Can Per­sim­mon start build­ing a bet­ter rep­u­ta­tion?

The con­struc­tion firm is about to pub­lish its first re­sults since £75m boss Jeff Fair­burn left. It’s time to clean house, writes Si­mon Good­ley

The Observer - - Business & Cash -

When the race­horse Per­sim­mon re­tired in 1897, the fu­ture Ed­ward VII’s bril­liant thor­ough­bred was packed off to San­dring­ham with his stud fee set at 300 guineas a pop.

That’s about £40,000 a try in to­day’s money, which in­stinc­tively feels like de­cent work if you can get it. That is, of course, un­til your thoughts turn to the nag’s cor­po­rate name­sake – the house­builder Per­sim­mon – where City wags reckon for­mer chief ex­ec­u­tive Jeff Fair­burn trousered £75m for per­form­ing a sim­i­lar job on the firm’s rep­u­ta­tion.

Fair­burn, of course, spent much of 2018 trot­ting out op­ti­mistic de­fences for his grotesque pay packet, with one of his bet­ter cracks be­ing an in­sis­tence that the fig­ure was “in line with ac­cepted prac­tice”.

That was quite an am­bi­tious line to de­liver with a straight face – and be­came more so when chair­man Ni­cholas Wrigley, plus the chair of Per­sim­mon’s re­mu­ner­a­tion com­mit­tee, Jonathan Davie, both quit over the scan­dal. Fair­burn was then left to limp on, coura­geously do­ing a run­ner of his own from a BBC Look North in­ter­viewer, which in turn seemed to has­ten the ex­ec­u­tive’s own re­tire­ment.

Which brings us to this week and the Per­sim­mon trad­ing state­ment – the first since the for­mer chief exec was forced out in Novem­ber and the first in more than a year that won’t be about Fair­burn’s pack­age.

As an­a­lysts at the on­line stock­bro­kers The Share Cen­tre put it: “The me­dia fo­cus will now shift to the group’s per­for­mance rather than its pre­vi­ous CEO’s pay packet. The shares have been lifted at the start of 2019 as peer Tay­lor Wim­pey re­ported a rel­a­tively pos­i­tive up­date for the year end­ing 2018 while the out­look for 2019 re­mained re­silient de­spite the po­lit­i­cal and macroe­co­nomic back­drop. In­vestors will ... be on the look­out for com­ments on the po­ten­tial im­pact of Brexit and whether the costs of labour and ma­te­ri­als are head­ing higher.”

Cer­tainly Per­sim­mon will be hop­ing that this could be the mo­ment when the whiff of Fair­burn is fi­nally scrubbed from the com­pany sta­bles, and his­tory sug­gests that there are worse points in the cal­en­dar to at­tempt that trick.

This week’s state­ment hap­pens to be sched­uled at a tra­di­tion­ally pro­pi­tious time of year for house­builders – with the first quar­ter of­ten prov­ing to be a pe­riod when the sec­tor is seen as be­ing in de­cent fet­tle.

Shares in house­builders tend to rise be­tween Jan­uary and March, when the news flow is skewed to­wards the all-im­por­tant spring sell­ing sea­son. That, in turn, fo­cuses in­vestors’ at­ten­tion, and the com­pa­nies seem to be able to find buy­ers for both houses and shares.

For four out of the past five years, shares in Per­sim­mon have risen be­tween Jan­uary and March. Ad­mit­tedly, last year was the ex­cep­tion, and maybe right now is not the time to be con­fi­dently ap­ply­ing longterm trends.

Still, if you have to start re­build­ing Per­sim­mon’s pub­lic im­age in the mid­dle of a na­tional mael­strom, then you might as well do it in Jan­uary, par­tic­u­larly as the Brexit down­side is known and partly priced in.

A note look­ing at the sec­tor’s prospects for 2019, pub­lished by fi­nan­cial ser­vices firm Canac­cord Ge­nu­ity in De­cem­ber, stated: “The sec­tor ap­pears to be broadly pric­ing in a 5% fall in house prices and a 10% fall in vol­umes, and if the ac­tual out­come for 2019 is at or close to cur­rent con­sen­sus ex­pec­ta­tions, we would ex­pect a sharp value rally.”

Trans­lat­ing from the jar­gon into English, that means: if Brexit isn’t that bad, Per­sim­mon might give some­body a big pay­day. Again.

Bloomberg

Builders at work on a Per­sim­mon de­vel­op­ment in Cran­field, Bed­ford­shire, in 2016.

For­mer chief ex­ec­u­tive Jeff Fair­burn’s mas­sive pay deal caused wide­spread con­tro­versy.

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