Persimmon cuts debt by £306m but no news on refinancing deal

UK housebuilder Persimmon has cut its debt from £906m to £600m since June but had no firm news on the progress of refinancing talks at this morning's trading update.

The fall was thanks to tighter cost controls and early receipt of a tax repayment following land writedowns.

The company said: “We have commenced discussions for the planned refinancing of the group's credit facilities. Having made good progress, our bank syndicate and private placement investors are actively engaged in establishing facilities appropriate for the future needs of the business.”

It said that full-year results for the year ended 31 December 2008 will be in line with expectations, pointing to 10,202 legal completions in 2008. At an average selling price of £172,000, the figure represents turnover of about £1.76bn.

In 2007, the company achieved 15,905 completions at an average selling price of £189,558, producing turnover of £3bn.

Liberum Capital analyst Charlie Campbell said the fact that the housebuilder has cut its debt is positive news, and switched his recommendation on the stock from “sell” to “buy”.

He said: “Now that progress is established and banks show that they are supporting housebuilders, we feel comfortable buying the stock. We like Persimmon's track record of cash generation, its strong position in houses (as opposed to flats) and its higher-than-average profitability levels.”

The company said tighter cash controls in the poor market conditions mean it will not pay shareholders a dividend this year.

The statement added: “Whilst we believe that the long-term future for the UK housing market remains good, the short-term outlook is challenging. However, we currently have forward sales of about £400m.”