The share price of Persimmon (LSE: PSN) added 15p to 1,486p during early trade this morning after the housebuilder announced a 49% surge in profit, beating analyst expectations. Persimonn shares have increased by 64% on this time last year, as the housing market benefits from easing credit conditions and rising consumer confidence.
The FTSE 100 member reported profits of £330m up from £222m in 2012, bolstered in part by the government’s Help to Buy scheme, which offers buyers an interest free loan of up to 20% of the purchase price of a new home worth up to £600,000.
Persimonn added 17,735 plots of new land across 130 locations during 2013. In total the firm has a 6.5 year supply of land for future projects, which is a decrease from 6.9 years in 2012, and in line with the group’s long-term strategy of reducing supply to a more optimal five years.
The chairman, Nicholas Wrigley, commented:
“Persimmon achieved a strong result for the year as we responded quickly to the increased customer demand that resulted from improved mortgage lending, the introduction of Help to Buy in April 2013 and the increase in consumer confidence as the UK returned to more meaningful economic growth.”
“2013 was a year of excellent progress against our strategic plan and the strong growth of the business has underpinned an acceleration of the Capital Return Plan. We anticipate a further year of encouraging sales growth in 2014.”
In today’s statement the group reported a 47% increase in earnings per share to 85p that will support a dividend payout of 75p per share.
Therefore, after this morning’s price movement the shares may trade on a P/E of 17 and offer a potential income of 5%.
Of course, the decision to ‘buy’ — based on those ratings, today’s results and the wider prospects for the home building sector — is solely your decision.