Home Builder Persimmon Falls After TV Program Highlights Faults
Persimmon Plc shares fell after a television documentary highlighted customer complaints about the quality of the homes the company builds, fire-safety concerns and excessive executive pay.
The program, which aired Monday evening on Britain’s Channel 4, contained interviews with disgruntled customers of the country’s second-largest home builder. They laid out a litany of construction faults and described high-pressure sales tactics used by the company, which has been a major beneficiary of the government’s Help to Buy low-cost loan program for new home buyers.
Persimmon dropped as much as 2% in London trading on Tuesday, following a 2.9% decline on Monday before the program was broadcast. That compares with a dip of about 1% for competitor Barratt Developments Plc since Friday’s close.
The Help to Buy program is set to be modified and extended from 2021 through 2023, and the U.K. government is weighing whether to ban Persimmon from selling its homes to buyers using the interest-free loans, the Times reported in February. About half the homes Persimmon builds are sold using Help to Buy.
In a statement provided to the program, Persimmon said it “can and will do better” under its new leadership. “We fully accept that on too many occasions in the past we have fallen short on customer care and the speed and empathy with which we dealt with problems,” according to the statement.
Housing Secretary James Brokenshire is concerned about the company’s quality of construction and handling of complaints, in addition to the practice of selling houses using leasehold structures that require buyers to pay an annual rent on the land beneath their homes, the Times said. Persimmon Chief Executive Officer Dave Jenkinson said at the time that the company hadn’t been in direct contact with the government about the issue.
Help to Buy was introduced shortly after Persimmon brought in an uncapped long-term incentive plan that resulted in a 75 million pound ($93.5 million) bonus for then CEO Jeff Fairburn. He decided to leave the company after the bonus became the focus of public ire about executive pay. Former Chairman Nicholas Wrigley and Jonathan Davie, former head of the company’s remuneration committee, both resigned in 2017 as a result of a decision not to impose a cap on the plan.
The Channel 4 program brought in an independent building surveyor to inspect a Persimmon home that was recently sold. He found almost 300 faults, including leaking sinks and a poorly fitted fire door. More than 70% of the issues raised fell short of building regulation standards, according to the program. Customers also complained that Persimmon had taken more than a year to make some fixes.
Persimmon started an independent review to examine its quality, customer care, governance and incentives in April. The new focus on customer service has resulted in an improved build quality rating, but is impacting sales volumes and margins, the company said in an earnings statement earlier this month.
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