Firms building on renewed confidence of Britain's recovering housing market

The upturn in confidence in the building industry will be on show this week, with upbeat results due from Persimmon and Bovis Homes

Persimmon
Persimmon

Housebuilder Persimmon will show it has reaped the benefits of Britain’s recovering housing market when half-year results on Tuesday illustrate surging demand and profits.

Government stimulus schemes have fuelled the housing market in recent months, sending buyers flocking to the York-based builder’s developments.

Persimmon, a recent entrant to the FTSE 100 Index, is expected to report reservations leapt 30% since the Government launched its Help to Buy scheme loan scheme in April.

By July forward sales were 19% ahead year-on-year at �920m.

The Charles Church and Westbury Partnerships builder will report a 7% increase in home sales during the first half of the year to 5,022, from 4,712 a year earlier, helping lift revenues 12% higher to about �900m.

Profit margins have soared to 15% a year-and-a-half ahead of target, while it has also sold out developments sooner than expected.

Deutsche Bank expects Persimmon’s first-half profits to swell by a third to �129.1m from �96.6m a year earlier.

The City will be keen to see if Persimmon will match higher earnings with a big increase in building, although the group has said it plans to maintain site numbers at around 385 for the year.

Chancellor George Osborne unveiled Help to Buy in March, which lends buyers 20% of the value of a new home worth up to �600,000, interest-free for five years.

This allows people to buy a property with a 25% deposit and together with another state stimulus programme, the Funding for Lending Scheme (FLS), has been credited with spurring a recovery in the housing market.

The FLS incentivises banks and building societies to lend more by offering them discounted loans.

Analysts on average expect Persimmon to post underlying profits of £285.3m for 2013, up from £221.8m a year earlier.

First-half results from Bovis Homes are expected to show more growth as the housebuilder is boosted by building on cheap land and the pumped-up housing market.

While its home sales in the six months to the end of June increased by just 19 to 963 on a year earlier, Bovis is set for sales to soar, with private reservations 40% higher in the first six months of the year to 1,389. Bovis has opened more sites to take advantage of the recovering housing market, trading from an average of 91 outlets during the period compared with 82 a year earlier.

Kent-based Bovis expects its operating margin to rise to 11% from 8.7% a year earlier and is increasingly building on land bought cheaply during the downturn.

The average price of homes has also jumped 15% to £188,500, compared with £164,400 a year earlier.

Bovis said the Government’s Help to Buy scheme helped drive a 26% increase in net private sales per site per week.

Deutsche Bank sees first-half sales rising 6.6% to £181.5m, and pre-tax profits leaping 42.5% to £17.6m.

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