Persimmon back in profit

HOUSEBUILDER Persimmon swung back into profit last year after writing up the value of its landbank by almost £75m.

Pre-tax profits came in at £77.8m compared to a £780m loss in 2008 when lower property valuations took their toll as the sector was ravaged by the recession.

The UK's largest housebuilder completed 8976 homes last year, generating a turnover of around £1.4bn. Sales prices were up by 7 per cent to an average of £160,513.

Despite the pick-up in the second half of the year, the figures are still down 12 per cent on 2008 when the housebuilder completed 10,202 sales with a turnover of £1.755bn.

However, the cancellation rate has stabilised at around 16 per cent, below the long term average of 20 per cent.

With market conditions steadily improving, Persimmon says it will potentially start work on 90 additional sites during the first half of the year. In 2009, it opened 40 in the first six months and 50 in the latter after imposing a temporary freeze in April 2008.

John White, group chairman, said: "Prices have held firm since the beginning of the year and we remain focused on improving our operating margins and to profitably grow the business."

Its operating margin currently stands at 6 per cent.Persimmon added it could make further write-ups if market conditions continue to improve.

However, it remains cautious about its outlook for the housing market. Its rivals including Redrow and Barratt Developments last week warned that a lack of mortgage availability was holding back the recovery within the sector.

"It is too early to make a precise forecast about the housing market, particularly in an election year, and we will remain cautious in our investment decisions," the company said.

The FTSE 250 group, which is one of the less heavily indebted British building firms, had net debt of £267.5m against £600.7m at the end of 2008 and a peak of £1.2bn in April 2008.