From City AM:
York-based Persimmon added 11,500 plots to its consented landbank of 92,400 plots...
Legal completions increased by seven per cent to 6,855 new homes, while total revenue surged by 12 per cent to £1.34bn in the six months to 30 June.
Don't just take my word for it, here's what their Chief Executive has to say:
We concentrate on the fundamentals of our business: maintaining a high quality landbank, maximising our strategic land capabilities, building sustainable homes, continuing to improve margins and providing good customer care.
So their number one and number two priorities are..?
Friday, 3 July 2015
Land banking? Nah, not us mate.
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17 comments:
Actually there is nothing intrinsically wrong with that - as long as they pay the 'rent' to the rest of us...
Just a question Mark, when they say "consented landbank of 92,240 plots", do you think that means plots they have building consent/permit on, and could build tomorrow if they wanted to?
L, correct, but if they have to pay for that value, then they wouldn't be land banking in the first place.
Kj, it means with permission to build, tomorrow if they want. Consent = permission, it is the same thing.
MW. Precisely. Clever innit?
MW: thanks.
@MW What's the accounting convention with this? Presumably these 90,OO0 plots are appreciating in value and loans can be raised against them? Does this value appreciation appear anywhere on the balance sheet?
DBC, they are stocks so shown at lower of cost and value. I checked their accounts, the plots are shown at £20,000 each on the balance sheet although in the blurb it says that are actually worth twice that I.e. About £4 billion = 90,000 x £40,000.
FFS!
MW: which accidentally is their market cap also according to their website...
Kj, good work, thanks. Which proves my point.
Their core competence is land speculation, pure and simple.
I dont see why they are a problem. Are the people who keep voting for it really to be put in the dock.
They will almost certainly trade the piece of paper. Much easier than building houses.
On inheritance tax (property tax) ...
http://www.meltfund.com/2015/07/good-news-inheritance-tax-property-tax.html
@MW
Perhaps the conventions of accounting need an internal professional challenge: not all stock is really valued at cost or at a mark-down. This outfit is openly trading at 100% inflated price for its stock of land; as Physiocrat says it's its commercial raison d'etre. Can you sign off accounts and audits knowing them to be unreal?
PS
I though this is what "mark to market" procedures meant.
P, exactly.
DBC, I do not know whether you understand my an kj's comments or whether you understood them but are disagreeing with them, and if so what your disagreement is.
@MW
Put it another way then: why aren't these plot valuations made mark to market?
DBCR. et al. No spec house builder 'should' mark to market. If he does he is deluding himself about his profits because he has to replace his stock of plots. HOWEVER, as we can see from Persimmons figures they are not spec house builders. Their business is in buying land and obtaining planning permission and then maybe building some houses or more likely dealing on the land. I prefer not to call it 'speculation' as it gives true speculators a bad name. True speculators take the slack out of markets - grain merchants for example.
DBC, it is just accounting tradition to show stocks at lower of cost and net realisable value. But they say that their land bank is worth £4 ban and the total value of their shares is £4 ban, so what's the problem?
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