Persimmon builds on housing recovery

Despite 24 per cent growth in second-half volumes, legal completions fell 12 per cent - but this was in line with the Persimmon's strategy of restoring margins rather than volumes. The second-half margin reached 6 per cent (levelling out to 4 per cent for the full-year) and underlying pre-tax profits - adjusted for the writeback - just edged into the black at £3m. The only housebuilder not to mount a rights issue, Persimmon has also cut its debt pile to £251m, from a peak of £1.2bn, and Mr Farley would like to see this under £100m by the year-end.

Encouragingly, the forward order book reached £900m, up 29 per cent year on year as confidence returned to the market. Persimmon opened 90 sites in 2009, but is scheduled to open 90 more in the first half of 2010 alone (nearly two-thirds of these are in the south of England). Regionally, the northern division was the worst performing. Still, the size of the deposit required to buy a new home remains the most significant barrier to sales. Mr Farley said that, on average, one in four sales is reliant on shared equity where buyers are loaned deposits - the majority through the government's Homebuy Direct scheme for first-time buyers.

Broker's speculate that Persimmon could lead merger and acquisition activity in the sector, potentially taking out a smaller rival such as Bovis. Mr Farley refused to comment but said that "if the right opportunity came along, we certainly wouldn't rule it out".

Broker Pamure Gordon forecasts pre-tax profits of £75m for 2010, giving EPS of 17.9p.

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