Friday 20 September 2019

Persimmon profits set to dip as housebuilder invests in improvements

The company is working to improve its customer care.

Persimmon is expected to report lower revenues and a slight dip in profits (PA)
Persimmon is expected to report lower revenues and a slight dip in profits (PA)

By Alys Key, PA City Reporter

Housebuilder Persimmon is expected to report lower profits on Tuesday as it overhauls its business practices and faces uncertainty in the property market.

Analysts are expecting margins to go up slightly on the same period last year, even as house price growth cools off and costs increase.

But a dip in revenue, which the company flagged in an earlier trading update, will result in a slight drop in pre-tax profits.

The housebuilder has not had an easy time of late Analysts at The Share Centre

The company said in its July update that its underlying housing margin is expected to be 30.8%, equal to the 2018 full-year numbers.

But it has also been slowing down the sales process to improve customer satisfaction, revealing in July that completions are down 7% for the first half while revenue dipped 4.5% to £1.75 billion.

Additional costs could also 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.

Investors will be watching with interest for any comments on dividends, given the group’s historic generosity.

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

On Friday, shares were trading 0.57% higher at 1,846.5. This was down by a quarter on the closing price one year ago.

Analysts at The Share Centre said: “The housebuilder has not had an easy time of late, as seen by the drop in the share price, with a range of issues including Brexit, a government review into its participation in the Help to Buy scheme and a recent TV programme questioning its build quality.”

They added that the forward order book would also be a key figure to watch out for, as well as average selling prices.

In April, the group launched an independent review into its operations, to be overseen by a QC.

The review moved to its next phase earlier this month, putting out a call for input from customers, employees and other relevant stakeholders.

Areas covered by the review will include compensation for top management, following the furore over former chief executive Jeff Fairburn’s circa £75 million pay packet last year.

PA Media

Today's news headlines, directly to your inbox every morning.

Editors Choice

Also in World News