Persimmon profits fall as housebuilder looks at repairing reputation | Business
Profits at the housebuilder Persimmon slipped as it invested in customer service in an attempt to to repair its reputation after criticism over shoddy workmanship and an overreliance on the government’s help-to-buy scheme.
The company said it had increased spending on customer service by about 40% over the first six months of the year and expected to spend an extra £15m on the initiative by the end of 2019.
That is on top of the additional £140m being spent on homes in progress after criticism over poor-quality builds that included leaks and cracking windows.
The extra work meant Persimmon was releasing homes into the market later than originally planned and the number of homes sold over the period fell from 8,072 to 7,584, resulting in a 4.5% drop in revenues to £1.7bn. That is despite a rise in the average selling price, from £215,813 to £216,942.
Profits dropped from £516m to £509m.
The chief executive, Dave Jenkinson, said: “Improving the quality and service delivered to our customers remains our top priority and I am encouraged with the progress made in the first half, which clearly shows that Persimmon is changing.
“Our customer satisfaction ratings for the current HBF survey year are showing improvement and I am particularly pleased that, in July, Persimmon became the first housebuilder to introduce a retention scheme for customers, placing us at the forefront of strengthened consumer rights for homebuyers,” he said.
Jenkinson was appointed chief executive earlier this year after the company ousted its former boss Jeff Fairburn following a public row over his bonus. The company had tried to pay Fairburn a bonus of £110m amid rising profits that were helped in large part by the government-funded help-to-buy scheme.
The programme, in which the government provides a guaranteed interest-free loan for a deposit, helped Persimmon make record-breaking profits of more than £1bn last year.
A public backlash against Fairburn’s payout eventually cost the chief executive his job, although he still walked away with total pay of £85m over a two-year period.
Persimmon has launched an independent review into its culture, quality of work and customer care in an effort to repair its reputation.
Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown, said: “In normal circumstances a drop in completions and revenues would be a warning sign for a housebuilder but while the blip to the top line might not make for pleasant reading, it’s actually good to see Persimmon applying the brakes.
“Following a flurry of customer dissatisfaction, it took the decision to temper the speed at which it released homes to market, in a bid to avoid a repeat performance.”