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Persimmon Stock Climbs as U.K. House Builder Puts Quality Over Quantity After Damning Review

Persimmon stock moved higher on Wednesday as the U.K.’s second largest house builder blamed a sales slump on plans to put ‘customers before volume.’

Persimmon stock moved higher on Wednesday as the U.K.’s second largest house builder blamed a sales slump on plans to put ‘customers before volume.’

Persimmon stock moved higher on Wednesday as the U.K.’s second largest house builder blamed a sales slump on plans to put “customers before volume.”

The company said total revenues for the year were down 2.4% to £3.65 billion, reflecting action taken to improve quality and service. Despite the fall, shares rose 1.1% in early trading.

It comes after an independent review of the company criticized its “poor workmanship” and said its corporate culture needed to change.

In a trading update, Persimmon said it was making good progress on improving customer care and quality.

Chief Executive Dave Jenkinson said: “Central to this plan is putting customers before volume, with new home legal completions for 2019 being 4% lower than last year.

“Delivering the maximum benefits to our customers from our quality and service improvement initiatives will continue to be my top priority for 2020.” New home completions dropped to 15,855 from 16,449 in 2018.

Full-year pretax profits for 2019 are expected to be in line with market consensus, the company said. Total forward sales value of £1.36 billion, down from £1.4 billion in 2018, gives Persimmon a “solid platform” going into 2020, the company said.

The damning independent review last month, led by Stephanie Barwise of Atkin Chambers and commissioned by Persimmon, highlighted a range of problems, including the quality of its homes, a “box-ticking culture” and executive bonuses.

“Persimmon’s culture must change...Persimmon cannot afford the stigma of a corporate culture which results in poor workmanship and a potentially unsafe product,” the review noted.

AJ Bell investment director Russ Mould said: “The volume and forward sales of its homes are both down and in order for volumes to stabilize the company has some work to do when activity ramps up.

“The company has sacrificed revenue by slowing down the process of making houses in order to ensure more attention is paid to build quality and customer care.”

Looking ahead. Going down the independent review route was brave. The findings proved damning and sent shares tumbling 4% just days after Prime Minister Boris Johnson’s election victory had sent them soaring. The change of approach and initial signs of progress have now sent the shares back up to their postelection levels of 2,826p.

Persimmon’s stock has been intrinsically linked to Brexit and will climb higher if Johnson can safely negotiate Britain’s exit from the European Union. The overhaul of culture and practices may also help in the long run.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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