Persimmon cuts dividend as housing gross sales tumble

Persimmon has reduce its dividend and revealed it faces tons of of hundreds of thousands of kilos in further prices associated to constructing security, as larger mortgage prices trigger a steep drop in housing gross sales.

Shares fell 8 per cent on Tuesday morning after the FTSE 100 firm introduced that it was scrapping its dividend coverage in response to “elevated uncertainty” and better taxes.

Persimmon, one of many UK’s greatest housebuilders, stated there have been clear indicators the housing market was slowing, revealing that the gross sales fee throughout its websites had fallen 20 per cent prior to now six weeks whereas the variety of patrons cancelling their dwelling buy had jumped by a 3rd.

The typical value of the corporate’s properties has fallen 2 per cent since July, whereas the £770mn worth of gross sales agreed for subsequent 12 months is down a 3rd on the £1.15bn it had agreed this time final 12 months.

“There’s a hell of plenty of uncertainty on the market,” stated chief government Dean Finch. “Individuals have had mortgage provides withdrawn, not been capable of get mortgages, charges have gone up.”

Persimmon didn’t announce particulars of its new dividend coverage. Chris Millington, analyst at Numis, estimated that dividends may “virtually halve” because of larger than anticipated prices and a slowing market.

Persimmon additionally introduced a steep improve in the amount of money put aside to cowl the restore of blocks caught up within the constructing security disaster sparked by the hearth at London’s Grenfell Tower in 2017 during which 72 folks died.

Earlier this 12 months, Persimmon stated “that the £75mn provision put aside for the rectification works stays applicable”. However on Tuesday, after prolonged negotiations with the housing secretary Michael Gove, the corporate raised its provision to £350mn.

Finch on Tuesday conceded that Persimmon had not adequately assessed its publicity to the disaster, as the corporate elevated the variety of buildings needing remedial work from 33 to 71.

“Why are there so many buildings on the market we weren’t conscious of? It’s a very good query,” he stated. “Data have been poor.”

Persimmon blamed the leap in prices on “the broader scope required by authorities, which has resulted each in a rise within the quantity of labor required and within the variety of eligible buildings, and . . . a background of great construct value inflation”.

Millington stated that whereas the rise was partly all the way down to a tightening of presidency guidelines, “to maneuver from £75mn to £350mn seems uncommon — it suggests the work achieved earlier than was not rigorous sufficient”.

Gove, not too long ago reappointed to the housing function by Prime Minister Rishi Sunak, has taken a combative strategy to the sector. Talking within the Home of Commons this week, he put builders on discover {that a} deteriorating economic system was no excuse for not making good on their “obligation” to repair faulty buildings.

“It can’t be the case that financial situations that have an effect on us all are being utilized by builders or anybody else to shuffle off their obligations,” he stated.