UK housebuilder axes 1,100 jobs

Housebuilding giant Persimmon today said it had laid off more than a fifth of its workforce since January as it faced up to the toughest conditions in the group’s recent history.

The firm said the number of house sales had slumped by 31% to 5,501 in the first six months of the year, leaving sales revenues down by more than a third at £1bn.

Persimmon confirmed that a total of 1,100 jobs will have been cut so far this year under an overhaul to save around £45m a year.

The York-based group, which trades as Charles Church, Persimmon Homes and Westbury Partnerships, said it hoped the measures were enough to see it through the housing market turmoil.

It now employs around 3,900 staff after the job cuts, with 32 offices across the UK. The company has shut three offices since January, but said today it did not plan to close any more as it seeks to retain a national presence.

However, it did not rule out further job cuts given the market woes, which have seen the average selling price drop to £181,500 from £189,255 in the first half of last year.

“The first six months of this year have undoubtedly been the most challenging period in Persimmon’s recent history,” the company said.

It added: “The significantly reduced availability of mortgage funds and a reduction in consumer confidence is restricting the level of sales activity and the volume of total housing transactions across all markets in the UK.”

Persimmon’s job losses add to nearly 2,000 staff cuts announced last week by rival firms Taylor Wimpey and Barratt Developments.

However, Persimmon said it did not expect to make any significant write-downs on the value of its land bank, which comes in stark contrast to rival Taylor Wimpey’s news that it was wiping £660 million off its land value.

Persimmon’s net debt – at £900m – compares with the £1.7bn revealed last week by Taylor Wimpey.

Housebuilders have been hit hard by the credit crunch as the mortgage drought has meant homebuyers have been unable to secure the finance they need, while property price falls have put people off buying a home.

Persimmon has been forced to shelve new projects as the downturn shows no sign of abating.

Chief executive Mike Farley said he expected the market troubles to last at least another 12 to 18 months, although he said Persimmon was planning to restart building on 20 to 30 sites over the next six months.

The group will look to start building on certain sites in good locations, such as a planned development on Cumnor Hill, Oxford, while it is also continuing to build affordable homes in line with Government aims.

Persimmon added that while forward orders were down 30% year-on-year, they had risen by 8% since the beginning of 2008 to £650 million.

Shares in the group fell 3% today, amid wider market falls. Taylor Wimpey and Barratt were also lower, down 8% and 5% respectively.

Simon Brown, analyst at Landsbanki, cut forecasts for annual pre-tax profits by 27% to £175 million after Persimmon revealed a faster than anticipated decline in first half sales, leaving margins 32% lower.

It made underlying pre-tax profits of £585.1m last year.

“The look through here to the other housing stocks is fairly bleak,” he said.

The pessimism surrounding the industry has seen housebuilders’ share prices tumble to a shadow of their worth a year ago.

Persimmon lost its place in the FTSE 100 Index last month after its share price plummeted. The firm’s stock is worth around a fifth of its value a year ago.