Persimmon hopeful of boost from rate cuts
Feb 27 2008 by Iain Laing, The Journal
HOUSEBUILDER Persimmon has signalled that recent interest rate cuts have helped improve consumer confidence as the firm remained cautiously optimistic for 2008.
The Charles Church owner said the impact of the credit crunch on the housing market appeared to be “easing a little” following rate cuts in December and February.
York-based Persimmon said weekly sales volumes were on the up and current sales cancellation rates down a third from levels seen during the autumn. The group expects sales to grow during the next six months.
Unveiling its full-year results for 2007, Persimmon posted annual pre-tax profits of £585.1m, up from £582.1m during 2006 and well within the range forecast by the City.
Group chairman John White said he remained cautious after what had been a “challenging” year, but added: “When confidence returns and sentiment improves, we anticipate a return to a stronger market.”
Persimmon said it had experienced a slower start to trading early this year, with visitor numbers down 13% compared to this time last year.
But the figures were now on the rise, and the quality of the potential buyers remained high, the group added.
Persimmon also said it had seen sales cancellation rates return to “more normal” levels of around 20%, compared to rates of over 30% during the autumn at the height of the credit crunch. The firm’s current order book was £1.05bn, compared to £1.3bn for the same time last year.
“While this is lower than the equivalent figure for 2007, it nevertheless represents a healthy level of sales at this early stage of the year,” the group said.
Persimmon said average selling prices across the group increased by 1% to £189,558 last year. The firm sold 7,903 homes during the second half of last year, down on the first half completions figure of 8,002. Total sales for 2007 were 4% down compared to the prior year.
Sales prices performed best in Scotland, up 4%, and across the group’s Central division, which also posted an average rise of 4%.
Persimmon’s premium building arm, Charles Church, saw average sales prices go up by 2% to £257,009, although volumes dipped 11% to 2,579. Overall group revenue was also 4% down to £3.01bn.
Persimmon’s shares were up nearly 2% yesterday . The stock has taken a battering amid the credit market turmoil, falling around 40% in the last six months.
Broker Panmure Gordon said the firm had delivered a “strong” set of results despite the tough conditions, but forecast its profits this year would be lower.
Panmure’s analysts said: “Despite being in the early-stages of the important spring selling period, we believe that the challenging market conditions being experienced will continue and therefore we forecast that housebuilders profits will be lower in 2008.”
