The Guardian - 21.08.2019

Section:GDN 1N PaGe:27 Edition Date:190821 Edition:01 Zone: Sent at 20/8/2019 20:14 cYanmaGentaYellowb

Wednesday 21 Au g u st 2019 The Guardian •

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Profi ts slide as Persimmon

tries to rebuild reputation

Kalyeena Makortoff

Sales and profi ts at Persimmon have

slipped as the UK’s second biggest

housebuilder attempts to repair its

reputation after criticism of shoddy

workmanship, huge executive rewards

and an over reliance on the govern-

ment’s help-to-buy scheme.

The company said it had increased

spending on customer service by

about 40% over the fi rst six months

of the year, adding an extra 200 staff

to its 5,000-strong workforce to help

deal with customer calls and site visits.

Persimmon said it expected to

spend an extra £15m on the initiative

on top of an additional £140m already

being spent on homes in progress after

criticism over poor-quality builds that

included leaks and cracking windows.

The group’s half-year profits

dropped from £516m to £509m. The

number of homes sold totalled 7,584,

meaning Persimmon generated more

than £67,000 profi t from every house

completed. The average selling price

rose to £216,942, up more than £1,000

on the same time a year ago.

The fi rm’s chief executive, Dave

Jenkinson , said improving quality

and customer service was the build-

er’s “top priority”. He said progress

made in recent months “ clearly shows

that Persimmon is changing”.

He blamed poor workmanship on

Persimmon’s eff orts to meet demand,

and said the fi rm would accept a fur-

ther slowdown in sales if it meant

quality standards were raised.

He added: “ It’s not a sacrifi ce, I

think it’s about creating long-term

shareholder and stakeholder returns

and I think that’s the right thing to do

for the business.”

Jenkinson was appointed chief

executive earlier this year after the

company ousted Jeff Fairburn follow-

ing a row over his bonus. Fairburn had

qualifi ed for a payout of £110m amid

rising profi ts that were helped in large

part by the government-funded help-

to-buy scheme.

Persimmon came under intense

pressure from politicians and share-

holders over the record-breaking

payouts. They were eventually scaled

back, with Fairburn being handed

£85m before he was forced to depart.

The builder’s chairman, Nicholas

Wrigley , resigned as he had failed to

cap the bonus or persuade Fairburn

to hand some of the award to charity.

In April Persimmon launched an

independent review into its culture,

the quality of its work and customer

care in an eff ort to repair its reputa-

tion. However, in June it emerged

that the builder had taken control of

a 14,000-strong complaints group on

Facebook, called Persimmon Homes

Unhappy Customers, and shut it down.

The help-to- buy programme, in

which the government provides a

guaranteed interest-free loan for a

deposit, helped Persimmon to make

record-breaking profi ts of more than

£1bn in the last full year. The scheme

underpinned half of its sales.

Jenkinson received a bonus of

£38m, and reportedly spent £800,000

on a pub in his home town of Morpeth,

Northumberland.

Persimmon said the long-term

incentive scheme that resulted in

bumper payouts for executives had

now ended. They stressed that Jenkin-

son’s salary stayed at £515,000 when

he was promoted to CEO and that he

would not receive any cash bonus or

other longer-term incentive this year.

Sophie Lund-Yates , an equity ana-

lyst at Hargreaves Lansdown, said:

“In normal circumstances a drop in

completions and revenues would be

a warning sign for a housebuilder, but

while the blip to the top line might not

make for pleasant reading, it’s actually

good to see Persimmon applying

the brakes. ”

Asos asks

suppliers for

discounts in

attempt to fi x

its fi nances

Rob Davies

The online fashion retailer Asos has

asked its suppliers for a 3% discount on

all the clothes and accessories it buys

from them, as the company struggles

to repair its fi nances after issuing two

profi t warnings.

Asos’s share price collapsed last

month after a second profi ts down-

grade in seven months. The retailer

blam ed IT problems at its overseas

warehouses. The shares, which were

changing hands at £77 just 16 months

ago, are now just £23. 16.

The retailer has written to its suppli-

ers to ask them to accept 3% less on the

price of their clothes and accessories,

starting on 1 September , describing

the price cut as a “necessary change”

and indicating it is still looking to cut

costs to improve profi tability.

In the letter, which was first

reported by the trade magazine Drap-

ers , Asos said it needed the discount

to weather the cost of launching ware-

houses in the US and Germany.

“We have recently reviewed the

current status of our supplier arrange-

ments, also taking into account the

Lidl’s share of

grocery market

hits record high

as new stores

lure shoppers

Kalyeena Makortoff

Lidl has bagged its biggest ever slice

of UK grocery spending after larger

supermarket rivals lost ground dur-

ing a poor stretch of summer weather.

Sales at the discount retailer rose

7.7% in the three months to 11 August,

fuelled by a burst of store openings

that attracted nearly 500,000 more

customers, compared with the same

period of 2018. The infl ux of shoppers

helped Lidl attain a market share of

5.9% – its largest to date.

The fi gures, from the supermarket

analysts Kantar, showed the online

grocer Ocado was the fastest- growing

supermarket, with sales up 12.6%.

That is good news for Marks &

Spencer, which has paid £750m for a

50% share in Ocado’s retail arm in an

attempt to accelerate the expansion

of its food halls.

The so-called “ big four” supermar-

ket chains – Tesco, Sainsbury’s, Asda

and Morrisons – all lost market share.

Tesco remains the UK’s market

leader, with a 27% share, but that is

down from 27.4% a year ago. Tesco

shrank by 1.6% during the period.

Lidl’s rival discounter Aldi grew at

6.2%, with nearly half of UK house-

holds shopping in one of its stores

during the period, demonstrating the

extent to which the German retailer

has established itself here. Aldi and

Lidl ring up one in every seven pounds

spent on groceries in the UK.

Overall, UK grocery sales were fl at

during the 12-week period, at nearly

£27bn, partly because of tough com-

parisons with a year ago when the

supermarket trade was boosted by

a long hot summer as well as events

such as the royal wedding and the

World Cup.

Fraser McKevitt, Kantar’s head of

retail and consumer insight , said: “The

memory of last year still looms large

for retailers and this summer’s com-

paratively poor weather, combined

with low levels of like-for-like price

rises, have made growth hard to fi nd

for retailers.”

The record temperatures recorded

in July were not enough to push the

market into growth but sunny spells

during the past four weeks boosted

sales of summer staples such as hay

fever remedies and suncream, up 17%

and 8% respectively, Kantar said.

Asda suff ered a 1.5% drop in sales, a

decline that brought its market share

down from 15.2% to 14.9%. Last week

Roger Burnley, Asda’s chief execu-

tive, blamed uncertainty surrounding

Brexit for its weak sales performance

in the fi rst six months of 2019.

signifi cant investments we have made

over the last few years and will con-

tinue to make, to lay the foundations

for future growth,” the letter said.

“Our future growth aspirations not

only benefi t us but also benefi t you,

our valued partner. ”

Asos told suppliers that accepting

lower prices would “fuel joint growth”.

The overhaul of its warehousing

and supply chain arrangements has

proved more diffi cult than expected.

Nick Beighton , the Asos chief exec-

utive, said in July that the company

expected to make profi ts of £30m to

£35m this year , far below City forecasts

of £55m and the £102m of 2018.

He said: “The major overhaul of our

infrastructure has been bumpier and

taken a lot longer than we originally

anticipated. We acknowledge that this

is a failure in execution.”

The Guardian has approached Asos

for comment.

▲ Models at the Asos menswear show

in June – the company’s share price

dropped after warehouse problems

PHOTOGRAPH: STUART WILSON/BFC/GETTY

£102m

The profi t made by Asos in 2018 –

it expects to make about £35m this

year, far below City forecasts

‘It’s not a sacrifi ce.

It’s about creating

long-term returns

for shareholders’

Dave Jenkinson

Persimmon’s CEO

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