Sales and profits at Persimmon have slipped as the UK’s second biggest housebuilder attempts to repair its battered reputation after criticism of its shoddy workmanship, huge executive rewards and an overreliance on the government’s help-to-buy scheme.
The company said it had increased spending on customer service by some 40% over the first six months of the year, adding an extra 200 staff to its 5,000-strong workforce to help deal with customer calls and site visits.
Persimmon said it expected to spend an extra £15m on the initiative 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 group’s half-year profits dropped from £516m to £509m. The number of homes sold totalled 7,584, meaning Persimmon generated more than £67,000 profit from every house completed. The average selling price rose to £216,942, up more than £1,000 on the same time a year ago.
Chief executive, Dave Jenkinson, said improving quality and customer service was the builder’s “top priority”. He said progress made in recent months “clearly shows that Persimmon is changing”.
He blamed shoddy workmanship on Persimmon’s efforts to meet demand, and said the firm would accept a further slowdown in sales if it meant quality standards were raised.
He added: “It’s not a sacrifice, I think it’s about creating long-term shareholder and stakeholder returns and I think that’s the right thing to do for the business.”
Jenkinson was appointed chief executive earlier this year after the company ousted its former boss Jeff Fairburn following a public row over his bonus. Fairburn had qualified for a bonus payout of £110m amid rising profits that were helped in large part by the government-funded help-to-buy scheme.
Persimmon came under intense pressure from politicians and shareholders over the record-breaking bonus payouts. They were eventually scaled back, with Fairburn being handed £85m before he was forced to depart. The builder’s chairman Nicholas Wrigley resigned as he had failed to cap the bonus or persuade Fairburn to voluntarily hand some of the award to charity.
In April Persimmon launched an independent review into its culture, the quality of its work and customer care in an effort to repair its reputation. However, in June it emerged that the builder had taken control of a 14,000-strong customer complaints group on Facebook, called Persimmon Homes Unhappy Customers, and shut it down. Jenkinson refused to reveal whether the builder had paid the administrator of the group to take it over, but said it had been aggressive and bullying.
The help-to-buy 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. The scheme underpinned half of its sales last year.
Jenkinson received a bonus of £38m, and reportedly up spent £800,000 on a pub in his hometown of Morpeth, Northumberland.
Persimmon said the long-term incentive scheme that resulted in bumper payouts for executives had now ended. The company stressed that Jenkinson’s salary stayed at £515,000 when he was promoted to CEO and that he would not receive any cash bonus or other longer term incentive this year.
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.”
