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Persimmon Shares Jump as Higher Prices Lift Margins

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July 6 (Bloomberg) -- Persimmon Plc, the U.K.’s biggest homebuilder by market value, rose the most in almost two months in London trading after first-half sales jumped 26 percent and its profit margin widened more than some analysts expected.

Persimmon climbed 6.2 percent to 370.2 pence, the biggest gain since May 10. Taylor Wimpey Plc, the U.K.’s second-biggest homebuilder by volume, rose 6.7 percent and Barratt Developments Plc gained 5.3 percent.

Revenue in the first six months rose to 785 million pounds ($1.2 billion), York, England-based Persimmon said in a statement today, without giving the year-earlier figure. The operating profit margin widened to 7.5 percent from 1.5 percent before one-time gains and losses.

“Persimmon is in good shape,” said Imran Akram, an analyst at Collins Stewart in London with a “buy” recommendation on the stock. “It has fixed its own debt problems through cash generation, the balance sheet is conservative and the shares are well off their highs. It looks very attractive here.”

Britain’s housing market has recovered from a slump that reduced values by a fifth. House prices rose for a fourth month in June to a two-year high as the market showed “broad stability,” Nationwide Building Society said June 30. Mortgage approvals still remain at about half the level during the housing boom in 2007 and prices are 8.6 percent below the peak.

Charlie Campbell, an analyst at Liberum Capital in London, had expected a profit margin at Persimmon of 4.7 percent.

Less Debt

Persimmon’s debt amounted to about 122 million pounds as of June 30, down from 494 million pounds a year earlier. The average selling price increased 8 percent to 168,500 pounds, mainly because the company sold more expensive houses.

“We’re very happy with our debt level, we’re getting good cash flow from the business,” Chief Executive Officer Mike Farley said in an interview. Prices are unlikely to increase during the rest of the year as the new coalition government implements spending cuts to reduce Britain’s record budget deficit, Farley said.

Persimmon bought about 4,000 plots of land in the period and agreed to terms on a further 3,500. It will “wait and see” before committing to further purchases, Farley said.

To contact the reporter on this story: Tim Barwell in London on tbarwell@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

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