More on Persimmon
Persimmon
Housebuilder Persimmon reported record profits for the year to December 2004 on the back of improved selling prices (on average, up 11% over last year) and higher unit sales. In contrast to a number of other construction companies, Persimmon has managed to maintain the momentum seen in the first half of the year (when 6,058 units were sold at an average selling price of £171,082). Unit sales for the full year were 12,360 (2003: 12,163), at an average selling price of £172,431 (2003: £154,810). Operating margins (before goodwill amortisation) increased to 23.3% (2003: 20.3%)
The forward order book at the year end was reported to be similar to last years at the time of the last trading statement in December, which was £550m or a roughly a third of annual sales.
Persommon admits that the market has slowed but remains relatively optimistic on the outlook for the medium term.
Low gearing, wide geographic diversification (the company operates from the south coast of England to Aberdeen in northeast Scotland) and low exposure to the more volatile buy-to-let market should ensure more stable earnings than some of its peers. The downside to the stock is largely that of the sector, our view is that the housing market will decline in the medium term although the company is rather more optimistic the market, increasing the full year dividend by 50% to (27.5p per share) partly due to “strong confidence” in the future. Dividend cover is 4x and the prospective dividend yield is 3.3% at the current price of 778p. The prospective PE of 6.6x, is at the lower end of the sector.
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