UPDATE: Persimmon Prepares For Seasonally Strong Autumn Season

By Anita Likus Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Persimmon PLC (PSN.LN), the U.K.'s largest house builder by market capitalization, Tuesday said it will open up new sites to prepare for the normally stronger housing market in the autumn, after beating analyst expectations, which sent shares higher. "We are optimistic about the autumn season," Chief Executive Mike Farley told Dow Jones Newswires in an interview, although he added that he remains cautious about investment decisions until mortgage availability improves further. He also said that, while there is some clarity in the housing market, the macro economic situation is less clear. In its trading update, Persimmon said it had booked GBP1.5 billion worth of home sales for the year already, beating analysts expectations for some GBP1.7 billion for the full year. It also reported margins at 7.5%, when it previously guided for 7% for the year, and against 1.5% for the same period last year. The news lifted its shares. At 0730 GMT, they were up 17 pence or 4.8% to 363 pence in a higher London market. Analysts welcomed the statement and Citi analyst Clyde Lewis said consensus forecasts will be raised. Persimmon reported completions for the six months to June 30 up 16% to 4,657 homes while the average selling price rose 8% to GBP168,500 with underlying price growth of about 3% since Jan. 1. The rest of the price increase came from the change in the sales mix as the company focuses on selling traditional family homes. The company also reduced its borrowings to GBP122 million at June 30, which represented gearing of 7%. CEO Farley said he would be happy to increase debt if necessary, although he can continue replenishing the land bank with the cash the company makes from sales. Persimmon bought 4,000 plots of land during the period and has agreed terms on a further 3,500 plots, which maintained its land holdings at Dec. 31 levels. U.K. house builders have just been through one of the worst downturns in decades, with tight mortgage financing pushing sales lower and reducing house prices. But as the situation improves, builders are trying to stock up on cheap land, to enable strong margins when they start building on it. Rival home builder Berkeley Group Holdings PLC (BKG.LN), for instance, has used this strategy to buy land cheaply at the bottom of the market and therefore avoided taking write-downs in the recent recession. Other house builders opted to raise additional funds in the market to buy up land. But Persimmon is the only volume house builder to have neither placed shares nor exercised a rights issue over this market downturn. CEO Farley said he is confident he will be able to replenish the six-year land bank from existing cash flow. Just as the market started recovering, house builders also had to endure a period of uncertainty due to the general election, which drove sales lower. Persimmon said that, while sales prices and margins have increased since the start of the year, it has experienced a slowdown in sales reservations since early May. But the company, as other rivals such as Taylor Wimpey PLC (TW.LN), which reported last week, said that since the U.K. government set out its budget proposals, sales have been in line with internal expectations and cancellations remained at about 16%. The company reported turnover for the period up by some 26% at GBP785 million. Persimmon shares closed Monday at 348 pence giving the company a market capitalization of GBP1.05 billion. The company will announce its first-half results on Aug. 24. -By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; anita.likus@dowjones.com (END) Dow Jones Newswires July 06, 2010 03:48 ET (07:48 GMT)