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Persimmon half-year results in the spotlight for update on property market

Published 19/08/2016

Persimmon is set to post a half-year profits surge on Tuesday
Persimmon is set to post a half-year profits surge on Tuesday

Half-year results from housebuilder Persimmon will be in the spotlight next week when it gives an update on Britain's property market in light of the Brexit vote, while advertising giant WPP also posts interim figures.

Persimmon is set to post a half-year profits surge on Tuesday as it continues to shrug off fears of a hit to property prices following the vote to leave the EU.

The Charles Church owner revealed robust home sales in a first-half update last month and said there would still be ''good opportunities'' in the property market in the wake of Brexit.

Results from York-based Persimmon - the UK's biggest housebuilder by volume - will also be scoured for any comment on more recent buyer demand and any signs of a pick-up thanks to the Bank of England's rate cut and economy-boosting measures.

Persimmon and its listed rivals saw shares surge after the Bank slashed rates to 0.25% from 0.5% and unveiled a package of measures worth up to £170 billion.

With more rate cuts likely by the end of the year, housebuilders are seen as being among the biggest beneficiaries of the Bank's economic-recovery plan.

Persimmon's shares have rallied by around 30% since July on the better-than-feared outlook, although they still remain below pre-referendum levels.

Analysts at Whitman Howard are expecting an impressive set of half-year figures from Persimmon, pencilling in a 27.9% surge in pre-tax profits to £349 million.

This comes after Persimmon said it sold 6% more homes in the first six months of 2016, at 7,238, with the average price up 6% at around £205,500.

It added it took ''good levels of sales'' throughout May and June, with private sales around 1% higher year on year despite uncertainty ahead of the EU referendum and tough comparatives from a year earlier.

Scott Fulton at Whitman Howard said Persimmon's recent share price bounce-back "reflects a growing awareness that predictions of a 2017 collapse are unfounded".

He is expecting only a modest drop in sales growth in 2017 as a result of the Brexit vote.

Half-year results from Sir Martin Sorrell's advertising and marketing giant WPP will be watched closely for further signs of a slowdown in the UK following the referendum.

It made a series of warnings over the impact of Brexit on the economy and advertising demand ahead of the vote and said in June that UK trading had slowed in the run up to the referendum.

But while trading may be impacted in the UK, the group makes just 14% of its revenues and underlying earnings in Britain.

Analysts at Numis Securities expect WPP's global operations to help the group weather the storm, predicting a currency boost from the pound's plunge following the decision to quit the EU.

They said the group will be a "major beneficiary" of the pound's weakness, estimating the sharp currency swings could add around 5% to group sales and earnings for 2016, rising to 10% next year.

WPP's interim results on Wednesday are also expected to show a 13% hike in underlying earnings to £755 million, with organic growth in net sales of 3.2%.

It said at its annual shareholder meeting in June that group-wide net sales were up 3.1% in the first four months of the year, while it added that revenue, net sales and profits were all "well above budget and ahead of last year".

The annual general meeting saw WPP suffer a shareholder backlash, with more than a third refusing to back Sir Martin's mammoth £70 million pay deal as it was accused of a ''history of excessive pay''.

WPP saw 34.2% of investor votes made against its remuneration report or withheld at the firm's AGM in London, although it survived the vote, with the backing of two thirds of investors.

A raft of investors and shareholders voiced their anger at the AGM over Sir Martin's pay package.

This includes a £1.15 million base salary and £62.8 million in shares from a long-term incentive plan - making him the best paid chief executive in the FTSE 100.

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