Persimmon sees pre-tax profits tumble

Charles Church housebuilder Persimmon today kicked off what is set to be a grim results season for the sector after first-half profits slumped by nearly two-thirds.

The York-based firm, which said trading conditions were the most challenging in its recent history, has cut 2,000 jobs to cope with the downturn in the market.

Pre-tax profits for the six months to June 30 tumbled 64 per cent to £100.9 million.

While Persimmon said sales volumes had not slipped any further since its gloomy April update, it said the autumn selling season would give a clearer indication of prospects for 2009.

But it warned: "The current economic conditions, the uncertainties surrounding the general financial markets and mortgage availability will be defining factors in the return to a more normal housing market.

"Until we see an improvement in respect of these factors it is difficult to predict the short term future with confidence."

The number of homes sold by the firm fell almost a third to 5,501 over the period thanks to the slump in mortgage availability as lenders reined in activity following the credit crunch.

Chief executive Mike Farley said the proportion of its homes bought by first-time buyers had fallen from around 17 per cent to 10 per cent in the first half of the year.

"First-time buyers are the people who have been hit hard - we would say whatever the Government can do, do it for first-time buyers," he said.

Mr Farley added that the business was now "well-set" to weather the downturn after the round of redundancies.

"I can't foresee the future but I can't anticipate any further job cuts at this stage," he said.

Persimmon's average selling prices fell 5 per cent to £181,485 as prices weakened, and the firm slashed its dividend pay-out to shareholders by almost three-quarters to reflect the difficult trading conditions.

But the company also voiced criticism over recent speculation of a Government suspension of stamp duty to help out the housing market - as those who were about to buy hold off to see if a tax break is introduced.

"The recent speculation regarding a change to stamp duty on housing transactions has undoubtedly caused further delay and uncertainty in respect of house purchases," the firm said.

Persimmon said it was pleased the Government was looking at measures to improve mortgage availability and said it looked forward to the confirmation of any moves "at the earliest opportunity".

The group has also written off £40 million due to falling land values but added that this represented just 1.5 per cent of its overall land bank.