Persimmon profits slashed but hopes for strong recovery

HOUSEBUILDER Persimmon today revealed a dramatic drop in pre-tax profits to £36.9m from £281m but said it is in a strong position to grow once the housing market improves.

However the York-based group, which has made 2,000 staff redundant since the start of the year, held out little hope that the current downturn is nearly over as it slashed its interim dividend to 5p from 18.5p.

Persimmon chairman John White said that it had sold 5,501 new homes in the six months to the end of June, down from 8,000 during the same period last year while the average selling price has fallen to £181,485 from £189,255.

The group said it took a £15m hit from its restructuring which has seen 1,100 office staff and 900 site workers made redundant and three offices close. It said the cuts will save it £45m a year.

Persimmon saw underlying pre-tax profits of £100.9m in the six months to June 30 but the £15m cost of redundancies and another £49m in land write-downs reduced this figure to £36.9m.

It currently has forward sales of £835.7m for the second half of the year which Mr White said, when added to first half sales, is around 90% of its expected sales for the year.

Persimmon has shaved its landbank by 7% to 76,159 plots.

Mr White said: “The business has performed well in very difficult conditions.  We are confident that our business, having been restructured, is in a strong position to move forward whenever the market improves.”

He said that by cutting its land buying, reducing building costs, postponing some schemes and focusing on increasing the number of affordable homes it builds, Persimmon is “best placed to meet the challenges of the current market and to react to any change of conditions in the future”.

The group said that unusually the market downturn had been seen across the country at the same time rather than the usual time lag for it to affect different regions, which it puts down to the lack of mortgage availability.

Persimmon said that speculation over changes to stamp duty had not helped the market, delaying many house purchases, but it welcomed the Government’s moves to boost the housing market, particularly over mortgage availability, which it says is key to any recovery in 2009.

It said it has a “relatively low level of exposure” to the market for high rise apartments which make up only 2% of its landbank and which it said is “particularly difficult”.