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Persimmon unveils £1bn profit amid Help to Buy doubt

Persimmon

Persimmon’s practices have raised concerns


Housebuilder Persimmon has announced annual profits of just over £1 billion a day after its shares fell on government concerns over its working practices.

Shares plunged by as much as 8% on Monday following comments by UK housing minister James Brokenshire on how the company operates within a public funding scheme for new house buyers.

The sector has been criticised for practices such as selling houses with rising leasehold charges, which make them hard to sell, and for poor quality workmanship.

In particular the company’s continued participation in the Help to Buy scheme has come under scrutiny and it was embroiled in controversy after paying its CEO Jeff Fairburn, pictured, a £75m bonus.

Today the company unveiled a pre-tax profit of £1.09bn for 2018, against £966.1m a year earlier on revenue up by 4% to £3.74bn (2017: £3.59bn).

Jeff Fairbairn of Persimmon interviewed by BBCThe group delivered 16,449 new homes to customers across the UK (2017: 16,043), an increase of 406 new homes compared with last year. The Group’s average selling price of £215,563 was 1% higher (2017: £213,321).

At 31 December 2018, the group’s land bank held c. 47,300 plots of land with implementable planning permission (2017: c. 52,600 plots) and all of these sites are under development. The company has a further c. 28,500 plots of owned land (2017: c. 24,500) which are currently proceeding towards achieving full planning consent.

The company has announced an interim and final dividend of 125p and 110p per share respectively.

Dave Jenkinson, who has been confirmed as chief executive, said he is “implementing a number of necessary new initiatives in customer care.”

He added: “A wide range of projects to improve customer satisfaction commenced in late 2018 and the initial results have been encouraging, giving us confidence in our ability to make progress in this important area.”

At the weekend a government source, referring to Mr Brokenshire, said: “James has become increasingly concerned by the behaviour of Persimmon in the last 12 months.

“Leasehold, build quality, their leadership seemingly not getting they’re accountable to their customers, are all points that have been raised by the Secretary of State privately.

“Given that contracts for the 2021 extension to Help to Buy are being reviewed shortly, which overall is a great scheme helping hundreds of thousands of people into home ownership, it would be surprising if Persimmon’s approach wasn’t a point of discussion.”

A spokesman for Persimmon said: “Our performance over recent years reflects the group’s success in growing its construction volumes to meet UK housing need, particularly by offering attractively priced new homes to first-time buyers.

“In late 2018 we announced a range of new customer service initiatives and we are confident that these will improve our performance once they have had time to take effect. We are also making a significant investment in training to address the shortage of skills in the industry.”

Market reaction

Emma-Lou Mongtomery, associate director from Fidelity Personal Investing’s share dealing service, said: “Having been at the helm when Persimmon comfortably passed the 1 billion profits mark, acting chief exec Dave Jenkinson has got the top job at the UK’s second-largest house builder.

“With mention of a clear focus on customers and colleagues, his official instalment paves the way for the company to rebuild its profile.

“After a year in which executive pay rows, build quality and leasehold issues all sent the share price tumbling, Mr Jenkinson has his work cut out. Investors will be hoping no overt mention of continuation of its involvement in the government’s Help to Buy is good news going forwards.”

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