Hints worst is over for builders
Jul 8 2009 by Iain Laing, The Journal
HOUSEBUILDER Persimmon says its sales have continued to improve amid encouraging signs from the property market.
The York firm said volumes were consistently ahead of last year, with the rate of decline in prices also showing signs of stabilising.
Persimmon pointed to historically low numbers of cancellations, which it said was another indicator of an improved housing market.
The company said in a trading update: “We are encouraged by the improvement in sales rates when compared to last year, but will remain cautious until mortgage availability improves further and employment prospects stabilise.”
It said it would continue to focus on cash generation and reducing its debt pile, which it had cut to £495m at the end of June from £906m 12 months earlier. In the six months to June 30, it legally completed 4,006 homes and generated revenues of £625m, down from £998m in June 2008 after a 4% fall in prices. “The rate of decline has, however, reduced and our recent experience is that prices are now stabilising in some locations,” Persimmon said.
The company has seen its shares recover from their lows late last year – they have doubled in price since December. But they are still trading at less than half their peak value in early 2008.
The severe downturn in the housing market last year led Persimmon to focus on keeping costs to a minimum and conserving cash.
It said it continued to monitor work in progress closely, but during the first half it opened 45 developments and plans to start another 50 in the second half.
It has about 390 sales outlets, compared with 420 last January. Forward sales revenues at the start of the second half of the year were £700m, against £458m at January 1.
Hargreaves Lansdown Stockbrokers equity analyst Keith Bowman said the statement raised hope the worst for the sector might be over. “Sales remain ahead of those seen in 2008, with the pace of recovery improving in recent weeks.”
