Persimmon profits halved

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The Independent Online
DUNCAN Davidson, chairman of Persimmon, the house builder, said yesterday that he hoped 1992 would prove to have been the nadir for the industry as he revealed that profits before tax had halved to pounds 10.2m during the year.

Mr Davidson said 1992 had been 'the most difficult year for house building' since he founded Persimmon 20 years ago. But he added that it had enjoyed a resurgence of interest since the start of the year, with net reservations up 30 per cent on 1992.

However, he would remain cautious until the upturn had been sustained for longer.

Turnover rose from pounds 143.8m to pounds 144.2m as the number of houses sold remained at 2,340. Prices also held steady at an average of pounds 61,500, although that was partly because of a rise in the number of more expensive houses sold.

But incentives such as carpets, electrical goods and legal fees cost an average of pounds 5,500 for every house sold - up from just pounds 1,500 at the peak of the market in 1988. That pushed margins down from 16 per cent to 9 per cent.

The improvement on sales this year has not been accompanied by an increase in margins although Mr Davidson said: 'I would like to see net margins get back up to about 15 per cent.'

Profits were also depressed by a pounds 3.1m provision against the cost of its land bank, up from pounds 1.1m the previous year. The land bank now stands at 12,650 plots, with an average cost of pounds 14,000.

The group aims to increase sales to 4,000 a year as the market recovers, although Mr Davidson said that would not happen this year. 'I can't say if it will take two, three or even four years, it depends on how long the upturn takes to come about.'

Earnings per share fell from 16.8p to 7.3p, but the final dividend was maintained at 5.8p for an unchanged total of 8.6p. The shares gained 5p to 240p.

Mr Davidson said the strength of the balance sheet meant that a rights issue was not needed. But he added: 'We like to keep our options open.'