Housebuilder Persimmon revealed that efforts to slash costs and sell more higher priced houses paid off as it reported a strong bounce back in annual profits.
The group, which trades as Persimmon, Charles Church and Westbury Partnerships, said underlying pre-tax profits soared to £95.5 million from £7 million a year earlier.
The UK’s second biggest housebuilder said buyer activity in the first eight weeks of 2011 had been “encouraging”, with prices remaining stable – at an average of £147,282 – and visitor levels up around 10%.
Forward sales are below last year, at £848 million against £898 million a year earlier, but this has improved since the end of last year.
Persimmon’s upbeat outlook comes as figures from Nationwide Building Society showed house prices rose 0.3% in February – the second gain recorded since May last year. But the society cautioned the market would remain sluggish.
Persimmon’s annual results rebound follows moves to cut costs throughout the business and rein in land buying to match reduced demand.
It has also boosted average selling prices by 5.7% to £167,249 as it sold houses rather than flats, boosted by an underlying increase in values of 3%.
On a bottom-line basis, pre-tax profits nearly doubled to £153.9 million from £77.8 million in 2009.
Despite its improved results, Persimmon cautioned that “general market indicators remain mixed and there remain significant challenges ahead”.
Matrix analysts praised the company’s results, saying: “The self-help approach adopted by Persimmon and the intelligent use of incentives will help to sustain a gentle improvement in reservations and, more importantly, a slow but sustainable recovery in margins through 2011.”
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