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Persimmon, Britain’s biggest housebuilder by value, today (Tuesday 21 August) reported a 63% in first half profits, helped by higher average selling prices due to the completion of more family homes. While Bovis Homes doubled its half year pre tax profits to £16.2 million in the first half of the year and it expects them to increase significantly in the second half of 2012. The half year results from Bovis also show that it increased its number of sales outlets by a fifth and completed 944 house sales, up 18% on a year ago, with an average sale price of £164,400. 

Average sales price for 2012 legal completions are expected to be around 6% greater than 2011 It is good news for the UK building market as prices remain in the doldrums due to the weak economy and lack of lending. It shows that new homes are selling. ‘The Group has delivered a strong performance during the first half of 2012 with profit before tax doubling against the backdrop of stable, but challenging, market conditions. This increase has been delivered through the compound positive effect of increased volumes, improved average sales price and stronger profit margins,’ said David Ritchie, chief executive of Bovis Homes Group.

‘As a result of a greater number of active sales outlets with an increasing proportion of new, more profitable sites, the Group’s profits will, subject to stable market conditions, continue to increase significantly in the second half of 2012, in line with the Group’s expectations,’ he added. He explained that the investments already made in high quality, consented residential land, combined with the strong pipeline of future land opportunities, will support further sales outlet growth into 2013 and beyond. ‘While investing strongly, the Group is controlling capital employed through land bank management and by managing working capital tightly, which will, based on stable market conditions, lead to strongly improving shareholder returns going forward,’ he said. The results also show that average active sales outlets increased by 21% and two land sales achieved in the first half of 2012 delivered a profit of £3.9 million.

The firm has added 1,037 plots with planning consent on eight sites to its land bank with a further 419 consented plots on two sites to be added in the second half of the year. Contracts in place as of the 20 August 2012 will see another 1,200 plots on ten sites added to the consented land bank and it has terms agreed in principle to acquire a further 20 sites, representing in excess of 3,000 plots. At Persimmon pre-tax profits rose to £98.7 million in the six months to the end of June, compared with £60.3 million in the same period last year. Revenue rose 13% to £806.7 million and the builder completed the sales of 4,712 new homes, a 6% increas on the previous year. The firm has strengthened its landbank, having acquired 5,779 new plots on 50 sites in the first half of the year and now ownes and controls 63,786 plots which amount to more than six and a half years supply at current levels. Its average selling price increased to £171,400 and the firm expects to continue with the current trend despite conditions in the UK housing market remaining a challenge. 'We anticipate further underlying demand for new homes but this will reman constraned by the low level of mortgage availability,' said Nicholas Wrigley, chairman of Persimmon. ‘Persimmon remains the national house building business that is furthest down the road to full recovery and its strategy underpins confidence in that view,’ said Investec analyst Mike Bessell. 

Both builders are as capitalising on cheap land bought following the financial crisis. There was also a strong Spring selling season in the UK as first time buyers rushed to take advantage of a stamp duty holiday before it expired at the end of March. The government has also launched its NewBuy scheme to encourage the return of 95% mortgages and a Funding for Lending scheme to incentivise banks to boost mortgage availability.