Housebuilder on track despite 2.5% revenue drop

Profits at housebuilder Persimmon is set to increase by 50% when it reports full year results in February.

In a trading update released to the City this morning, the firm said profit for the year to 31 December will be at the high end of analysts’ expectations, which currently range between £130-148m.

However, the firm said total revenue will come in at £1.53bn, down 2.5% on the £1.57bn reported in 2010. This is because of more sales than expected through the government’s First Buy scheme, in which the housebuilder has to put in 10% of the cost of a house, meaning average selling price fell 2% on 2010.

The total number of homes sold in 2011 was almost identical to 2010, at 9,360, but the firm said it underlying operating margin will grow to “approaching” 10% despite the fall in average sales price.

Its statement said: “As a result of this significant improvement in underlying operating profitability, combined with a reduction in net finance costs, we anticipate an increase of c. 50% in underlying profit before tax. This result will be towards the top end of analysts’ expectations.”

The firm said a strong autumn selling season had allowed it to secure forward sales of £615m for 2012, 9% above the level at this time last year, when the autumn season was exceptionally weak.

Overall the firm said the market remained “challenging”, but that it had seen “encouraging levels of visitors, resilient sales reservations, low cancellation rates and stable prices.”