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Monday 20 August 2018

Persimmon profits leap 25% after ‘outstanding’ performance

The housebuilder revealed a 25% jump in pre-tax profits to £966.1 million in 2017, boosted by booming demand for new builds.

Persimmon has hailed
Persimmon has hailed "outstanding" results after profits jumped 25% for 2017.

By Holly Williams, Press Association Deputy City Editor

Housebuilding giant Persimmon has revealed that annual profits jumped by a quarter and said it was “encouraged” by the start to 2018 despite Brexit uncertainties.

Shares in the group – which also owns the Charles Church and Westbury Partnerships brands – raced more than 10% ahead after it revealed a bumper £966.1 million bottom-line profits haul for last year, boosted by booming demand for new builds.

On an underlying basis, pre-tax profits were also up 25%, at £977.1 million.

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

But the results come after a furore over executive pay packets at the group, with bosses last week agreeing to hand back around £50 million in bonuses.

It slashed chief executive Jeff Fairburn’s near-£100 million award by £25 million 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.

The pay controversy led to chairman Mr Wrigley’s and remuneration committee chairman Jonathan Davie’s resignation late last year.

Persimmon’s profits leap comes after it reported last month that revenues for the full year were up 9% to £3.42 billion, after completions of new homes rose 6% to 16,043.

The group’s average selling price increased by 3% to £213,300.

As with fellow housebuilders, Persimmon has been helped in recent years by surging demand thanks to the Help to Buy initiative, which allows first-time buyers to purchase new-build properties with deposits of just 5%.

But Persimmon has previously insisted its much-criticised executive shares bonus scheme has also helped drive the 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.”

Persimmon also gave its shares a fillip after announcing it will bump up its dividend payouts following the profits cheer, and pledged to pay out an additional 125p a share for the next three years, boosting the value of its long-term dividend programme to £13 a share by 2021.

Russ Mould, investment director at AJ Bell, said: “Questions will be asked about the structure of 2012’s long-term incentive plan, the riches it bestowed upon management and how shareholders let it through on the nod, but Persimmon has gone a long way to calming at least one unhappy party by showering investors in the stock with a cash windfall of their own.”

Press Association

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