May 1, 2019 / 6:53 AM / 3 months ago

UPDATE 2-Persimmon slows home sales to focus on quality

* Sees higher build costs for 2019

* Says pricing conditions remain firm

* Addresses issues raised in BBC report on fire safety (Adds company, analyst comment, background, shares)

By Samantha Machado and Shashwat Awasthi

May 1 (Reuters) - Housebuilder Persimmon on Wednesday reported fewer orders so far this year partly due to the company’s action to change the timing of house sales to focus on quality and improve customer service.

Britain’s second-largest housebuilder, which has faced criticism over the quality of its houses, said it was addressing these concerns by taking a more targeted approach to the timing of sales releases.

“As expected, these measures have reduced the number of sales reservations made since the start of the year,” the company said.

But Persimmon also said it was confident that, with the continuation of current market conditions, these sites would make a good contribution to sales once the homes were released for sale.

In April, the company began an independent review to assess measures taken to improve its business. The review’s focus includes customer care and quality assurance processes.

“The market should take comfort that the new CEO is clearly prioritising customer care and service and the market remains good,” Canaccord Genuity analyst Aynsley Lammin wrote in a note.

A BBC report here this week said some of Persimmon's houses were not fire-safe due to missing cavity barriers used to prevent fires spreading.

Persimmon, responding to a Reuters request to comment, said since the issue was discovered in October last year it had taken extensive action to remedy the problem, including carrying out 2,700 inspections to date.

“As soon as the issue came to light we launched an investigation to identify the extent of the problem and to immediately rectify any affected properties,” Persimmon said, adding that the process of arranging inspections was ongoing.

The company, which focuses on building cheaper family homes, also said it expects overall build costs to rise by about 4 percent for the year, echoing smaller rival Taylor Wimpey’s comments last week.

“Given the increased uncertainties around the future performance of the UK economy we have remained very selective with the acquisition of new land during the period,” Persimmon said, even as it affirmed confidence in its future prospects.

Persimmon said forward sales revenue so far in 2019 fell to 2.70 billion pounds ($3.52 billion) from 2.80 billion pounds a year earlier.

The company, however, said it was seeing resilience in the market for new houses since the start of the year, as high employment levels and low interest rates support consumer confidence.

“Pricing conditions remain firm,” it said, reporting average selling price of about 237,850 pounds year-to-date, compared with about 236,500 pounds a year earlier.

Data from mortgage lender Nationwide on Wednesday showed that growth in British house prices picked up slightly in April, adding to signs that a slowdown in the housing market ahead of Brexit might have bottomed out.

Shares were roughly flat at 2,234 pence by 0804 GMT.

$1 = 0.7668 pounds Reporting by Samantha Machado and Shashwat Awasthi in Bengaluru; Editing by Saumyadeb Chakrabarty and Jane Merriman

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