Persimmon

Housebuilder Persimmon reports ‘robust’ start to the year

One of Britain’s largest housebuilders Persimmon has reported robust trading since the start of the year with total forward sales revenue, including completions, up by about 8% to £2.76 billion in 2018 to date.

In a trading update ahead of today’s annual general meeting, the FTSE 100-listed company said average selling prices for its homes rose to £236,500, up from £229,500 a year earlier, adding that pricing conditions remain firm across its regional markets.

The group added: “Customer activity since the start of the year has been encouraging with the Group’s total enquiry levels running circa 13% ahead of the prior year.

“This has resulted in robust trading since the start of the year with visitor levels to site, sales conversion rates and cancellation rates all running in line with our expectations.”

Persimmon said it has opened 65 of the around 100 new sites planned for the first half of the year and is building new homes on all sites that have an implementable detailed planning consent.

The group added that it is currently developing 375 active sales outlets across the UK.

The builder concluded that its board “remains confident of the future prospects of the group.”

In March, Persimmon named Roger Devlin as its new chairman, hoping he will help the company move on after a row over an executive incentive plan saw his predecessor quit last year.

Shareholders are expected to vote on remuneration for senior bosses later today.

A full trading update will be announced in July.

Persimmon secures extension of bank facilities

The directors of national housebuilders Persimmon have announced that the firm has recently concluded a one year extension of the maturity of its £300 million Revolving Credit Facility (“RCF”), out to 31 March 2023, with strong support from the company’s five relationship banks.

Persimmon’s directors said they “regard the RCF as an important element in providing support to the Group’s working capital flexibility as Persimmon targets further disciplined growth in volume in line with its long-term strategy of meeting market demand across the UK”.

The explained that their projected growth will require continued substantial investment in new land, necessary community infrastructure and site development work in progress, and in the Group’s training programmes for trade skills and management capabilities.

The Group now has 30 house building businesses across the UK having opened six new businesses over the last three years to support the Group’s delivery of further increases in new home construction.

Since 2012, when Persimmon launched its new strategy, to the end of 2017, the Group has increased its annual construction of new homes by over 70 per cent, opened 1,189 new outlets, invested c. £3.2 billion in land and delivered c.470 per cent total returns to shareholders, placing it third in the FTSE 100 index over the period.

Three Persimmon executives share £100m bonus

Jeff Fairburn

Three executives at Persimmon were paid bonuses in excess of £100 million last year, the housebuilder has confirmed.

New figures have revealed that chief executive Jeff Fairburn was paid a total of £47m in 2017, finance director Mike Killoran received £37m and managing director David Jenkinson received £20m.

Last month directors agreed to forgo around £50​m in bonuses following a political and shareholder backlash over the long term incentive scheme introduced by the company six years ago​.

​The pay controversy led to the resignation of chairman Nicholas Wrigley and remuneration committee chairman Jonathan Davie late last year. ​​ ​However, these latest figures were unaffected by last month’s £50m reduction.​

In its annual report, Persimmon also confirmed that should shareholders approve a £1.10 dividend payment at the annual meeting in July, thereby reaching a long-term capital return plan target, a further bonus of £51m will be paid out to the executive team as part of the group’s 2012 long-term incentive plan. This is 50% what would have been paid after 50% was waived when the scale of payments became public. As part of this agreement the second tranche of the payouts must be held as shares for longer.

Writing in the annual report, new remuneration committee chairman, Marion Sears, said: “Under the agreement, the top three executives are legally entitled to receive these payments and legal advice re-confirmed that the remuneration committee had no discretion to modify them.”

Last week the firm appointed Roger Devlin as chairman from June 1.

Persimmon appoints Roger Devlin as new chairman

Roger Devlin

Roger Devlin has been announced as the new chairman at Persimmon where he will replace Nicholas Wrigley who resigned amid concerns over excessive executive pay at the housebuilder.

Currently chairman at pub group and brewer Marston’s and recently appointed chairman-designate at betting firm William Hill, Mr Devlin will take on the post from June 1.

His appointment comes after Mr Wrigley and remuneration committee chair Jonathan Davie stepped down in December following investor disquiet over a long term incentive plan introduced in 2012, which could have seen the management share £600 million depending on profit and housebuilding targets.

Believed to be the most generous ever in the UK, the bonus payouts were linked to the company’s stock market performance, which has been massively boosted by the UK government’s Help to Buy scheme.

Nigel Mills, senior independent director and acting chairman of Persimmon, said: “Following a very thorough process, the Board has agreed that Roger is the right candidate to chair Persimmon. I am sure that his wide business experience and his personal qualities will enable him to make a significant contribution to the future of the group.”

Roger Devlin, who is also currently the senior independent director of the Football Association, will step down from both this role and his position at Marston’s on May 31.

He said: “Persimmon has delivered excellent financial performance as well as materially increasing output in recent years. The housebuilding industry offers good growth prospects, and I look forward to working with Jeff Fairburn, his executive team and the Board in providing a broad range of quality homes to our valued customers while continuing the group’s track record of superior returns to shareholders.”

Persimmon profits up by 25 per cent following “outstanding” year

Jeff Fairburn

Persimmon has revealed annual profits soared by a quarter last year and the housebuilding giant mains “encouraged” by the start to 2018 despite Brexit uncertainties.

Revenue in 2017 year was up by nine per cent to £3.42 billion with legal completions ahead by 872 new homes to 16,043 and average selling price up by 3.2 per cent to £213,321.

Persimmon’s pre-tax profit increased from £774.8 million in 2916 to £966.1 million.

Shares in the group – which also owns the Charles Church and Westbury Partnerships brands – raced more than 10 per cent ahead after it revealed the bumper bottom-line profits haul for last year, boosted by booming demand for new builds.

Newly appointed acting chairman Nigel Mills, who took on the role on an interim basis on Monday after Nicholas Wrigley stepped down, praised an “outstanding” performance for 2017.

He said: “Persimmon’s performance in 2017 has been excellent. The group’s focus on high quality growth, coupled with capital discipline, has accelerated the delivery of our strategic objectives and generated record returns for our shareholders.”

He added that the start of the 2018 spring season had also been “encouraging”, with the group’s private sales rate per site up 7 per cent and average selling prices 2 per cent ahead at £234,106, with overall pricing conditions remaining firm.

The results for last year follow the high-profile controversy over executive pay at the group, with bosses last week agreeing to hand back around £50 million in bonuses.

The furore over the affair led to Mr Wrigley’s and remuneration committee chairman Jonathan Davie’s resignations.

In December, Mr Wrigley, a former banker, said he regretted not capping the company’s bonus scheme and was leaving “in recognition of this omission”.

Current chief executive Jeff Fairburn’s near-£100 million award was cut by £25 million in recent weeks following mounting pressure from politicians and some shareholders over the long-term incentive plan introduced by the company six years ago, with the firm having been boosted by the Government’s Help to Buy scheme.

Reacting to today’s annual results, Mr Fairburn said ongoing strong demand would help the market in 2018, although he flagged concerns over Brexit.

He said: “Whilst conditions in the new-build housing market remain supportive, the negotiations associated with the UK’s exit from the EU, including both the transitional arrangements and the terms of the longer term relationship, together with the nature of UK’s trading relationships with its other global partners, present key uncertainties that will have a substantial influence on market outcomes.

“However, with a long-term unfulfilled demand for housing, we believe that UK fundamentals remain strong.”

Jeff Fairburn to give away part of £110m Persimmon bonus

Jeff Fairburn

Persimmon chief executive Jeff Fairburn has decided to give a “substantial” amount of his £110 million bonus away through a charitable trust after he said that he never wanted to receive the money.

Mr Fairburn said he obtained the windfall as part of an uncapped bonus scheme which was in place before he became chief executive in 2013.

He now plans to set up a private charity “to benefit wider society over a sustained period of time”, though he gave no definitive details on how much of the bonus he would be giving away.

Mr Fairburn indicated that his wish had been to take an “old-fashioned approach” and keep the matter private, but conceded that this notion was misplaced.

In a statement issued this week he said: “I did not seek these levels of award nor do I consider it right to keep them entirely for myself.

“Once it became apparent that our outperformance would lead to a very significant award for me, I made plans to use a substantial proportion of the total to support the charities that are particularly important to me and my family.”

Persimmon’s chairman Nicholas Wrigley and the head of its pay committee Jonathan Davie were forced to quit in December last year following outrage over the uncapped pay scheme, which could see as much as £600m shared among the management team.

The growth since was fuelled in part by the UK government’s Help to Buy scheme, which has helped drive up sales of new homes. The initiative, launched by George Osborne in 2013, sees house buyers take an equity loan from the government of up to 20% of the cost of a new build home, and combining it with a 5% deposit and 75% mortgage. Scotland has its own scheme which works in the same way but with different thresholds.

Council refuses two applications for almost 700 homes near Plean

Stirling Council has refused two applications from Persimmon Homes to develop land to the east of Plean around Cushenquarter Farm.

Persimmon Homes was seeking permission to build 500 residential units, an access off the A9 Main Street and the erection of a primary school. Its application sought planning permission in principle, with the details of the proposal, including layout, housing types and parking to be confirmed in subsequent applications.

The housebuilder’s second application sought full planning permission for 198 residential units with a new access off the A9 Main Street and open space.

Both applications were presented before Stirling Council’s planning and regulation panel yesterday.

Panel convenor, Councillor Alasdair Macpherson, said: “Stirling Council has sought to ensure that there would be sufficient school capacity and healthcare facilities to accommodate these developments. The matter of road safety was also not addressed by the applicant.

“It is, in part, due to the lack of commitment from the developer to secure such capacity that these applications have been refused.”

Persimmon grows revenues by 9%

Housebuilder Persimmon has said that profits for the full year will come in marginally ahead of expectations as revenues for 2017 were 9% up in 2016 at £3.42 billion.

The group said legal completions rose 6% in the year to December and average sale price up 3% at £213,300.

It added that demand for new homes remained healthy through the autumn sales season and the value of forward sales at the end of 2017 was 10% up on the year at £1,355m.

Since the launch of its group strategy in 2012, Persimmon said it has made a significant contribution to increasing UK housing supply by opening 1,189 new selling outlets and delivering 80,726 new homes to the market during which time it has increased its annual production by over 70%.

The new brick manufacturing plant in Harworth, near Doncaster, is now complete and begun deliveries to site and there are plans to expand capacity at the factory that builds the Space4 insulated frame build-system.

Persimmon’s trading update concluded: “We remain mindful of market risks including those associated with the uncertainty arising from the UK leaving the EU. However, we are keen to deliver further improvement in our housing output and remain ready to invest wherever the local planning environment is supportive.”

The firm announces its 2017 results next month.

Persimmon chair resigns amid incentive plan dispute

Nicholas Wrigley

Nicholas Wrigley has announced his intention to resign as chairman of Persimmon following concerns over excessive executive pay at the housebuilder.

Remuneration committee chair, Jonathan Davie, has left also the group, with Wrigley remaining in his position while the Board seeks a successor.

It follows investor disquiet over a long term incentive plan introduced in 2012, which could see the management share £600 million depending on profit and housebuilding targets.

Believed to be the most generous ever in the UK, the bonus scheme is due to start paying out to senior staff on December 31. The payouts are linked to the company’s stock market performance, which has been massively boosted by the UK government’s Help to Buy scheme.

Chief executive Jeff Fairburn is in line for the biggest payout, which is set to top £100m.

Announcing Mr Wrigley and Mr Davie’s departures, Persimmon admitted that the generous pay out plan presided over by the duo “could have included a cap”.

Persimmon said: “The company introduced a Long Term Incentive Plan in 2012 (2012 LTIP).

“The board believes that the introduction of the 2012 LTIP has been a significant factor in the Company’s outstanding performance over this period, led by a strong and talented Executive team.

“Nevertheless, Nicholas and Jonathan recognise that the 2012 LTIP could have included a cap. In recognition of this omission, they have therefore tendered their resignations.”

But Persimmon added that since the award scheme was launched, the company has made “substantial cash returns to shareholders at the same time as increasing the size of the business and delivering significant value”.

It added that Persimmon has delivered an increase in the number of new homes supplied and invested £2.9 billion in new land.

Help to Buy disproportionately helping larger housebuilders, analysis reveals

Building Professional Employee Builder Worker stockCritics of the Scottish Help to Buy scheme have called for the policy to be scrapped after an investigation revealed just three high volume housebuilders have received around £189 million in subsidised mortgages between them.

Freedom of information (FOI) data obtained by investigatory journalism platform The Ferret has shown that Persimmon Homes, Taylor Wimpey and Barratt have been the largest beneficiaries of Help to Buy since its inception, selling thousands of homes and building nearly half of the homes under the scheme.

The Help to Buy (Scotland) scheme allows people to purchase a new-build home without the need for a large deposit. It enables the Scottish Government to subsidise the cost of home-buyers’ mortgages with prospective buyers getting up to 15% of the purchase price of a new home.

According to The Ferret, York-based Persimmon Homes has benefited most from the scheme. It has sold 2,308 homes via Help to Buy – accounting for nearly one fifth of all the homes sold through the Scottish programme.

Based on the average equity stake per home provided by the Scottish Government, The Ferret estimates that the Scottish Government has put around £77.4m into the purchase of Persimmon built homes.

London-based Taylor Wimpey has received an estimated £57m worth of mortgage support, while BDW Trading, which is part of Leicester-based Barratt Homes, has benefited from around £54.8m worth of subsidised loans.

Courtesy of The Ferret

Courtesy of The Ferret

In early 2016, the Scottish Government announced it would ring-fence one third of its Help to Buy funding for smaller developers.

But the figures show that in the 2016 – 2017 financial year, Persimmon, Taylor Wimpey and Barrat built 52% of the homes supported by the scheme. So far in the current financial year, these three firms have accounted for 50% of the 1,264 homes which received Scottish Government subsidy.

Green MSP Andy Wightman, who also chairs the cross-party group on housing at the Scottish Parliament, urged the Scottish Government to end the scheme in the next budget, claiming it makes housing more expensive for everyone else by pushing up prices generally and does little to benefit those on low incomes.

He told The Ferret: “For too long now, boosting profits for senior management and shareholders has taken precedent over delivering homes that can properly be called affordable. Housing policy should focus on the supply side rather than demand.”

Graeme Brown, director of Shelter Scotland, said that the money would be better spent on supporting affordable housing for social rent.

“Help to Buy is not the right way of addressing the housing crisis. It adds public money into the market rather than lowering prices for everyone,” he added.

Directing resources to increasing the supply of affordable housing for social rent, he argued, “would reduce the threat of homelessness to many people who are currently struggling to keep a roof over the heads due to a combination of high rent, stagnant wages and welfare reform”.

Nicola Barclay, chief executive of Homes for Scotland, emphasised to The Ferret that taxpayers were likely to get their money back over the long term, and could even profit, provided house prices rise, as the loans were repaid.

She said: “With housing completions still 36% down on pre-recession levels, Help to Buy has played a hugely important role in sustaining the construction of new homes, supporting tens of thousands of jobs and contributing £1bn in Gross Value Added to the wider economy since launch.”

The Scottish Government announced last year that Help to Buy enabed more than 30 households a week to purchase a new build home

The Scottish Government announced last year that Help to Buy enabed more than 30 households a week to purchase a new build home

Housing minister Kevin Stewart said that the Scottish Government was investing £3bn in building 50,000 affordable homes and that the Help To Buy scheme was in addition to this.

He told The Ferret: “We are committed to help struggling buyers purchase their own home through our shared equity schemes.

“Over 10,000 households have benefited from our Help to Buy programme since its introduction – two thirds of these were first time buyers and three quarters were aged 35 or under. The evidence also shows the scheme has had success in helping people move from social housing and from waiting lists into sustainable home ownership.

“Shared equity support is provided directly to buyers and builders receive no support from the Scottish Government. Help to Buy is led by demand from buyers and the Scottish Government has no control over the number of developments made available by each builder or where these developments are located.”

Responding to the report, the Common Weal think-tank has went further and challenged the Scottish Government to “answer a number of questions about its closeness to the property developer lobby in Scotland”.

Other revelations in The Ferret included evidence that the Scottish Government has asked industry representatives to come up with evidence that will justify continuing the subsidy scheme.

The FoI’s also show that Homes for Scotland (HfS) rejected the idea of a small developers fund to replace the current Help to Buy scheme.

Commenting on the findings, Common Weal head of policy, Ben Wray, stated: “These revelations open up serious questions about just how closely the Scottish Government and the property developer lobby are when it comes to designing housing policy.

“It’s perfectly reasonable that Homes for Scotland is listened to, but the Scottish Government appear to be reliant on the lobbyist for evidence to justify policy which its most wealthy members benefit from directly. The fact that HfS are direct partners in devising the new build-to-rent subsidy raises further alarm bells about the closeness of this relationship.

“The Ferret FoI revelations also show that HfS has specifically rejected a small housebuilder fund to replace the current help-to-buy, which the evidence shows is a cash cow for a few big corporate developers. HfS do not represent all opinion on housebuilding and all housebuilders in Scotland, and the Scottish Government would do well to remember this.

“Common Weal will be watching the Budget closely next week to see if subsidies for big corporate property developers are maintained, or if full funding commitment is put into building public rental housing.”

Nicola Barclay has since taken to Twitter to clarify that Homes for Scotland represents all developers and “supports an all tenure approach to give everyone the chance of a home”.