By Lorraine Turner
LONDON (Reuters) - Housebuilder Persimmon (Persimmon PLC) swung to a full-year profit aided by a substantial writeback as weak mortgage data in January weighed and added it would continue to reduce its debt.
The UK's largest housebuilder by market value, reported a pretax profit of 77.8 million pounds, compared with a 780 million loss in 2008. This includes a write-back of 74.8 million pounds, based on the re-evaluation of the value of its land, after 624 million pounds of writedowns to date.
Before exceptional items and goodwill charges pretax profit was 7 million pounds, in line with expectations.
However, the group added the year has started well with volumes and prices rising.
"I think the year has started well for us... on the one hand the housing market itself is performing well, but we must be affected by the wider economic recovery as a whole," Chief Executive Mike Farley told Reuters.
"On the first eight weeks, we've seen a little bit of price growth, about 1 percent... that's sustainable we believe.."
Sales are up 8 percent year-on-year for the first eight weeks of 2010, added Farley, while conversion rates on sites were up on the second half of 2009. However there was some caution for the remainder of the year.
Last week Barratt Development (Barratt Developments PLC) and Redrow (Redrow PLC) warned that mortgage approvals, land availability and macro economic factors continue to drag on growth in the sector.
Sentiment was knocked further on Monday after mortgage approvals hit a nine-month low in January to 48,198 from 58,223 in December after bad weather and the end of the stamp duty holiday, leading to renewed fears of a double-dip recession.
The news pushed sterling to a 10-month low versus the dollar on fears that the rebound in house prices from early 2009's five year low may be running out of steam.
NO M&A FOCUS
Persimmon added it would make further write-ups if there is no significant deterioration in house prices.
Farley told Reuters that the group's focus this year remains on debt reduction and improvements in operating margins, following recent press speculation that it may be interested in buying smaller rival Bovis Homes (Bovis Homes Group PLC).
Though analysts argue that the group's record of generating cash, after lowering its debt to 267.5 million pounds from 600.7 million at the end of 2008, puts it in a strong position for the remainder of the year.
"The group may, in our view, return to M&A during 2010 if the post-election outlook remains visible. It has a superb track record in acquiring and cutting costs," said Imran Akram at Collins Stewart.
At 9:31 a.m. British time, shares in Persimmon were up 1.0 percent, Barratt was 0.3 percent higher, Taylor Wimpey were flat, Bovis Homes jumped 1.12 percent, Redrow was up 0.74 percent while Bellway (Bellway PLC) gained 0.84 percent at 9:08 a.m. British time.
(Editing by Louise Heavens, Mike Nesbit)