Persimmon says dip is only a blip as it forecasts better times

Published on Monday 4 July 2011 21:00

SCOTLAND's largest housebuilder saw completions and turnover dip in the first half, but forecast a second-half recovery in a gradually stabilising housing market.

Persimmon revealed it completed 4,439 homes in the six months to end-June, against 4,657 in the same period of 2010, while turnover fell to 715 million from 785m.

Jeff Fairbairn, divisional chief executive for Persimmon's northern region, said: "Scotland is no different, it is reflecting the overall UK situation. It is mortgage availability that is still the biggest constraint on the market, particularly the first-time buyer market."

Housbuilders and mortgage lenders have held talks about the problems, and Mike Farley, Persimmon's group chief executive, said: "The discussions are at an early stage, but the good thing about it is that it's been recognised by the lenders, that it's a 95 per cent loan-to-value product that is required."

Persimmon said sales had improved since the start of the year, and it expected to complete the same number of houses as in 2010 by boosting volumes in the second half.

The York-based group said its order book was now ahead of the same point last year with forward sales at 725m, while the average selling price fell to 162,000 from 169,000 as the company completed a higher number of smaller houses.

However, the group said it expected average selling prices to go up in the second half as it legally completed more detached house sales already included in its forward order book.

Fairbairn said that Persimmon had reshaped its business to help rebuild profit margins in a tight market. The company expects that underlying operating margins for the first half, stripping out exceptional items, will have risen to 9 per cent from 8 per cent.

"We have a stronger concentration on margin delivery, we are not chasing volume for the sake of it," Fairbairn said. The high water mark for profit margins before the freeze-up in capital markets in 2007 was "in the high teens," he added.

He said historic low interest rates were helping the market in terms of affordability. But Fairbairn added that Persimmon believed there would be "no great impact" when rates begin to rise again.

The company said it opened 70 new UK sites in the first half of the year.Fourteen of these were in Scotland, including Findon Park at Portlethen in the Aberdeen area, and two in the East Kilbride area.

Four new Scottish sites are planned for the second half including one at Cove, near Aberdeen, and one in Dunfermline.

Persimmon said it had acquired 7,500 plots of land in the past six months to "support both the improvement in the company's profitability over the medium term and an expansion in legal completions as and when market conditions allow".

It also said its minimal borrowings of 15m, compared to 122m at this time last year, would also lead to lower finance costs and further improve profitability.