Cost-cutting Persimmon axes dividend payments
Jan 9 2009 by Iain Laing, The Journal
HOUSEBUILDER Persimmon will not pay a dividend this year as it continues to conserve cash in the current tough trading climate.
The York-based company, which saw its share price fall by more than 71% last year, warned the short-term outlook remained challenging but said results for 2008 will be in line with market expectations.
Persimmon, which operates brands including Charles Church, legally completed the sale of 10,202 units in the year at an average selling price of £172,000, compared with £189,558 reported for the previous year. It achieved turnover of £1.76bn in the year.
With the company focused on controlling costs, including through headcount reductions, Persimmon said total borrowings at the year end stood at around £600m, compared with £906m in June.
The company said: “Until there is an improvement in the restricted credit conditions currently experienced we will continue to focus on conserving cash. As a consequence the board does not intend to pay a final dividend this year.” Persimmon added it had started discussions regarding the planned refinancing of its credit facilities.
The trading update revealed Persimmon had current forward sales of £400m. It reported a figure of £603m a year ago.
The company added: “While we believe that the long term future for the UK housing market remains good, the short term outlook is challenging.”
Panmure Gordon stockbrokers had been expecting a 5p a share final dividend from the company at its full-year results in March.
It added: “This may be a little disappointing to some but it is not overly surprising in the current market and share prices certainly are not factoring dividend payments in.” Panmure added that it expected more details on the debt refinancing at the results in March.
It is likely to involve higher interest rates but Panmure said there were no immediate concerns given Persimmon had a current facility worth £1.4bn.
The broker added in a note: “Persimmon is undoubtedly a high quality operator in the sector and will no doubt exit recession in good shape, but until we know a little more about the refinancing we will remain a little cautious.”
The company’s shares rose around 3% yesterday.
