Persimmon sales slump after 'poor workmanship' on new builds

Tom Belger
Finance and policy reporter
Persimmon saw its sales fall as it tries to tackle quality issues on its homes. Photo: PA

Persimmon has blamed falling sales on its efforts to put “customers before volume,” after a critical review on the quality of its new-build homes across Britain.

Britain’s second biggest housebuilder (PSN.L) saw its sales slide by 2.4% year-on-year to £3.65bn in 2019, while new home completions were also 4% lower than the previous year.

But the figures appeared to be better than expected by investors, with shares in the company up 1.5% in early trading after the announcement on Wednesday.

Dave Jenkinson, group chief executive, said it was making the “step change necessary” to improve home quality and customer service in a trading update.

The housebuilder, a leading provider of homes under the government’s Help to Buy scheme, has come under fire over building standards in recent years.

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It apologised after an investigation by Channel 4’s Dispatches programme last year revealed buyers’ wide-ranging complaints about snagging. One expert commissioned by filmmakers found 295 problems on a single new-build home, including leaking sinks and a fire door that failed to close.

Persimmon ordered an independent review of its operations, which was published last month.

The review said: “Many of Persimmon’s employees, customers and stakeholders wish Persimmon to change, and in a changing regulatory environment, Persimmon cannot afford the stigma of a corporate culture which results in poor workmanship and a potentially unsafe product.”

It found Persimmon had a “systemic nationwide problem” of missing or improperly fitted cavity barriers in its properties, and called it a “manifestation of poor culture.”

The review also said Persimmon’s traditional role as a land assembler and house-seller, rather than builder, meant it focused too narrowly on inspections immediately before and after the sale.

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“It must be recognised that genuine customer care starts with the quality of the build, therefore beginning much earlier in the process,” the report said. Persimmon’s procedures may have led to a “culture of non-observance” or a “mere box-ticking exercise” in its checks, it added.

The company said in its latest update it currently has around 365 developments under construction, and plans to open a further 80 sites in the first half of the year. It bought more than 9,900 plots of new land in 60 locations last year.

It added that it completed 15,855 homes last year, down from 16,449 the previous year.

Jenkinson said the company had now introduced a customer retention scheme, calling it a “first for the industry,

"Persimmon continues to make good progress with the implementation of its customer care improvement plan. Central to this plan is putting customers before volume, with new home legal completions for 2019 being 4% lower than last year,” he said.

“I am encouraged by the enthusiasm and commitment with which the whole Persimmon team is making the step change necessary to deliver higher levels of quality and service to our customers.”

The company also said “regional housing markets” had benefited from resilient consumer confidence in 2019, helped by low interest rates, a competitive mortgage market and robust employment levels.