Persimmon slumps to £780m loss and warns of difficult year to come

Click to follow
The Independent Online

The housebuilder Persimmon laid bare the parlous state of the housing market yesterday by posting a £780m loss for last year, following huge writedowns in the value of its land bank, and warning that 2009 is "likely to be another difficult year".

Despite the grim result, the housebuilder said that sales for the first two months of this year had been "ahead of our expectations" and an improvement on the dire conditions at the end of last year. But its total sales order book of £698m for 2009 to date is lower than the £1.05bn for the same period last year. The average selling price of its homes tumbled by 8.7 per cent last year.

Other struggling housebuilders, including Barratt and Redrow, have also reported a marginal upturn in activity in 2009 to date, but house prices are still down by 17.6 per cent since last February, according to Halifax.

John White, Persimmon's chairman, said: "We believe the combination of lower interest rates and an improvement in affordability will assist in increasing first-time buyer activity, although the threat of increased unemployment remains a concern."

Shares in Persimmon jumped by 28.25p, or 8 per cent, to 375.5p as investors were reassured over the refinancing, first unveiled on Monday.

For the 12 months to 31 December, Persimmon delivered a group pre-tax loss of £780m, compared with a profit of £583m in 2007, following non-exceptional items charges of £905m. Of these charges, writedowns in the value of its land holdings accounted for £652m and goodwill for £201m.

"The fact that refinancing has been secured without the need for a dilutive fund-raise should settle the market's nerves," said Rachael Waring, an analyst at Panmure Gordon.

Persimmon said it had renegotiated its debts and had agreed a new £322m credit facility that matures on 31 March 2012. These facilities would give it funding lines of £1.09bn, falling to £560m in 2011. Mr White said: "We consider that 2009 is likely to be another difficult year, but we believe that we will eventually see an upturn in the housing market."

Persimmon's revenues fell by 42 per cent, or £1.8bn, last year and it suffered a 36 per cent fall in legally completed sales to 10,202. Its underlying operating margin fell by 11.3 per cent hit by incentives, such as shared equity schemes.

Persimmon is not paying a final dividend for either 2008 or 2009.