Persimmon says market no worse

Persimmon said that the speculation over stamp duty had weakened an already difficult housebuilding market but sales volumes had not deteriorated since April.

Hemscott Editor | 21-08-08 | E-mail Article

The housebuilder said pre-tax profits were £100.9m for the six months to the end of June, compared with ££281.1m last year. This was slightly lower than analysts’ estimates. Revenues slipped from £1,514.4m to £998.4m as home sales dropped 31% year on year.

The group is taking a number of measures to reduce costs. It has already announced that it will shed 1,100 jobs. It is also reducing its land purchases and focusing on increasing the percentage of its business that comes from affordable housing projects. It announced today that it will also be cutting its dividend to 5p per share from 18.5p per share.

There was some light at the end of the tunnel as Persimmon said sales volumes have not deteriorated further since April. However, it added that prices and margins remained under pressure as the industry tried to offload excess stock, leading to heavy discounting. The supply of excess stock is clearing and the group has benefited from a lack of exposure to high rise flats.

The group said that the outlook for 2009 remains difficult to predict, but activity levels in the Autumn should give a clearer picture.

Its current debt levels are £905.5m, giving it a gearing level of around 40%. This is comfortably within its committed facilities of £1.4bn. The group has written down its land value by £40m.

The news sent the shares up 37.75p to 336.25p as the market welcomed signs that things weren’t getting any worse for the group. They are still a long way from their highs of over 1,500p at the beginning of last year, but equally this represents something of a recovery from their lows of 250p. The shares now trade at 9.76x earnings, which remains high for a housebuilder. This is still a dangerous sector, though Persimmon is one of the best in class.

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