Persimmon has returned to profit for the first time in a year, due to a £28m ($46m) writeback previously written off the value of its landbank.
The gain helped push the group to a pre-tax profit of £9.8m for the first half, compared with £36.9m a year ago and a £780m loss at the year end.
Persimmon narrowed its year-end net debt target from £450m to £400m after six months in which it has focused on conserving cash.
Mike Farley, chief executive, said the group would retain cash by developing the existing landbank rather than buying new properties.
“We’ve got seven years’ worth of land. At these volumes we could not buy any land for two years and not worry about it,” he said.
The group owns or controls more than 64,000 housing plots but sold only 4,000 homes in the first half.
The writeback follows £652m of land writedowns last year, leaving Persimmon’s landholdings valued at £1.7bn
Mr Farley said there may be more to come: “if the market were to stay much as it is today there’s a good probability that there would be more at the year end.”
Group turnover fell from £998m to £612m and earnings per share from 8.8p a year ago to 3.3p. The company passed on its interim dividend (5p).
● FT Comment
The symbolism of Persimmon returning to headline profits when the housebuilding sector is finally drifting out of the doldrums is pleasing but the market was unimpressed on Tuesday: the shares fell 7p to close at 511½p. Key investors focus more on the underlying figure, which has fallen from a £100.9m pre-tax profit last year to a £18.1m loss this year, and yet more on the value of Persimmon’s net assets, which are down by over 30 per cent. Tuesday’s writeback, equivalent to 4 per cent of the total writedowns since last year, indicates that Persimmon has been conservative in valuing those assets. But the fact that it was generated by subtracting a £121.4 upwards valuation from a £149.3m writedown shows these estimates are more art than science. Persimmon is well-managed, with a preponderance of larger houses and ample supply of housing plots, but it is well-valued at 1.15 times its net assets per share. That is roughly the same as the rest of the sector, which looks more likely to go sideways than rise much.