Persimmon profit falls as it spent heavily on schemes to counter quality complaints

(qlmbusinessnews.com via cityam.com – – Tue, 20th Aug 2019) London, Uk – –

Persimmon has reported a drop in profit for the first half of the year as it spent heavily on schemes to aimed to counter complaints over the quality and fire safety of its homes. 

The figures

Britain’s second largest housebuilder reported a 1.4 per cent drop in pre-tax profit, which fell to £509.3m for the six months ending 30 June. 

Persimmon said it had spent 40 per cent more on customer service than in the same period last year and that this would lead to an estimated £15m annual increase in customer care costs. 

The average selling price of Persimmon’s homes rose to £216,942 – up from £215,813 a year ago. 

Basic earnings per share dipped 4.15 per cent to 129.3p. 

Persimmon’s shares were up 0.91 per cent in morning trading to 1,879p.

Why it’s interesting 

Persimmon has faced criticism recently over the quality of its new-build homes, leading to the firm being branded a group of “crooks, cowboys, and con-artists” by an MP last month.

Robert Halfon also said he had met constituents living in Persimmon homes that were “shoddily built, with severe damp and crumbling walls”. 

A recent investigation by Channel 4 found one of Persimmon’s Help to Buy homes had a total of 295 faults, including fire doors that did not close. 

The housebuilder launched a review of its business practices in April, and had decided to push back the timing of handovers to allow homes to be checked more thoroughly.

Arlene Ewing, an investment manager at Brewin Dolphin, said that while investing in the quality of its homes and customer care “has taken a small bite out of profits, it appears to be the right trade off for the long term”.

Julie Palmer, a partner at Begbies Traynor, said Persimmon “faces a recovery operation that’s going to be more than just a quick fix”.

“The spectre of Brexit still looms,” she added, “and without a decision on terms of leaving and a damaged reputation, Persimmon may struggle to grow. Its priority must be to rebuild its reputation because in this highly competitive and uncertain market its needs to win back the hearts and minds of customers.”

What Persimmon said 

In today’s results document, Persimmon said it would be introducing a “new independent team of construction quality inspectors” to help address concerns over the quality of its homes. 

Chief executive Dave Jenkinson said the changes made in the first half “clearly shows that Persimmon is changing”. 

“I am proud of the commitment and dedication our teams have shown in supporting the many initiatives we have introduced to deliver a step change in our customers’ experience,” Jenkinson added.   

“I am confident that the progress we are making with our initiatives, our strong forward build, healthy forward sales and robust balance sheet place Persimmon in a strong position for the second half.”

By Anna Menin