Persimmon rides out rate rise

Britain's biggest housebuilder, Persimmon, expects the housing market to remain strong and said the recent rise in interest rates has had "no tangible effect" on its business.

Reporting a top-of-the-range 16% increase in interim profits to £271.5m, executive chairman John White said visitor levels and enquiries remain at healthy levels despite the surprise rate rise.

"For the majority of our homebuyers, decisions to move are driven primarily by their family dynamics and therefore we expect this healthy market to be sustainable," he said.

The group, which joined the FTSE 100 index last December, is "well placed to take advantage of a strong and stable housing market," Mr White added.

Its results were boosted by a first-time contribution from Westbury, the rival house building firm which it bought for £644m in January.

Mr White said the integration of Westbury has been completed ahead of schedule and that costs savings accelerated to £10m in the first half with at least a further £20m expected in the second half. Savings for 2007 and beyond are put at over £40m. There were one-off reorganisation costs of just over £15m in the first half.

Group turnover rose by 42% over the six months to 30 June, to £1.5bn, and home completions were ahead by 38% to 8,226 units. Excluding Westbury, volume was ahead by 7%.

Average selling price rose by 3% to £188,427, although the group is not expecting any further increases. Mr White said: "We do not expect to see significant selling price increases above those already realised this year. Therefore we are redoubling our efforts to keep increases in build costs and overheads to a minimum."

He said the group had been encouraged by recent moves by the government to improve the planning process and also welcomed its decision to reconsider full implementation of Housing Information Packs.

Total sales revenues for the year to date, including completions, is at an all time high of £2.9bn, which puts the group "in a healthy position" to achieve volume expectations for the full year.

The interim dividend is raised by 15% to 13.8p a share, which Mr White says is an expression of confidence in the success of the Westbury acquisition and in future earnings growth.