Persimmon will lay off 500 workers as a result of its acquisition of its rival housebuilder Westbury, it emerged yesterday, as the company predicted a rebound in 2006.
The £643m Westbury deal was completed last month. Persimmon said that 500 of Westbury's 1,500 jobs would go with the closure of the company's regional and central offices. About two-thirds of the £40m-a-year anticipated cost savings will come from office closures and the rest from greater economies of scale in procurement.
Persimmon, which sold 12,636 homes last year, an increase of 2 per cent, said it was now aiming for annual volume of 20,000 properties in the medium term. The enlarged group is likely to produce 16,700 homes this year.
Persimmon's 2005 results were viewed by the City as markedly better than competitors, such as George Wimpey, which experienced a sharp drop in profits and cited tough market conditions. Persimmon's pre-tax profits grew 6 per cent to £495.4m. Turnover advanced 7 per to £2.3bn. The average selling price was 5 per cent better at £180,892. Analysts at Citigroup described it as "a phenomenally good performance given the market environment".
John White, Persimmon's chief executive, said the key was the company's more "flexible" approach, allowing its regional businesses to decide how to price and market homes.
"We are not over-exposed in any one market, geographically or in terms of products. And we allow our businesses to operate themselves - not people in the centre dictating", said Mr White, who will become chairman in April, handing the chief executive role to colleague Mike Farley.
Persimmon said it should be able to reduce the level of incentives to buyers this year. Mr White said: "We've had two years of a flat market but there's been no price crash. That's as good an outcome as we could have hoped for. People are now coming back into the market, with interest rates relatively low and the threat of a price crash receding by the day ... they feel they've been sitting on their hands long enough now."
Persimmon predicted that prices would grow 3 per cent this year. Mr White said there was little prospect that prices would start "roaring" again as buyers are still stretched.
The company is sitting on forward sales of 7,000 units, worth £1.25bn.
Duncan Davidson, who will retire as chairman in April said: "I am proud to have led Persimmon for 34 years.... During this time we have achieved growth in total shareholder return of over 25 per cent on a compound annual basis and have increased the group's market capitalisation from £14m to over £4bn."Reuse content