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Tue February 19 2019

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Persimmon proves impervious to cack-handed leadership

15 Jan Despite boardroom upheaval and PR disasters, leading house-builder Persimmon continues to grow and grow.

Former chief executive Jeff Fairburn
Former chief executive Jeff Fairburn

In a trading update today, the Persimmon board said that its 2018 financial results – to be posted next month – would show 4% revenue growth to £3.74bn and pre-tax profits ahead of market expectations.

New housing revenues increased by 4% in 2018 to £3.55bn (2017: £3.42bn). Legal completion volumes increased by 3% to 16,449 (2017: 16,043), including private sales of 13,341 new homes (2017: 13,274).  The average selling price of £215,560 was 1% higher than in 2017.

Cash balances of £1,048m were held at 31st December 2018 (2017: £1,303m) after returning £732m of capital to shareholders in 2018 (2017: £417m).

In November Persimmon sack its chief executive Jeff Fairburn after a string of much-publicised public relations gaffes that saw him unable to defend his £75m bonus. [See our previous report here.] However, it has continued to retain Citigate Dewe Rogerson as its financial public relations consultant.

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In today’s trading update the board said: “As we look forward to the 2019 spring season Persimmon is in an excellent market position. Whilst the future performance of the UK economy is currently subject to increased levels of uncertainty the group is well positioned with its strong outlet network together with the availability of a range of attractive house types at affordable prices across the regions of the UK, supported by a high quality land bank and conservative financial structure.”

Persimmon now has 31 house building businesses across the UK, having opened seven new businesses over the last four years. The Group opened a new operating business based near Ipswich on 2nd January 2018 which has delivered 348 new homes so far.  On 2nd January 2019, it opened a new business at Harworth, near Doncaster.

The company is also continuing to develop its manufacturing capabilities. Brickworks, its new brick manufacturing plant in Harworth is now nearing optimal production levels. A roof tile manufacturing plant on the same site, Tileworks, is set to start deliveries in the second half of 2019.

While the media may not think much of Persimmon, financial analysts have no problems. Alasdair Ronald, senior investment manager at Brewin Dolphin Scotland, commented: “It’s another good set of figures from Persimmon, which has confirmed expectations of increased revenues – profits are also expected to be ahead of previous consensus. The company’s order book remains reasonably robust, 3% ahead of last year, and average selling prices have held up well; despite uncertainty in the UK economy. While margins are believed to be close to the top, they remain healthy – Persimmon is able to maintain them by increasing the use of materials produced by its subsidiaries and directly employing labour. The business continues to offer some of the highest returns in the sector and remains the blue chip option among housebuilders.”

MPU

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