Last checked at 27 Oct 2008 07:00
INTERIM MANAGEMENT STATEMENT
27 October 2008
Persimmon plc today releases its third quarter Interim Management Statement. This report has been brought forward from the previously announced date of 18 November 2008 in view of the impact that the recent significant events in financial markets have had on the UK housing market, in particular the further pressure being experienced on selling prices and, consequentially, residential land values.
We anticipate that our underlying trading results for the full year will be in line with expectations. We expect to legally complete c. 10,000 homes for the year ending 31 December 2008. Sales revenues for this year including legal completions to date are at c. £1.8 billion with a further c. £250 million of sales already taken for 2009.
Since we reported our Half Year results on 21 August 2008 we have encountered deteriorating trading conditions. The uncertainty created in the housing market by the increasingly turbulent and uncertain outlook in financial markets has had a negative impact on all our regions across the UK. The availability of mortgages has continued to be very restricted and cancellation rates have increased to c. 35% over recent weeks due to these market uncertainties. Sales conditions remain extremely competitive, while incentives and marketing costs are increasing leading to further margin pressures.
We continue to control all our costs tightly. As previously reported we are maintaining an extremely cautious approach to work in progress expenditure and continue with the planned reduction of our landbank in line with the scale of our business. We also remain focussed on increasing social housing sales volumes. This year we expect to increase these volumes by c. 25%.
When we announced our half year results in August we stated that we would continue to review the value of our land holdings in the light of market conditions. During H1 2008 we experienced selling price weakness of c. 5%. At the half year stage we made a net realisable value provision against our land holdings of £40.0 million as a consequence of this price weakness together with the anticipation of a further c. 5% reduction in the second half of the year. As a result of the increased downward pressure on selling prices currently experienced, we now anticipate a c. 10% reduction for H2 2008 with this continuing trend of price falls.
From an accounting standpoint we have undertaken a thorough review of all our land based on prudent assumptions. This has resulted in a net realisable provision requirement of a further c. £600 million. The total provision represents c. 19% of stock value at June 2008 and would result in a pro forma net asset value at that date of c. 610 pence per share. The additional provision requirement will be accounted for in the second half and further details will be provided when we announce our Preliminary Results for the current year on 3 March 2009.
Despite the market deterioration, we expect our borrowings to have reduced during the second half, with our planned cash generation in line with previous guidance and that our debt will reduce further during 2009. The Group continues to comply with all its financing covenants.
We are fully supportive of the Government's initiatives to increase mortgage availability to 2007 levels. Until this begins to take effect we do not expect to see any improvement in trading conditions and we continue to carefully monitor all our activities. In the meantime our focus remains on generating cash and reducing overall working capital levels to maintain a strong balance sheet for the future.
Meeting details:
A meeting will be hosted by Mike Farley and Mike Killoran
Time: 9am on 27 October 2008
Venue: Merrill Lynch, 2 King Edward Street, London EC1A 1HQ
To access the live conference call, please dial:
Tel: 0844 8000920 or 01296 311652
Passcode: 621 588
A replay facility will be available for 2 weeks:
Dial In: 0800 032 9687 or 0207 136 9233
Passcode: 22552440
For further information, please contact:
Mike Farley, Group Chief Executive
Mike Killoran, Group Finance Director
Persimmon plc
On 27 October 2008: +44 (0) 20 7153 1533
After this date: Tel: +44 (0) 1904 642 199
M: Communications
Edward Orlebar
Tel: +44 (0) 207 153 1523 / +44 7738 724 630