Persimmon begins orderly site shutdowns, cancels dividend

Persimmon has begun the orderly shutdown of its construction sites and closed all of its sales sites, the housebuilder said on Wednesday, as it announced the cancellation of its dividend due to the coronavirus outbreak.

The company said only essential work will take place on construction sites, to make partly-built homes safe and secure and where failure to complete the build could put customers in a vulnerable position.

The group said it entered "this period of uncertainty" with a "robust" operational performance in the year to date and a strong forward order book. Nevertheless, it is preparing for a "significant" delay in the timing of legal completions, a rise in cancellation rates and a material slowdown in new sales, the extent and duration of which is uncertain.

"In light of the current uncertainty caused by the Covid-19 virus and its operational impact on UK economic activity, and in line with the group's strategy of minimising the financial risk through the cycle, the board believes that conserving cash and maximising financial flexibility is in the long term best interests of the business and all its stakeholders," it said.

As a result, it has decided to cancel the proposed 125p per share interim dividend payment that was due to be paid on 2 April and to delay the proposed annual, final dividend payment of 110p per share. It will reassess it later in the year when the effects of the virus are clearer.

Persimmon also said that it was unable to provide any financial guidance for 2020.

Group Chief Executive Dave Jenkinson said: "The group's long-term strategy of minimising financial risk and maintaining capital discipline over the long term through the housing cycle, ensures that we are well placed as we enter this period of uncertainty.

"Whilst the impacts of this pandemic go beyond the normal cyclical nature of the housing market, the group's high quality land holdings, significant liquidity and strong balance sheet will allow us to work through these challenges and emerge in a strong position for the benefit of all our stakeholders."

William Ryder, equity analyst at Hargreaves Lansdown, said: "We suspect Persimmon won’t be the last housebuilder to take drastic actions to keep cash in the business. In our view, very few people are going to choose to buy a new house in the next few months. It looks like we’ll have to spend a chunk of the summer sitting at home, and many will be suffering financial hardship - hardly ideal conditions for house hunting.

"This means housebuilders risk facing the double danger of falling volumes and falling prices. Together, these twin threats can demolish profits and cashflow surprisingly quickly, and while we’re not at that point yet, the likelihood is rising. The housebuilders will dig in and try to shelter behind their balance sheets - which are in much better shape than they were during the financial crisis.

"In the short term we think most of the major builders will manage, but if the disruption is prolonged even the stongest balance sheets will find themselves worn down."