market consensus, thanks to new developments

The FTSE 100-listed housebuilder said its total group revenues rose by 4% to £3.74bn in 2018, up from £3.42bn in 2017, as new housing revenues also increased by 4% to £3.55bn
Persimmon home
Persimmon said its legal completion volumes in 2018 increased by 406 new homes to 16,449, up from 16,043 in 2017

Persimmon PLC (LON:PSN) shares edged higher on Tuesday after the housebuilder said it expects its 2018 pre-tax profits to be modestly ahead of current market consensus, with the firm having benefited from new developments opened through a year which saw it part company with its CEO.

In a trading update for the year ended December 31, the FTSE 100-listed firm said its total group revenues rose by 4% to £3.74bn, up from £3.42bn in 2017, as new housing revenues also increased by 4% to £3.55bn.

READ: Persimmon boss Jeff Fairburn asked to leave after backlash over pay

The group said its legal completion volumes in 2018 increased by 406 new homes to 16,449, up from 16,043 in 2017, while the average selling price of around £215,560 was 1% higher than 2017’s £213,321 figure.

It added that forward sales at the end of 2018 were up 3% at £1.4bn after second-half legal completion volumes of 8,377, which were 305, or 4% stronger than the first half of the year.

The company had £1.048bn in cash as at December 31 2018, down from £1.3bn a year earlier, after returning £732m of capital to shareholders.

Looking ahead, Persimmon said: “Whilst the future performance of the UK economy is currently subject to increased levels of uncertainty the Group is well positioned with its strong outlet network together with the availability of a range of attractive house types at affordable prices across the regions of the UK, supported by a high quality land bank and conservative financial structure.”

It added: “We will give an update on our assessment of the housing market over the early weeks of 2019 when we announce our results for the year ended 31 December 2018 on Tuesday 26 February 2019.”

CEO news still awaited

Persimmon announced at the start of November that its chief executive Jeff Fairburn had been asked to leave the housebuilder following a backlash over his £75mln bonus package.

Fairburn stepped down at the end of the year, with the housebuilder’s managing director David Jenkinson appointed interim chief executive until a permanent replacement is found.

The company said it had requested Fairburn resign as it believed the “distraction” around his pay continued to have a “negative impact on the reputation of the business” and on his ability to continue in his role.

Share price reaction muted

Russ Mould, AJ Bell Investment Director commented: “At least the figures that investors will be assessing are the company’s profits rather than the (former) chief executive’s pay, although it does not seem to be helping Persimmon’s share price too much.

“Even the news that the house builder is going to make profits that exceed analysts’ forecasts and get to somewhere around £1.1bn is not enough to get the shares going.”

In early afternoon trading, Persimmon shares were 0.4% higher at 2,237p.

 -- Adds analyst comment, share price --

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