TWOD

The Times December 22, 2006


Persimmon rules itself out of race for Wilson Bowden
Elizabeth Colman and Rhys Blakely

Builder content to give up No 1 slot
Firm sees future in affordable home


Persimmon, Britain’s largest housebuilding firm, has ruled itself out of the race for rival Wilson Bowden, opting to target acquisitions in the affordable new family home market.
In its pre-close trading statement yesterday, Persimmon said that synergy savings from its recent purchase of Westbury in January would exceed prior forecasts of £40 million from 2007 onwards. It had also reduced debt from the acquisition to 35 per cent — ahead of forecasts of 50 per cent in gearing reductions.

However, Mike Farley, Persimmon’s chief executive, said that this was not readying the company to join the bidding war for Wilson Bowden.

He said that he was prepared to relinquish the title of Britain’s largest homebuilder, if a rival such as George Wimpey or Barratt bought Wilson Bowden, in favour of growth in the affordable family home market.

Mr Farley said: “We’re not macho about being number one — we’re very focused on organic growth. We’ve got a great opportunity with this new business — the Westbury partnerships — and we are focusing where we see best value . . . [on] strategic land, and enhancing margins.”

The FTSE 100 group is on track to report record full-year results in line with expectations, with revenues at about £3.15 billion, up 38 per cent from 2005 for the year to December 31.

Forward sales into next year would exceed £700 million, compared with £572 million a year earlier, Persimmon said. It expected to report a 32 per cent increase in completions to 16,700 in the statement covering the year to December 31.

Analysts expected the company to report pre-tax profits at about £583 million, compared with £495.4 million in 2005. Shares closed down 0.46 per cent at 1501p.

Persimmon said: “There is continuing confidence in the UK housing market and the new year and early spring periods have historically produced an uplift in reservation rates.”

Mr Farley said that the market “remains competitive”. Homes in Persimmon’s target market of new, affordable housing sold on average at £80,000 to £90,000.

Persimmon paid £664 million for the Westbury business, which has been integrated into the Charles Church brand.

Mr Farley said that he was unable to give full figures for benefits from the acquisition until savings from procurements, comprising 25 per cent of expected synergies, were confirmed.

He said that cost pressures from rising land values meant margins were “under pressure”. “We’ve been working hard to improve Persimmon’s margins — margins will increase in the second half.”

Under an incentive plan created during the Westbury purchase, Persimmon directors will share in £10 million if synergies from the deal exceed the £40 million target by 20 per cent.