Housebuilder Persimmon PLC (LSE:PSN) delivered first-half results that would have impressed the new Labour government and investors, with accelerating numbers of new housing completions and profits ahead of forecasts.
Management commented that consumer confidence continues to improve with a strong pick up in enquiries and visitor levels since the general election in early July.
Adjusted profit before tax of £149 million for the first half of the year was down 5% a year ago, which was 13% better than the consensus estimate of just under £132 million.
Overall results were "solid", said analyst Sam Cullen at Peel Hunt, who highlighted that the sales rate in the first weeks of the second half is 0.69 per outlet per week, "significantly ahead of the prior year", and the private order book stands 28% higher.
With the company expecting completions to be at the top end of the guided range, while still expecting margins to be in line with the prior year, "this implies small (2-3%) upgrades to the current consensus", Cullen said.
The completions guidance is around 1% higher than consensus volumes of 10,371, said UBS analyst Gregor Kuglitsch, who added that the 3% increase in average selling price to £263k "we think could mean there is upside risk to FY24 consensus ASP of £256.9k".
Completions at the top end of its previous guidance "will be music to the ears of a new Labour government which has prioritised increasing the supply of new homes", said AJ Bell investment director Russ Mould.
Persimmon referenced the recent loosening of planning laws, but Mould said the big driver for shares is the signs of improved demand, which is expected to be helped by the Bank of England’s first rate cut last week.
"The housebuilding sector is heavily reliant on the availability of affordable mortgages and, from that point of view, the trajectory of borrowing rates is heading in the right direction," he said.
"Continuing build cost inflation and a fairly soggy property market helped constrain margins in the first six months of the year and investors will increasingly want to see evidence of these green shoots translating into improved profitability.”
Analyst Charlie Campbell at Stifel said: "Our estimates for 2025 and beyond look more and more conservative as interest rates fall and planning improves."
He said Persimmon is one of his top picks in the sector due to its geographical bias towards the north of Britain and its lean towards first-time buyers, "as we expect northern house prices to outperform and as rents are rising".