Persimmon confident despite sales fall

HOUSEBUILDER Persimmon saw a fall in sales over the last three months but is confident that it can produce a “strong” set of results for the year.

The York-based group said today in a trading update that despite more “challenging” trading conditions in the second half of 2007 which saw its forward sales into 2008 at £603m, compared to £701m a year earlier, it expected profits to increase for the year, coming in in the “mid range of analyst expectations”.

Chief executive Mike Farley said that Persimmon will increase its yearly dividend by at least 10%.

He said that the group had improved operating margins by tight cost constrol, delivery further benefits from its acquisition of rival Westbury and the development of its land portfolio.

Persimmon has seen slowing sales since it reported its half-year results last August. It sold 15,905 house sales last year, down 5% from the 16,701 sales it achieved in 2006.

“Volumes have been impacted as lower consumer confidence and the tightening of credit markets reduced activity in the important autumn period,” said Mr Farley.

Despite the fall, he said that sales prices have “remained resilient during this period”, although the group has had to up its marketing spend and sweeten the incentives to attract prospective buyers.

Persimmon saw the price of its homes rise by 3% during the year to an average of £189,558 despite increasing the number of affordable homes that it sells.

Its landbank has remained steady at around 79,000 plots.

The group said its balance sheet remained strong with healthy cash flows and gearing down slightly at 31%.

It put the drop in forward sales down to “market uncertainties” during the last quarter of 2007.

“Now that interest rates have changed direction and with the spring selling period ahead of us we expect to experience an increase in the level of activity over that achieved in recent months,” said Mr Farley.

Looking ahead, he said: “It is too earlyin the New Year to predict exactly how the market will develop over the next few months. However we are confident that our focus on cash management through these more challenging times will ensure that when the market improves we are well set to take advantage of it. We believe that the underlying fundamentals for our industry remain intact and supportive,” he added.

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