Persimmon exits trough with higher land values

Published 25th Aug 2009

Persimmon, one of Britain's largest housebuilders, has increased the value of its portfolio for the first time since the housing downturn hit Britain in the strongest sign yet that the market trough has passed.

A review of its land at the end of June allowed Persimmon to release £27.9 million of £652 million in provisions for falling land values made the previous year. Without the one-off credit, at the operating level the company made an £18.1 million loss against a £101 million profit last time.

It unveiled a 74 per cent fall in first half pre-tax profits but said that selling prices had stabilised and had increased 6.7 per cent in the past month.

Pre-tax profits for the six months to June 30, fell from £37 million in the same period last year to just £8.9 million.

However, John White, chair of Persimmon, said: "We expect sales rates to remain resilient due to the successful destocking that has occurred in the industry combined with continuing good levels of underlying demand for new homes in the UK."

Mr White said recent visitor levels had beaten those of last year while cancellation rates had been significantly lower at 16 per cent throughout the six months compared to 30 per cent in the whole of last year.

The value of reserved sales since July 1 had increased by 9 per cent to £910 million from July a year ago while the average selling price in the period had risen 6.7 per cent to £174,000 as it began to sell a higher proportion of traditional homes rather than housing association ones, particularly in the south.

His comments were similar to those of rival Bovis Homes yesterday and Barratt Developments and Redrow earlier this month which all said they too had seen signs of stabilisation in the collapsed housing market.

However, prices have been helped by the fact that the industry has been reluctant to build new homes as it attempts to offload its stockpile of houses to bring down debt. Persimmon also remains concerned about a dearth of mortgage finance for homebuyers.

Mr White remained cautious about future sales and price increases saying they "will be dependent upon mortgage availability, job prospects and the health of the general economy.”

Persimmon's net debt at the end of June had fallen from £905 million to £494 million and it expects that to fall below £400 million by the year-end.

Shares fell back 2.5p to 516p on profit taking. As previously stated, Persimmon is not paying a dividend.

Source: ' Times '

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