House price slide and lending squeeze conspire to hit first-half profits at UK housebuilder
Pre-tax profit at Persimmon dived 64% in the first half of this year, falling to £100.9m from £281.1m in the same period last year.
Announcing its results for the six months ended 30 June 2008, the UK housebuilder blamed the fall in profits on “very difficult market conditions”.
With the effect of the credit crunch on mortgage borrowing driving down sales and the national house price slump affecting selling prices of new homes, turnover fell to £998.4m from £1,514.4m a year earlier.
The 31% fall in the number of new homes sold by Persimmon, from 8,002 in the first half of 2007 to 5,501 this year, reflected a “significant reduction in mortgage availability”, it said.
A 4% fall in the average selling price of Persimmon's homes from £189,255 to £181,485 was attributed not only to the UK house price slump but also partly to the firm's 27% increase in social housing work.
The £40m writedown made on land values proved less than had been feared, but the firm said that further writedowns might be required depending on the state of the UK housing market.
However, Persimmon is optimistic that the rapid restructuring it has undertaken this year, at a cost of £15m, will help it tackle the continuing difficult market conditions.
The restructuring, which has included 2,000 redundancies and three office closures, is expected to generate a cash saving of £45m per year beginning from September 2008.
John White, chairman of the group, 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.”