Persimmon reports soaring profits and ‘robust’ demand despite Brexit

The news is a rare ray of light for the UK construction industry after a slew of gloom-ridden prophecies

Ben Chapman
Tuesday 23 August 2016 15:18 BST
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Persimmon has seen a 29 per cent jump in profits, but analysts warn that it may not last
Persimmon has seen a 29 per cent jump in profits, but analysts warn that it may not last (Rex)

Persimmon, one of the nation’s largest house builders, saw profits leap 29 per cent this year and said demand since the Brexit vote had been “robust”.

The news is a rare ray of light for the UK construction industry after a slew of gloom-ridden prophecies.

Barratt said in July that it would slow the pace of construction and rethink its land buying programme to prepare itself for a slowdown. The UK’s biggest housebuilder, saw its shares plummet 40 per cent in the days after the Brexit vote, before staging a partial recovery.

Estate agents Countrywide and Foxtons have also suffered big falls. Meanwhile, investors have pulled billions from funds investing in shops and offices, leading many to be suspended.

Bucking the trend, Persimmon saw a jump in reservations from buyers of new homes over the last two months despite surveys suggesting the prospect of Brexit could cool the housing market.

Persimmon said there had been a 17 per cent increase in buyers paying fees to take homes off the market in July.

“There is very good underlying demand out there,” Jeff Fairburn, Persimmon chief executive, said.

“The market is well-supported by good mortgage products and we are focused on the first-time buyers and first-time movers at the lower end of the market,” he said.

Persimmon does not build in central London where price rises have turned a corner into negative territory according to recent surveys.

The company reported a jump in first-half pretax profit to £352m and the positive comments pushed its shares up 4.5 per cent in Tuesday morning trading.

The price of homes for sale in England and Wales fell in August, posting the biggest drop since November, property website Rightmove said earlier this month, with the largest fall recorded in London and the South East.

Gary Paulin, head of global equities at Northern Trust said the profit jump was "remarkable" and the outlook for house builders remained strong: "As the structural limits on supply remain, so too excess demand driven by ultra-low interest rates, high-affordability and full employment, the medium to long-term fundamentals remain solid".

Some analysts struck a note of caution however. “This might just be the calm before the storm,” said Neil Wilson of ETX Capital.

“Earnings reflect only the first half of the year and although housebuilders are upbeat about the next six months no one knows for sure what the economic fallout really will be. If unemployment rises as expected the impact on housing and retail sales will be a little less upbeat than these snapshots suggest.”

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