Evidence of progress in its rehabilitation helped lift share in Persimmon (PSN) on Wednesday morning as the shares advanced 1.4% to £28.34.

Annual revenue fell 2.4% as it curbed the rate of home completions to improve customer service and build quality.

Revenue for the year through December fell to £3.65bn, down from £3.74bn on-year.

New home legal completions fell 4% to 15,855 after the company moved to address some criticism of the quality of its homes.

As AJ Bell investment director Russ Mould observes: ‘In truth it had little choice after the Government raised questions over its eligibility for the lucrative Help to Buy scheme due to the issues faced by Persimmon customers and the huge bonus paid to its former CEO Jeff Fairburn.

‘The results of an independent review published in December, suggesting the company had built shoddy and potentially unsafe homes, merely ratcheted up the pressure on management.

‘Rebuilding the company’s reputation will take time and investment, although at least the company has a strong balance sheet to lean on.’

‘GOOD PROGRESS’

'Persimmon continues to make good progress with the implementation of its customer care improvement plan,' chief executive Dave Jenkinson says.

'Central to this plan is putting customers before volume.'

Persimmon said it expected its pre-tax profits for the year to be in line with market consensus.

The company achieved an average selling price on its homes of £215,700, broadly in line with the previous year's £215,563.

In sacrificing revenue and volume to improve build quality, Persimmon is walking along a similar path to sector peer Vistry (VTY), formerly Bovis Homes, which rejigged its own approach in early 2017, hiring industry veteran Greg Fitzgerald to restore its fortunes.

After a period of retrenchment the company appears to be back on the front foot. Back in November, it agreed to buy construction firm Galliford Try’s (GFRD) Linden Homes and Partnerships & Regeneration units in a deal worth £1.14bn.

This included Vistry's issue of 63.7m new shares to Galliford plus £300m in cash and the assumption of Galliford's £100m 10-year private debt placement.

Although the acquired businesses made no contribution to the 2019 financial year and the company faced some pressure on sale prices, strong cost control and easing build cost inflation mean it still expects to report a record adjusted pre-tax profit of £181.6m for 2019, slightly ahead of estimates.

Investors were not too impressed though, marking the shares down 0.7% to £13.33.

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Issue Date: 15 Jan 2020