MD steps up to be the new chief at Persimmon

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HOUSEBUILDER Persimmon promoted its managing director Jeff Fairburn to chief executive and said margins and sales continued climbing in 2012.

The York-based group revealed chief executive Mike Farley is retiring at its annual shareholder meeting in April, and will be succeeded by Mr Fairburn, who joined Persimmon 23 years ago.

Revenues for the year totalled £1.72bn, a 12 per cent increase from £1.54bn in 2011. The group will update on 2012 profits in February.

The builder said it sees a gradually improving housing market this year, aided by a state-backed lending scheme, but does not expect any major upturn.

Persimmon continued its tradition of appointing from within by promoting Mr Fairburn, who has been North division chief executive for six years. Mr Farley is standing down after seven years at the helm. He joined the group in 1983.

“It’s been planned for a while; I’m very pleased that it’s come to fruition,” said Mr Fairburn, 46. “I’ve been getting more involved in the business over the last year, being group MD.

“The key thing for me is the business is in great shape, continuing on that track and making sure we deliver our plan. We’ve set out quite clearly what we intend to do over the course of the next 10 years.”

Last February the builder revealed ambitious plans to pay shareholders £1.9bn over the next decade, without piling on debt.

It intends to make the first of its scheduled dividend payments in June, which at 75p per share will cost it £225m. Persimmon ended 2012 with net cash of about £200m, up from £41m in 2011.

Mr Farley, 59, plans to go on holiday and take a few months off before weighing up a possible next move.

“He’s been with Persimmon for almost 30 years and has had a great career and leaves the business in great shape,” said Mr Fairburn.

Chairman Nicholas Wrigley added: “Mike Farley has been an outstanding chief executive and has made an enormous contribution to the development of Persimmon over many years. The announcement in February 2012 of our new long-term strategy and £1.9bn capital return plan over nine-and-a-half years is a testament to his strong leadership, strategic clarity and long-term planning.

“He will leave Persimmon with our gratitude and best wishes for his retirement.”

Persimmon, in line with its peers, has been building more family homes and fewer apartments, plus building on land acquired cheaply through the downturn, to lift its margins. Average selling prices increased six per cent year-on-year to £173,400.

It sold 9,903 homes in 2012, up six per cent on the 9,360 completions in 2011.

Mr Fairburn said there are “encouraging signs” in the housing market, aided by the Bank of England’s Funding for Lending Scheme, which offers banks and building societies discounted credit in return for boosting lending.

“The Bank of England credit conditions survey indicated that lenders are planning on putting more money into the market,” he said.

“Funding For Lending is showing some signs of improvement. There are early indications of various mortgage rates improving, but on the other hand, the criteria for assessing people for mortgages is tightening a little.

“We expect to see some modest growth. We do not see any great increase in volume.”

He said internet traffic at its website increased 25 per cent year-on-year in the final quarter, and this is starting to turn into site visitors. Forward sales totalled £645m at the end of December.

Margins for the year rose to 13 per cent from 10 per cent in 2011. Persimmon said its second half margin was 13.5 per cent.

The group said opening new sites at attractive returns, plus tight cost control, should help strengthen margins further. It has a medium-term target of 15 to 17 per cent.

Liberum Capital analyst Charlie Campbell said Mr Farley’s retirement was “surprising, although successor (Jeff Fairburn) is internal and liked by the market”.

Shares in Persimmon closed down 1p at 836p.

Brokerage Panmure Gordon said Persimmon beat its expectations on units, selling prices, net margins and debt.

It hiked its target price from 801p to 815p.

Nigel Greenaway, South division chief executive, joins the board as an executive director. Marion Sears has also been appointed non-executive director, replacing Neil Davidson who retires at the AGM.

Dave Jenkinson becomes North division chief executive.