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From Times Online
October 27, 2008

Persimmon warns profits under fresh pressure

Robert Lindsay

Persimmon, one of Britain's leading housebuilders, is writing off £600 million, or 19 per cent, of the value of its land as it gave warning that the housing market deterioration was accelerating.

It said that its profit margins were being further pressured as it has had to increase marketing and incentives to achieve sales.

In a rapid turnaround from its predictions only two months ago that the housing market had bottomed, it said: "The availability of mortgages has continued to be very restricted and cancellation rates have increased to about 35 per cent over recent weeks due to these market uncertainties."

The housebuilder said the writedown would bring its net asset value per share to 610p and further details would be provided when it announces full-year results in March.

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A 5 per cent fall in selling prices in the first six months of the year had accelerated with prices falling another 10 per cent in the second half.

It insisted that, despite plunging sales and selling prices, it expected to sell 10,000 homes this year - 35 per cent fewer than last year - with £1.8 billion sales so far and £250 million sales booked for next year.

It said the increasingly turbulent and uncertain outlook in financial markets had created uncertainty for home buyers and has "had a negative impact on all our regions across the UK."

Robin Hardy, analyst at KBC Peel Hunt, said the company had £900 million of debt at the end of its first half, and there was "now even greater risk of a breach of interest cover covenants in June 2009."

He added: "Its debt is all syndicated or commercial paper based and these markets are closed."

Housing still isn't a bad place to be... demand is always greater than supply people just cant get the funds. it will bounce back, a few companies will go under before then tho!

Rob, Preston, Lancs

When property falls in a property crash the fall is at least -50% it always has been in the past and will be again be the same this time and in future times

-50% is the fall in the past

-50% is what is to be expected now

Nicholas Iles, Oswestry, Shropshire, United Kingdom

My company was one of the first estate agents to go under in Edinburgh. We sold for developers in addition to average households in the market. Developers and Surveyors have not got a clue about the effects of compound interest .Between them they created runaway greed and negative equity.

Peter Sargent, Edinburgh, Scotland

We all knew Persimmons' statement 2 mths ago were rubbish when compared with competitors

The market dictates prices not builders. Developers are easy targets, seen as greedy & shifty. Not 1 of them are in the FTSE 100 + it's a highly regulated industry.

Try building your own house - it's hard

Phil, Lancashire, England

It will give the building trade some time to reflect on some of the "junk" they have designed and built.

Its called poetic justice.

ronnie, Bridego Bridge, UK

yes guys, bl00dy hilarious isn't it...

think about all those people who work for companies like Persimmon that have lost their jobs through no fault of thier own then tell me it's funny. At the end of the day, it's not the developers that set house prices, its the agent's that decide the value.

peter, derby, uk

Hahahha...and I sooo believed them two months ago. Oh these "experts" they have me in stitches. It's tough being so clever in business. Well done, all those who told them waht to do with their new houses

lou, boston, england

"The availabilty of mortgages continues to be very restricted" That one always makes me laugh. There are loads of mortgages out there but you do need a deposit ; interest rates are still low by historic standards. Father Brown has got it right. £305k, no try £205k - we all got used to silly prices.

Chris, Chipping Norton,

All I can say is they must have been building their new homes in Cloud Cuckoo Land.

Michael, West Midlands,

Recently got a mailing from these chaps - offering £35k off a £305K house - but I told them they needed to cut to £210K before it would be worth my while buying - renting a similar sized house is so much cheaper and risk free.

Father Ignatius Brown, Norwich, Norfolk

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