Homebuilder Persimmon Plc Profit Tops 1 Billion Pounds After Help-to-Buy Boost

(Bloomberg) -- Persimmon Plc became the first U.K. homebuilder to report profit of more than 1 billion pounds ($1.3 billion) as the government’s Help-to-Buy policy bolstered sales.

The York, England-based company was among the biggest gainers in the FTSE 100 index of stocks on Tuesday after it announced a 13 percent rise in pretax profit. Help to Buy accounts for about half of Persimmon’s sales and selling homes built on cheap land to buyers benefiting from the interest-free loans helped the company achieve record margins.

The profit on each home Persimmon sells has almost tripled since 2013, the year the government program was introduced. The policy, which was designed to encourage companies to build more, has helped fuel demand for new homes, even as the housing market as a whole slows amid uncertainty over Brexit.

Persimmon’s results come days after the Times reported that the government may ban the company from using Help to Buy when it’s extended from 2021. Ministers are concerned about using taxpayer money to support the firm after receiving complaints about the quality of the company’s construction and its sale of homes on expensive leases, the newspaper said.

Persimmon rose as much as 2.9 percent, and was up 1.4 percent as of 8:57 a.m. in London, one of the top-10 performers in the FTSE 100. The shares fell as much as 8.4 percent on Monday following the Times report.

The company also announced:

  • Interim Chief Executive Officer Dave Jenkinson was named as the permanent successor to Jeff Fairburn, who left Persimmon last year amid a scandal over executive pay.
  • Pretax profit was 1.09 billion pounds.
  • The profit on each home Persimmon sells has risen to more than 66,000 pounds.
  • The company delivered 7,970 new homes to Help-to-Buy customers, up from 7,682 in 2017.
  • Revenue for the full year was 2.7 percent above the average analyst estimate, at 3.74 billion pounds.
  • Link to the earnings statement.

©2019 Bloomberg L.P.