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on the value of its owned land, and wrote-off a further £9m in fees relating to potential transactions that it has withdrawn from.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

Barclays has seen pre-tax profits drop 33% in the first half of 2008 following more credit crunch related write-downs.

The bank made £2.75bn, down from £4.1bn, which it said was “acutely disappointing” but which beat many analysts’ expectations.

The fall in profits was less than that seen by most of its competitors.

Barclays said it had taken charges of £2.45bn for bad debts, including exposure to US sub-prime mortgages and other credit market problems.

“Barclays has done particularly well, given that so much of its growth over the past few years has come from an investment bank” Robert Peston BBC Business Editor

‘Tough’ conditions

Barclays said the outlook would remain difficult.

“It would be wrong… to suggest that the market conditions over the foreseeable future will be anything other than tough,” said chief executive John Varley – pointing to slowing economies around the world.

“That means that we must remain very vigilant to managing risk.”

He added that some parts of the business “may take quite some time” to return to the profitability of previous years.

The £2.45bn of charges in the first six months of 2008 compared with £959m of write-downs in the same period a year ago.

Barclays’ investment banking arm – Barclays Capital – saw profits fall 68% to £524m, after it took nearly £2bn in write-downs as a result of the credit crunch

Capital raising

BBC business editor Robert Peston said that Barclays had done well, especially given that so much of its growth over the past few years has come from Barclays Capital (Barcap) – which remained profitable.

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“More-or-less every analyst on the planet expected Barcap to be the pre-eminent credit-crunch victim,” he said.

“But, to date, Barcap has not suffered credit losses anywhere near as big as Merrill, or UBS, or even Royal Bank of Scotland”

Barclays has 11.5 million UK customer accounts, and 786,000 mortgage accounts.

At its credit card operation Barclaycard, bad debt charges increased 10%, partly because of its recent purchase of Goldfish.

Barclays recently raised £4.5bn from investors to boost its balance sheet.

The bulk of shares were sold to major overseas and institutional investors, led by Qatar, China and Singapore.

And earlier this week Barclays agreed to sell its life assurance arm to Swiss Re for £753m as part of its capital raising efforts.

News reported by The BBC