Persimmon bounces back as sales strengthen

HOUSEBUILDER Persimmon said today that forward house sales are now well ahead of last year and that it expects to carry a healthy order book in 2010.

The York-based firm reported today in its third quarter interim management statement that it anticipated legally completing around 9,000 homes by the end of the year.

It said it was currently fully sold up for 2009 and had a further £500m in sales already taken for 2010 – up 50% ahead of the same point last year.

Continued good visitor levels, low cancellation rates of 16% and the increase of 6% in the average selling price of homes reserved since July 1 to around £173,000 provides a more positive position for the firm.

Persimmon said that the improvement in average selling price was largely the result of a change in sales mix, but also reflected some modest price growth in some regional markets.

“We have sold a greater proportion of private houses and fewer apartments in the period, while housing association sales volumes have been lower. We are focusing on margin enhancement wherever possible,” it added in a statement.

“While we are increasing investment in new site openings and some selective land purchases, close control of cash generation continues. Debt continues to reduce, notwithstanding the increased investment in work in progress for year end legal completions and a further 50 new site openings in the second half of 2009 for completions in 2010.”

Persimmon said that borrowing were £399m in October compared to £960m in the same month 2008 but it expected borrowing by the year end to be significantly lower.

As a result, the firm is now in a strong position to continue to open new outlets and purchase new land as it becomes available.

However, Persimmon said that while sales volumes have been consistent it still has “significant concerns” over the availability of mortgages particularly the higher loan to value products required by first time buyers.

But it added that it had been pleased with customer interest in the Government HomeBuy Direct Scheme, through which the 1,000th Persimmon home was recently reserved.

“In summary, while we remain concerned about the potential impact on our markets of any significant increase in unemployment over the coming months, debt is reducing well ahead of our previous guidance, sales volumes have stabilised and pricing conditions are currently more positive,” it said.

“Having strengthened our forward order book and reduced borrowings significantly, the group’s financial position remains strong.”