Spring comes slowly to housing market

The York-based builder said after a snow-hit December, sales and visitor numbers at the start of its crucial spring selling season have been "encouraging". However, the group is not expecting much growth this year.

"I think sales prices will be fairly muted – and sales growth effectively," said chief executive Mike Farley.

"People are still being cautious – as are we. But nevertheless people are still wanting to buy houses. The key issue across the board is mortgage availability and it's still this issue for first-time buyers, getting access to higher loan-to-value products."

Halifax, part of Lloyds Banking Group, yesterday said house prices fell 1.3 per cent in December, more than three times faster the anticipated rate. Halifax said house prices fell by 0.9 per cent quarter-on-quarter in the fourth quarter of 2010.

Mr Farley said there are some signs of the mortgage drought easing, but from a low level.

"Talking to the lenders they are increasing their appetite for lending this year," he said. "Their targets for lending this year are higher. That would suggest there could be more competition in the mortgage market which would be good news for us."

December's heavy snowfall, which blanketed the country and kept would-be buyers away, reduced Persimmon's sales activity by 50 per cent in December.

Despite this it sold 4.5 per cent more homes in 2010 than 2009, increasing legal completions to 9,384 in 2010 from 8,976 a year earlier.

Its average selling price increased by six per cent to 167,000, generating turnover of 1.57bn.

The builder said it will report a "significant increase" in underlying pre-tax profits, which will be at the top end of analysts' range of 75m to 96m.

Last March the group reported pre-tax profits of 77.8m for 2009, which included write-backs of 74.8m.

Late last year the group warned the typical autumn pick-up in sales failed to materialise. The industry is now beginning its spring selling season, traditionally another busy period.

Mr Farley said while it was too early to say how spring sales will do, he is "encouraged" by higher sales in its first week of trading compared with a year earlier. The week's visitor numbers almost doubled on a year ago, he added.

"It's a little difficult to build a whole forecast on one weekend but you've got to start somewhere," he said. "It's a good, cautious start."

The group has so far booked forward sales of 565m for this year, based on stable prices.

Mr Farley said the group has continued to see stronger sales performance in the south compared with the north. However, he said schemes at Sherburn-in- Elmet, North Yorkshire and Leeds have performed well.

"We've even seen some ripple effect in Hull," he said. "We are encouraged but undoubtedly the market is still slightly stronger in the south."

The group continued buying land in the second half of 2010, picking up 5,000 plots to take its land supply to 59,000 plots. That gives it about 6.3 years' supply.

Persimmon also reported strong progress on cutting debt, giving it firepower for land purchases, site openings and even acquisitions.

Debt was down to 51m at the end of the year, beating the 267.5m level a year earlier.

"We've got a lot of headroom on our facilities which gives us a lot of headroom either way," said Mr Farley. "Our focus is on organic growth... (But) we will look at opportunities."

It expects to open 70 developments over the next six months, maintaining developments at about 380 open outlets.

Shares in the group, the UK's largest housebuilder by market value, were broadly flat at 437.5p yesterday.

Rachael Waring, an analyst at Panmure Gordon stockbrokers, increased her forecast for Persimmon's profits in 2010 from 80.3m to 95m.

"We believe Persimmon is a good quality company, which is well placed to cope in a housing market in which we do not forecast any improvement over the next 12 months," she said.

Analysts at Citi added the group's shares look good value.

"Persimmon remains one of the best operators and has significantly improved its balance sheet with net debt falling substantially," they said.

Persimmon chief steps down

Persimmon's former chief executive and current chairman John White is retiring after 32 years' service.

He will be replaced by non-executive director Nicholas Wrigley, 55, also an executive vice chairman of investment bank Rothschild.

Mr White, 59, said: "It's been a great privilege to serve Persimmon for 32 years but I feel this is the appropriate time for me to move on. I leave the company in the knowledge that it is in a great position for the future, with a strong balance sheet, a first class management team and an excellent board of directors.

"Nicholas Wrigley has been a valued member of the board since 2006 and I'm confident he is the ideal person to oversee Persimmon's further strengthening as a leading housebuilder."