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Persimmon to change pay rewards to focus on quality homes amid reports of possible Help-to-Buy ban

Measures to ensure new homes are at built to a “more advanced stage” before releasing to the market have led to a slower pace of sales reservations in the new year
Persimmon reported record full year profit that topped £1bn

Persimmon PLC (LON:PSN) said on Tuesday it would step up efforts to improve customer service and deliver quality homes amid reports that government was considering banning the housebuilder from the Help-to-Buy scheme.

The Times reported at the weekend that the government was weighing up whether to strip Persimmon of its right to participate in the scheme following complaints about the quality of homes and leasehold charges attached to new homes.

READ: Persimmon shares hit by reports government may ban housebuilder from Help to Buy scheme

The news served a further blow to the group after coming under fire over the nine-figure bonus awarded to former chief executive Jeff Fairburn, who was asked to leave in November even after accepting a reduced payout of £75mln following pressure from shareholders and the public.

In the company’s full-year results statement, chairman Roger Devlin said Persimmon would change its pay and incentives to include a “greater emphasis on both quality and customer care with plans that are more rigorous than we have had in the past”.

“We remain focused on making a good contribution to increasing the industry's output of new homes across the UK so that more people gain access to good value, well-designed homes in line with government policy and targets,” Devlin said.

“We will continue to invest in our own manufacturing capabilities - timber frame construction, brick and tile works - to ensure we are able to support our development programmes over future years.”

Persimmon starts 2019 with sales slowdown

However, measures to ensure about a dozen new sites are built to a “more advanced stage” before being released to the market have led to a slower pace of sales reservations in the early weeks of the current spring trading period, he said.

He added that overall sales remain in line with expectations and the company is confident that these sites will make a good contribution to sales once build has progressed.

Full year profits and revenues gain

Devlin made the remarks as Persimmon reported a 13% rise in pre-tax profit to a record of £1.09bn for the year ended December 31.  

Revenue increased 4% to £3.6bn as the number of legal completions rose by 406 to 16,449 and the average selling price edged up 1% to £215,563.

The operating margin rose to 30.8% from 28.2% last year. 

The group declared a final dividend of 110p per share, in line with last year, after ending the year with net cash of £1.05bn, compared to £1.30bn the prior year.

Shares rose 2.3% to 2,406p in morning trading. 

New CEO appointed

In a separate statement, Persimmon announced the appointment of Dave Jenkinson as its new chief executive. He had held the position on an interim basis since the departure of Fairburn. Jenkinson has been with Persimmon in a number of roles for the past 22 years, most recently as group managing director.

“ My priorities will be to maintain the strong operational and financial momentum of the business, to develop further our customer care operations and to bring a greater focus to our wider responsibilities as a leading UK house builder,” Jenkinson said.

 “We have a strong and committed team and I look forward to continuing to work with all my colleagues to deliver the high quality, attractively priced homes that the UK needs." 

Record profits a solid effort but Help to Buy boost could end soon, says analyst

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said record profits that top £1bn in what’s meant to be a sluggish market is a solid effort and is "certainly a strong opening-bell" from new Jenkinson.

"Realistically, the most impressive thing to come out of these results is the increase in margins - they make for strong foundations," she said. 

"With Brexit galloping into view, the housebuilders need to be on their guard, and they’d be forgiven for getting a bit complacent." 

She added: "Conditions are about as good as they can be, with low interest rates, record low unemployment and helpful government schemes like Help to Buy all helping people get on the property ladder.

"With Persimmon’s participation in the Help to Buy programme under heavy scrutiny, following its former use of controversial leasing fees, and poor quality builds, these conditions have to end at some point."

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