Persimmon hit by £600m writedown

Persimmon has announced a land writedown of £600m after a further deterioration in market conditions.

In an interim management statement, the housebuilder said the recent turmoil in the financial markets had hit sales and land values.

It brought the statement forward by three weeks in an attempt to stop the decline in its share price, which has wiped 40% from its market cap in a fortnight.

The writedown follows a £40m provision in the first half of the year and the £640m total represents about 19% of its land assets. The move became necessary after cancellation rates increased to about 35%.

Despite the writedown, Persimmon said trading for the full-year would be in line with expectations.

It said: “We expect to legally complete circa 10,000 homes for the year ending 31 December 2008. Sales revenues for this year including legal completions to date are at circa £1.8bn with a further circa £250m of sales already taken for 2009.”

Despite the fall, the housebuilder said it was still in compliance with its lending covenants. The group has debt of £908m.

It said: “We expect our borrowings to have reduced during the second half, with our planned cash generation in line with previous guidance and that our debt will reduce further during 2009. The group continues to comply with all its financing covenants.”

Persimmon’s shares were up 1.25% to 220p in early trading.