Persimmon ride through sales dip

HOUSEBUILDER Persimmon has revealed a 26% rise in half-year turnover despite a slowdown in sales prior to George Osborne's austerity Budget.

HOUSEBUILDER Persimmon has revealed a 26% rise in half-year turnover despite a slowdown in sales prior to George Osborne's austerity Budget.

The UK’s largest housebuilder also reported higher sales and improved debt and margins in the first half but said shaky consumer confidence was weighing on the outlook.

And although the group remains cautious about the market over the coming months it said legal completions for the six months to June 30 increased by more than 16% to 4,657 homes, with average selling prices up 8% at £168,500 and turnover ahead by around a quarter to £785m.

It sounded a note of caution as activity during the summer looks set to follow traditional patterns and slacken off, not helped by buyers waiting for more clarity over employment and the wider macroeconomic picture.

“How severe people take the forthcoming budget, that is the fundamental issue for us, that is something we won’t know more about until the autumn,” said chief Executive Mike Farley.

While sales prices and margins increased on the start of the year, Persimmon said the normal seasonal slowdown in reservations since the start of May was exacerbated by uncertainty ahead of the Government’s emergency Budget.

Since then, the York-based company Persimmon said that sales have been in line with its expectations.

It added: “Whilst we remain cautious, we have a strong platform for profit growth as and when the housing market improves further.”

Persimmon said cancellations remain at low levels in line with a year earlier at around 16%. Total sales including legal completions and forward reservations are around £1.5bn, up from £1.3bn a year earlier.

Having entered the sector’s peak period for borrowing, Persimmon said its debt had fallen to £122m from £494m a year earlier and from £267m at the start of the year. It is expected that this could fall to below £100m by the end of the year.

The company said it would continue to invest in new site openings in time for the normally stronger housing market in the autumn.

However, it stressed that it would maintain a cautious approach to investment until mortgage availability showed signs of improvement. Investec Securities left its forecasts unchanged and said the update from Persimmon was “noticeably hesitant“ in its tone on the outlook.

Analyst Alastair Stewart said there were signs that firms were pulling out of land buying due to fears of a double-dip in the market. “We believe the housing market has lurched down in recent weeks according to our meetings with the industry,” he added.

Persimmon said first-half operating margins increased to 7.5% from 1.5% a year ago, in line with the group’s strategy of improving margins and lowering debt, which fell to £122m from £494m last year.

Mr Farley said activity declined between the General Election in May and the emergency Budget, but he added that confidence had improved in the last couple of weeks.

Analyst Robin Hardy at brokerage KBC Peel Hunt said: “We have been surprised by how well the market has stood up through 2010 and these provisional figures square with that.

“We are likely to raise 2010 profits by at least £10m from our current £47.9m.”

Analysts feared the worst after indicators pointed to a weaker market, with house price growth tailing off in recent months.

House prices rose by just 0.1% in June, according to Nationwide Building Society, while lender Halifax reported a drop in prices in May.


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