Persimmon, the UK’s most valuable housebuilder, has long been a hit with shareholders but anathema to politicians, journalists and rivals – who have portrayed the York-based group as synonymous with executive excess, shoddy workmanship and corporate arrogance.
But Covid looks like it has intensified the partly new management’s recent efforts to put its house in order metaphorically and, in the case of its annual output of 16,000-plus homes, literally.
Unlike many of its rivals, it has not tapped the government’s furlough scheme and any of its workforce unable to work have been paid in full; the group has not accessed the Covid Corporate Financing Facility; it has cancelled or postponed planned dividend payments (which underpinned its contentious remuneration policy); and, to labour the point, “continues to pay all taxes promptly”.
It is, of course, not the only builder keen to be seen to do the right thing; Barratt, for instance, has returned all furlough money, but Persimmon did not apply in the first place and, frankly, has the most goodwill to make up.
Most notoriously for many, former chief executive Jeff Fairburn was almost universally condemned for his long-term incentive plan, reported to have been worth more than £100m and also granted to around 140 executives valued on the level of dividends paid out and, ultimately, the eventual share price.
The sticking point for critics was that the awards were not capped at a particular share price level: when the scheme was approved, they were £6.57, and as the furore dragged on in 2017 and 2018, they approached £30 – driven by the group’s sector-leading margins and cashflow.
On December 2017, Persimmon chairman Nicholas Wrigley and Jonathan Davie, chair of the remuneration committee, both resigned, conceding that the plan “could have included a cap”.
But Fairburn stayed on, although two months later, he accepted, with two other directors, an effective 30% reduction in the total number of shares they could receive.
The final straw was walking out of a BBC TV interview in October of that year, muttering aggressively at the journalist off camera. The following month, he stepped down “at the request of the company”. He was replaced by group MD Dave Jenkinson, one of the other two recipients of the top awards.
By then, Persimmon had become the go-to company for housebuilder-bashing politicians and journalists. It was far from the only developer to be accused of shoddy workmanship at the end of the last decade, but it was the one that Channel 4’s Dispatches focused on in its July 2019 exposé ‘Britain’s New Build Scandal’. Earlier that year, Persimmon was suspended from the government’s Prompt Payment Code for failing to pay suppliers on time, only being reinstated some 10 months later.
Public relations, it’s fair to say, never appeared to be high on the agenda for the UK’s most profitable housebuilder. As I observed in 2018, its approach “seems grounded in the Millwall FC school of PR: ‘no one likes us [except our hugely happy shareholders], we don’t care’”.
But the winds of change were blowing. New chairman Roger Devlin ordered an independent review into quality, which led to a customer care plan and slowing down of its build rate to tackle much-reported defects. Most remarkably, a new CEO is on the way after Jenkinson’s unexpectedly short stay at the top.
Persimmon chief executives have all been cut from much the same cloth: housebuilders all, man-and-boy, and have always been appointed from within. The average tenure in the group of the last five bosses since it was founded in 1972 has been around 30 years. The CEO-designate Dean Finch is a different fish, possibly never picking up a brick in his 30-year international career in the transportation sector. Expect a more corporatist approach and tone and lots of ESG box-ticking.
As for the much-maligned Fairburn, he has used some of his award to buy a 50% stake in private Yorkshire housebuilder Berkeley DeVeer – and industry gossip has it that others from Persimmon might soon join him there.
Alastair Stewart is an equities analyst and consultant