Persimmon back in the black as sales rise

Published 03rd Mar 2010

Persimmon helped to restore confidence in the housing market yesterday as it moved back into the black with a £78 million pre-tax profit.

The housebuilder, which recorded a £780 million loss in 2008, said that rebounds in demand and in prices in the second half of last year were responsible for the improvement in its full-year figures, partly reversing the sluggish start to 2009. Forward sales of homes were equal to £900 million, a 29 per cent increase on their value in 2008.

It added that sales and prices had continued to rise in the first eight weeks of this year, despite the dip in activity recorded in recent weeks by official measures, showing falls in mortgage approvals, sales and prices in January.

Mike Farley, Persimmon’s chief executive, said that prices of the company’s homes, which are weighted towards houses rather than apartments, had held up, rising by 1 per cent in January and February, while sales were up 7 per cent on the same period last year. Mr Farley said that he expected prices to rise by between 2 per cent and 3 per cent over 2010.

Much of the profit was attributed to restructuring — operating expenses were 14 per cent lower than in 2008. Revenue was down from £1.76 billion in 2008 to £1.42 billion, and completions fell from 10,202 to 8,976. The average sale price in 2009 was £160,513, down from £172,994 in 2008. However, net debt levels were reduced from £600 million to £267 million, while cashflow rose to £357 million from £239 million in 2008.

Despite the return to profit, the group’s caution was behind a decision not to reinstate the dividend, although this will be reviewed in the second half of 2010. Mr Farley said that new-build sales were still suffering because of down valuations. These were the main reasons for almost one in five sales falling through last year.

John White, chairman, said: “Our cash generation and cost control have placed the business in a strong position, both operationally and financially, for a recovering market. Prices have held firm since the beginning of the year and we remain focused on improving our operating margins and to profitably grow the business.”

The housebuilder has benefited from government funding for first-time buyers, with 2,700 of its plots receiving a cash boost from the scheme.

Persimmon said that its landbank was “healthy” with 60,454 plots, equal to six years’ supply, and a further 5,500 agreed.

Source: ' Times '

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