UK housebuilder Persimmon shares fall on earnings
A drive to improve the quality of its houses slowed sales and knocked profits at the UK’s second largest housebuilder Persimmon in the first half of the year.
Facing criticism over the standard and safety of its houses, as well as a row over management bonuses after it benefited from the British government’s buyer subsidy scheme, the company commissioned an external review of its business practices in April.
While it waits for the results, it has decided to push back the timing of handovers as it seeks to quash the charge that its homes were being delivered in poor condition. Liberum analysts said that was in line with market expectations, and Persimmon shares were down marginally on the results.
The company lost nearly a third of its value last year and appointed company insider Dave Jenkinson as chief executive permanently in February after former CEO Jeff Fairburn stepped down after a row over his bonus package.
“The change of CEO gives it an advantage to be open and honest about its previous issues and attempt to start its relationship with its customers anew,” said Julie Palmer, a partner at corporate restructuring consultancy Begbies Traynor.
Today’s statement from Dave Jenkinson seems to want to make these two points clear
However, Begbies Traynor said with uncertainty over the UK’s divorce with the EU looming, Persimmon may struggle to expand. In the first six months of the year, the company, which competes with Taylor Wimpey and Barratt Developments, sold 7,584 houses, versus 8,072 in the same period of 2018.
Its focus on cheaper family houses helped increase sales last year at a time when the top end of the UK housing market was suffering from Britons’ nerves about Brexit. Persimmon said it was working with suppliers to assess the risks associated with Brexit, without giving details.
“We have continued to experience some pressure with respect to the cost and availability of certain materials in the supply chain as the output from the industry continues to expand”, the company said, adding it expected cost inflation to be around 4% this year.
Persimmon said the average selling price of its houses rose to £216,950 (€238k) from £215,813 a year earlier, while revenue fell to £1.75bn from £1.84bn.
