Persimmon cancels one dividend payment and postpones another

The housebuilder said it believed “conserving cash and maximising financial flexibility is in the long term best interests of the business and all its stakeholders”

Persimmon -

Persimmon PLC (LON:PSN) has cancelled one promised dividend that was due to be paid next month and said it was postponing the payment of another proposed for July until later in the year because of uncertainty around the impact of the coronavirus epidemic. 

The FTSE 100 housebuilder’s cash holdings, which started the year at £844mln, stood at roughly £610mln at the end of last week, further bolstered by a £300mln bank facility. 

Citing the uncertainty caused by coronavirus and its operational impact on UK economic activity, twinned with the group's strategy of minimising financial risk, directors said they believe “conserving cash and maximising financial flexibility is in the long term best interests of the business and all its stakeholders”.

In light of the UK government’s lockdown measures to limit the spread of coronavirus, Persimmon is “preparing for a significant delay in the timing of legal completions, a rise in cancellation rates and a material slowdown in new sales”, all of an uncertain quantum. 

April’s 125p per share payment has been cancelled as the board said before the global pandemic this has been thought of as surplus capital but now “does not believe it would be prudent at this time to regard this cash as surplus”, though payment of the 110p dividend that had been due in July will be reassessed later in the year when the effects of the virus are clearer.

Chief executive Dave Jenkinson said a number of measures have been set out throughout the business to protect customers, staff, contractors and suppliers for the duration of the pandemic. 

“We will listen carefully to the government's future advice as the situation develops and will make further adjustments where necessary."

With 350 sales outlets open at the end of last year, a spokeswoman confirmed that construction sites are “commencing an orderly shutdown with only essential work taking place which will be focused on making partly built homes safe and secure and where failure to complete the build could put customers in a vulnerable position”.

Shares in the company, having halved since late February, fell initially on Monday before springing higher, up 7% to 1,818.87p by mid-morning.

With Persimmon joining four sector peers so far in cutting or pausing their dividends, analyst William Ryder at Hargreaves Lansdown said they suspect more will follow.

“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,” he said.

“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.”

   -- Adds share price and broker comment -- 

Quick facts: Persimmon

Price: 1622.5 GBX

Market: LSE
Market Cap: £52.24 m

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