Scottish rebound helps Persimmon to profit

A REBOUND in Scottish housing market sentiment helped Scotland prove one of Persimmon's top two "northern" markets as a return to group profitability led to a resumption of dividend payments yesterday.

• Persimmon's performance north of the Border was significant in its return to profit Picture: PA

The housebuilder, one of the biggest players north of the Border with company operations in Bathgate and Hamilton, reported an underlying interim pre-tax profit of 39.4 million compared with a loss of 16.7m last year. The firm said it was restoring a dividend of 3p a share as a sign of confidence in the future as legal completions rose 16 per cent to 4,657 in the first six months of 2010.

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Jeff Fairburn, chief executive of Persimmon's northern division, said: "Scotland and Yorkshire have performed the best in the division. Scotland was still affected by the banking situation a year ago (after Royal Bank of Scotland and Bank of Scotland-owning Lloyds both took taxpayer bailouts], but that has improved a lot now.

"That was particularly the case in and around Edinburgh, which was impacted as people were concerned about their jobs. But that has ironed itself out and there is a return of confidence."

Persimmon's reinstatement of the dividend at the interim stage was a more positive move than smaller rival Bovis, which also swung back into the black this week but said it aimed to restore its shareholder payout at the end of the financial year.

Persimmon's average selling price rose 8.6 per cent to 168,936, while underlying profit margins surged to 8 per cent from 1.6 per cent, among the strongest in the still-embattled industry. Revenues jumped 27 per cent to 776.6m.

The group said it had strong forward sales of 912m as of now, compared with 638m last December, at similar margins to those achieved in the first half.

It plans to open 75 sites over the next few months with more than half in the south of England where the market was the strongest.

However, Fairburn said there would also be new Scottish sites at Newton Mearns, Holytown, Lenzie and Aberdeen. "Aberdeen has proved a very resilient market," he noted.

Persimmon said it remained cautious as mortgaqge lending continued to be constrained, although it added that the clarification of the government's public-spending plans in October might "create greater certainty" for the housing market.

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Fairburn said there was bound to be short-term concern about potential unemployment arising from the cuts in spending "but the jobs situation may well not be that bad in the private sector".

He said Persimmon had taken on 600 workers in the period, made up of 200 staff, 60 apprentices and 340 sub-contractors. "We are pleased to be encouraging apprentices to enter the trade again," Fairburn added.

There has been speculation that the gradual recovery of the housing sector since the credit crunch of 2007-8 might spark industry consolidation, with Persimmon cited as a potential acquiror because of its size.

But Fairburn said the company remained more focused on organic growth. "We are not currently looking at acquisitions," he said.

The firm, which has recently entered a joint venture with property regeneration company St Modwen Properties, unveiled a further writeback of 70.7m compared with 27.9m last year.