Blackfriar: Persimmon shareholders hope the firm can end the traumas of the last 18 months

Persimmon said completions were down 7 per cent in the first half
Persimmon said completions were down 7 per cent in the first half
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All eyes will be on housebuilder Persimmon tomorrow as it announces interim results after a torrid year.

The York-based firm said in July that it has sold fewer houses so far this year following a decision to delay sales to boost customer satisfaction, which has taken a tumble.

Analysts at Liberum said this is a good move for the long term as Persimmon’s reputation has taken a hit recently and they want to see progress on build quality and customer care.

In July Persimmon said completions were down 7 per cent in the first half while revenue fell 4.5 per cent to £1.75bn.

Persimmon is expected to report lower profits tomorow as it overhauls its business practices. Analysts are expecting margins to rise slightly despite a slowdown in house price growth and cost increases. The dip in revenue is expected to lead to a slight drop in pre-tax profits.

Additional costs could come from the group’s efforts to improve its customer care, after it came under scrutiny from the Government and customers for the quality and delivery of its builds.

Russ Mould, investment director at AJ Bell, said Persimmon’s shares have been hit by concerns (justified or not) over how the UK economy will fare post-Brexit, whether the housing market is overcooked and due a correction, and “a few self-inflicted problems for good measure”.

In April, the group launched an independent review into its operations, to be overseen by a QC. Stephanie Barwise is looking into all aspects of Persimmon’s construction and inspection practices.

The review has now moved to the evidence gathering phase and it is seeking input from customers, employees and other relevant stakeholders. The findings will be announced in December.

The review will also look at compensation following the furore over former chief executive Jeff Fairburn’s £75m pay packet last year.

While Persimmon’s customer care score has improved over the last few years, it was stuck at 79 per cent - just below the level required to match the four-star rating enjoyed on average by its industry peers - at the last annual measurement date in 2018.

The company clearly has work to do and the market will be looking for evidence of progress tomorrow.

CEO Dave Jenkinson appears to be getting to grips with the issue and a brace of new customer care measures and investments have been announced. Mr Jenkinson told analysts that, given enough time to take effect, he was confident that these measures would make Persimmon a four-star builder.

Earlier this year, Persimmon announced it would be the first of the major UK housebuilders to introduce what the industry calls a “homebuyers’ retention”. Under the new scheme the homebuyer’s solicitor withholds 1.5 per cent of the total home value (an average of £3,600 per home) until any faults identified are resolved.

It is a structure that’s common in the commercial sector. With annual volumes of around 16,500 new homes, Persimmon now has a £60m incentive to resolve faults quickly.

Retention is an idea that’s been mooted in the past, but has always been resisted by the industry in the UK. Any measure that puts control back into the hands of the customer has to be welcomed.

Chairman Roger Devlin and Mr Jenkinson have shown they are serious about changing the culture at Persimmon and repairing damaged relationships with customers and Government.

Shareholders are hoping the firm can now begin to put the traumas of the last 18 months behind it.