Persimmon made £1.1bn in profits in 2018, the housebuilder confirmed today, as it named a new chief executive.
Dave Jenkinson, the finance officer who has been acting chief executive since its former boss left under a cloud over his bonus last year, will take on the role permanently, Persimmon confirmed.
With a £75m bonus, Jeff Fairburn was the UK’s highest paid boss in 2017, and Persimmon asked him to leave after a car crash interview prompted widespread anger over his rumuneration.
Jenkinson, who by contrast will not get a bonus for 2019, said: “Persimmon is a great company with a bright future and I am honoured to have been asked to lead it.
“My priorities will be to maintain the strong operational and financial momentum of the business, to develop further our customer care operations and to bring a greater focus to our wider responsibilities as a leading UK house builder.
“We have a strong and committed team and I look forward to continuing to work with all my colleagues to deliver the high quality, attractively priced homes that the UK needs.”
Persimmon’s annual profit before tax grew 13 per cent to £1.09bn over the course of last year, compared to £966m in 2017.
Revenue rose four per cent to £3.74bn as legal completion volumes climbed 2.4 per cent to 16,449 homes, selling at an average of £215,563, up one per cent year on year.
Of those homes, Persimmon delivered 7,970 to customers using Help to Buy’s equity loan scheme.
Net cash dropped almost 20 per cent year on year to £1.05bn.
Basic earnings per share grew 11 per cent to 283.3p compared to 2017, while Persimmon declared a final dividend of 110p per share.
Why it’s interesting
Persimmon’s Help to Buy boost to its profits comes as shares slide, with investors scared that the property giant could lose its Help to Buy contract.
The housebuilder is the biggest per-unit user of the scheme, but housing minister James Brokenshire has reportedly pressed the firm on how it operates within a public funding scheme for new house buyers.
The Help to Buy scheme has faced criticism for poor quality workmanship and rising leasehold fees, making homes harder to sell.
While Help to Buy will continue to operate until 2023, reports suggest Persimmon could get pushed out of the scheme in a review of contract extensions from 2021.
However, under Jenkinson the housebuilder has enacted various measures aimed to boost customer satisfaction, and the firm has grown its construction volumes more than 75 per cent since 2012.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, called the results a “solid effort” in a sluggish market.
But she warned that with Persimmon's future in the Help to Buy scheme at risk, any change to low interest rates and record employment levels could hurt the housebuilder.
“With Brexit galloping into view, the housebuilders need to be on their guard, and they’d be forgiven for getting a bit complacent,” she added.
“For now though, all seems well, it’s hard not to applaud higher completions at a higher margin, as well as the work that’s gone into improving quality. It’s important to see the core business strengthening, as it should mean Persimmon will be held in good stead if Brexit, or Help to Buy conditions start to get a bit bumpy.”
Persimmon said it expects to deliver a similar number of new homes in 2019, with forward sales of £2.02bn.
What Persimmon said
Chief executive Dave Jenkinson said: “Our results for 2018 reflect our successful focus on offering attractively priced new homes primarily to the first time buyer and first time mover markets, where housing need is greatest.
“My focus is to build on this strong platform, maintaining our operational momentum, but also implementing a number of necessary new initiatives in customer care.
“A wide range of projects to improve customer satisfaction commenced in late 2018 and the initial results have been encouraging, giving us confidence in our ability to make progress in this important area. We continue to invest in our teams, systems, and our off-site manufacturing capabilities to support the group's further growth.”