Persimmon posts sharp profit fall

Posted by admin on 21 August, 2008 under Business news | Be the First to Comment

UK housebuilder Persimmon has posted a sharp fall in profits for the first six months of the year as it struggles to deal with the housing market slump.

The York-based firm said pre-tax profits for the half-year were £36.9m, down from £281.1m a year ago.

Sales were down more than 30% on last year, and profits were also hit by costs related to shrinking the business and write-downs of its land values.

The company has cut 2,000 jobs since the start of the year.

But with some indication that the market had stabilised since what the firm called a “significant downturn” in April, shares in the housebuilder rallied on Thursday.

They closed up 28.5 pence, or 9.5%, at 327p in London.

“The business has performed well in very difficult conditions” Persimmon chairman John White

Gloomy news on mortgage lending and house prices since the start of the year have taken their toll on shares in the sector, with Persimmon down more than 60% since its 2008 peak.

Mortgage problems

Persimmon said it sold 5,501 new homes in the first half of the year, down from 8,002 sales in the same period last year.

It blamed the drop in sales on a lack of affordable mortgages – a fact that also depressed the average selling price of a new home to £181,485 from £189,255 last year.

Persimmon remained cautious on the outlook for the property market, and reduced the value of its land bank.

It took a £40m write-down on the value of its owned land, and wrote-off a further £9m in fees relating to potential transactions that it has withdrawn from.

Persimmon took an additional £15m hit on restructuring costs, which included the closure of three offices, 2,000 job cuts and the postponement of starting work at some new sites.

Better prepared

“The business has performed well in very difficult conditions,” said Persimmon chairman John White.

“We are confident that our business, having been restructured, is in a strong position to move forward whenever the market improves.”

But the firm added that its prospects depended on the pick-up in the availability of affordable mortgages.

Richard Hunter, an analyst at Hargreaves Lansdown, was not optimistic for a swift recovery.

“The fact remains that the outlook is bleak,” he said.

News reported by The BBC