Big Persimmon profits put it on acquisition trail

Zardoz tony at
Sun Feb 28 22:04:57 GMT 2010

Big Persimmon profits put it on acquisition trail 
By Mark Foxwell - Mail on Sunday - 27th February 2010

Britain's biggest housebuilder, Persimmon, is this week expected to dazzle the market with profits of £60 million and a huge reduction in its debt - a positive signal for the sector, reigniting speculation that it might be looking at major acquisitions. 

The strong results for 2009 stem largely from the fact that Persimmon will add a forecast £58.2 million increase in the value of its land to its £1.8 million profit before the one-off 'write back'. 

Persimmon reduced its debt from £908 million in the first quarter of last year to £275 million as a resurgent housing market encouraged off-plan sales, prompting analysts to suggest that the group will be debt-free by the end of the year.
 Building again: Workers at a site in Northumberland
Industry observers are questioning whether smaller rival Bovis could be a takeover target with a putative price of about £600 million. However, a Persimmon spokesman downplayed the possibility of such a move in the next few months saying there was too much uncertainty in the sector.

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In contrast, Taylor Wimpey will post a loss of about £734 million after being hammered by write-downs this year. Like many housebuilders, the company suffered a severe decline in sales and prices during the recession due to low consumer confidence and restricted lending. 

Taylor Wimpey will give an update on the sale or flotation of its US business, which is considered a drain on the company. 

Chris Millington, analyst at broker Numis Securities, said: 'Taylor Wimpey left the write-downs too late. The company is having to play catch-up, which is why the loss is so large. However, Taylor will now be better placed because of this and hopefully margins will go up.' 

Taylor Wimpey's write-downs in the value of its land amounted to £604 million of the loss. 

Meanwhile, rival Redrow continued its turnround story last week. The housebuilder, one of the hardest hit during the recession, announced a better-than-expected reduction in losses and improved sales volumes. Losses fell from £46.2 million in the second half of 2008 to £8.7 million in the same period in 2009. 

Barratt Group also posted strong interim results, trimming losses to £178.4 million from £594.5 million a year ago. 

The company said it expected the sale price of its homes to rise by up to ten per cent this year.

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