Persimmon cancels dividend and begins shutdown of sites
Persimmon is the latest housebuilder to cancel its dividend in an attempt to conserve cash as coronavirus uncertainty hits sales.
The housebuilder said the period of uncertainty will lead to a delay in the timing of legal completions, a rise in cancellation rates and a material slowdown in new sales for Persimmon.
As such the board said conserving cash and “maximising financial flexibility” is in the long term best interests of the business and its stakeholders.
The board has cancelled the proposed 125p per share interim dividend payment and postponed the final dividend payment of 110p per share in July.
Persimmon noted: “Whilst the company’s regular annual payment of at least 110p per share has been stress tested for payment through the housebuilding industry cycle, the Covid-19 virus presents an exceptional set of circumstances.”
Sign up to City PM’s Midday Update newsletter, delivered to your inbox every lunchtime
The group said it will evaluate the final dividend payment “should economic and business disruption abate” in the next few months.
Housebuilders Redrow and Taylor Wimpey announced the cancellation of their dividends yesterday, forecasting a sharp drop in sales amid the outbreak.
Persimmon 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.”
Persimmon followed the lead of Taylor Wimpey and Barratt Homes in closing construction sites, despite health secretary Matt Hancock clarifying sites could remain open provided workers were adhering to social distancing advice.
The housebuilder said to “ensure the safety of its customers, staff, contractors and suppliers throughout this period” it will close all sales offices until further notice. Construction sites are starting an “orderly shutdown” with only essential work taking place, which will be focused on making partly built homes safe and secure.
William Ryder, equity analyst at Hargreaves Lansdown, said: “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.”
Shares are up 4.23 per cent.