Building bosses set for £785m bonanza
BOOMING sales of new-build homes pushed Persimmon shares to record highs last night – setting the scene for a £785m bonanza for bosses.
The developer revealed profits jumped 30pc to £457.4m in the first half of the year – sending shares up 45p to an all-time high of 2601p.
But the surge in the share price reignited concerns about the company’s long-term incentive pay scheme that looks set to hand 150 managers a £785m windfall – with chief executive Jeff Fairburn in line for £125m.
Rival Berkeley also came under fire for handing executives £92m in bonuses through a long-term incentive pay scheme.
Berkeley founder and executive chairman Tony Pidgley earned £29.2m – taking his pay over the last three years to £74m.
The looming Persimmon pay deal – which looks set to be one of the biggest in UK corporate history – has sparked fury among campaigners and MPs who claim the company is benefiting from rip-off leasehold homes that leave homeowners with costly ground rents. One in six of the houses built and sold by Persimmon has a lease – meaning the buyers do not own the property outright and have to pay an annual fee to the freeholder.
The sale of leasehold homes – and the introduction of government-backed mortgage schemes such as Help to Buy – helped the company report a 12pc rise in halfyear revenues to £1.7bn yesterday. It completed the sale of 7,794 new homes, an increase of 8pc, at an average selling price of £213,262. Under a package agreed in 2012, executives are set to be handed 30.2m shares if they hit targets, with Fairburn getting 4.8m.
The 51-year-old made no apology for the potential size of his bonus, adding: ‘The business is in great shape. It has given shareholders excellent value.’ But Cliff Weight, director of shareholder advice group ShareSoc, warned the lavish awards were ‘an example of what is wrong with British business’.
He said: ‘Clearly this is part of the capitalist system and if you want people to operate as entrepreneurs then you have to accept they will sometimes get large rewards. But it is unnecessary to be handing so much equity to executives – the amount should be at least half as much.
‘It should be up to the institutional investors in Persimmon to make the situation better. They need to stand up to this and should apologise.’
Stefan Stern, of the High Pay Centre, claimed Fairburn’s pay award was ‘difficult to reconcile with a housing market that is failing the country’.
He said: ‘Something has got to be wrong when people are struggling to afford homes but you are seeing bonuses like this.’
Persimmon yesterday put its bullish sales down to continued high demand for new build homes and support from the Help to Buy scheme.