HOUSEBUILDER Persimmon, under fire over chief executive Jeff Fairburn’s bonus, reported a five per cent in first-half revenue, attributing growth to resilient consumer confidence and attractive mortgage products.
Persimmon, which is currently focused on building more affordable family homes, said that total revenues for the six months to June 30, 2018 were £1.84 million compared to the same period last year. Housing revenues were £1.74 billion, 5% higher than the previous year (£1.66bn) with new housing legal completion volumes increasing by 278 homes, or 3.6%, to 8,072 homes.
The York-based company, Britain’s second-biggest housebuilder, said that the average selling price of its homes increased by 1.2% to £215,800. “Consumer confidence remains resilient in our markets and attractive mortgage products provide compelling support to purchasers of new homes,” said Persimmon. “The group has a strong platform to achieve further growth in the second half.”
Persimmon, which builds about 16,000 homes each year across Scotland, England and Wales, bought 45 new parcels of land for 11,000 new homes during the first half of the year. Total land spend in the period was £343m, down from £369m. The average selling price of the new homes sold into the private market was 2% ahead at £236,700, while new homes sold to housing association partners had an average selling price of £117,600.
The company said that it expected continued improvement in underlying housing operating margin in the first half of 2018, building on the performance of the group in the second half of last year. “Despite inflationary cost pressures, disciplined cost control and continued efficiency savings have supported this margin progression,” Persimmon said.
However, the furore over the chief executive’s salary and bonus has rumbled on. Persimmon has drawn sharp criticism from institutional investors and politicians for paying large bonuses while benefiting from the Government’s Help to Buy scheme. Mr Fairburn had been in line for a £110m payout – later reduced to £75m – and chairman Nicholas Wrigley was forced to stand down last year in the wake of the scandal.
Vince Cable, leader of the Liberal Democrats, described the scale of Mr Fairburn’s bonus as “obscene” and earlier this week Rachel Reeves MP, a former Shadow Secretary of State for Work and Pensions and chair of the Business, Energy and Industrial Strategy Committee at Westminster, tweeted the pay ratio of Mr Fairburn compared to his lowest-paid employee, excluding apprentices and trainees: 3,195:1.
Pay issues aside, Laith Khalaf, a senior analyst at Hargreaves Lansdown, believes that the housebuilding industry’s “terrific run” could be slowing down. “Persimmon is still selling more houses at higher prices, but business is not booming like it was last year,” he said. “Indeed, the share price has fallen by more than 10% in the last month as investors have lowered their expectations for the sector.
“The UK housebuilding industry has been on a terrific run, fuelled by low interest rates, rising property prices, and the Help to Buy scheme. But some of the wind is now being taken out of the housebuilders’ sails, as property price growth has slowed, and building costs have ticked up.
“Interest rates still remain attractive for housebuyers, and the Help to Buy scheme continues to provide critical support for transactions in the newbuild market. While the Government has committed to the scheme until 2021, share prices in the sector may come under pressure as we get nearer to that date, unless the deadline is extended.
“None of this adds up to a crisis for the housebuilders just yet, but the pickings may be slimmer from here on in.”
Mortgage lender Nationwide said British house prices rose at their slowest annual rate in five years in June and look set to remain subdued due to modest economic growth and squeezed household budgets.
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