The collapse in the housing market has slashed the profits of Persimmon, one of the country's leading builders. But the company is clinging to the hope that conditions may be bottoming out.
Persimmon tackled the credit crisis which cut off mortgage advances to thousands of homebuyers by cutting 40 per cent of its workforce, shutting offices and delaying work on new sites. Shareholders share the pain with a 73 per cent cut in the dividend payment for the half-year to June.
Its chief executive, Mike Farley, said sales volumes had not slipped any further since April when it issued a trading update. "All we can say is that since April things have got no worse, but no better either."
But Richard Hunter at the broker Hargreaves Lansdown said: "The company has a sound track record and is probably as well placed as any for a property market upturn, but there are no indications that this is yet on the horizon."
To compound the gloom, government figures show the number of new homes built in England fell 19 per cent last year, while those built by private sector dev-elopers such as Persimmon fell 27 per cent.
Persimmon's profits for the half-year fell 64 per cent to £100.9m. The number of homes sold collapsed by nearly a third to 5,501. Average selling prices dropped 5 per cent to £181,485 as it was forced to accept lower offers to shift houses. This trend is continuing.
It made a £40m writedown on the value of its land and wrote off a further £9m in fees relating to transactions which were aborted. Three offices were closed and 2,000 jobs were axed, resulting in £15m of restructuring costs.
Mr Farley said speculation about a change to stamp duty had delayed activity in the market, but he welcomed the prospect of government help "sooner rather than later" to make mortgage funds more readily available.
Persimmon's drive to build more affordable homes provided something of a buffer. Although not as profitable as private homes because the properties are cheaper, they now account for 20 per cent of the total built by the group and that could rise to 25 per cent.
"There are guaranteed sales and no marketing costs involved, and affordable homes are now an important part of our portfolio," said Mr Farley.
He dismissed speculation that Persimmon may be forced to go to shareholders for more cash to help bring down its £900m borrowings. Mr Farley said: "No rights issue is planned. We intend to reduce debts by around £200m by the year end."
He said debts were comfortably within its borrowing limit of £1.4bn. As part of the cash-saving measures, the dividend is slashed from 18.5p to just 5p – worse than analysts anticipated.
"We now await the autumn selling season which, depending on the level of activity, will help to give a clearer picture for 2009."
The shares, down 76 per cent in a year, partly driven lower by speculators shorting the stock in anticipation of further falls, rallied yesterday, with a 28.5p rise to 327p.