Blackfriar: Enviable legacy of John White, but there is a way to go

Mr White, who stood down from his role as chairman at the York-based group last week, leaves behind an enviable legacy.

He started out as an apprentice bricklayer on building sites, but rapidly worked his way up through the industry. During 13 years as chief executive of Persimmon he grew the group into the UK’s biggest housebuilder with a string of hefty acquisitions, including Ideal Homes in 1996, Beazer Group in 2001 and Westbury Plc in 2006.

On his watch, the group also became the first housebuilder to join the FTSE 100.

But his assertion that steering Persimmon through the latest recession was his biggest achievement indicates just how challenging the recent market has been – and continues to be.

“The biggest achievement by far has been in the last three years, when we’ve had some pretty awful times,” said Mr White.

“Like the rest of the industry we were exposed with high debt and yet we’ve driven that down to virtually nil, without recourse to shareholders.

“For the first time in my career we’ve been talking about reducing the size of the business. That’s been quite a sad time. We’ve had to battle through it but we’ve come through it better than most.”

Persimmon was forced to make thousands of job cuts and shut offices during the downturn, but remains the only major UK housebuilder not to raise cash through a rights issue during the recession.

The financial strength the group has demonstrated is testament to Mr White’s stewardship and the stable succession plan which has characterised the group. His replacement at the helm of the builder was Mike Farley, himself an internal recruit after joining the group in 1983.

But after steering Persimmon through the worst of it, Mr White leaves an industry which is still some way off being healthy.

The decimation of the past three years has left housebuilding short of many tradesmen, and the sector will struggle to cope if a construction upturn arrives rapidly.

But that’s the least of the industry’s problems. New figures from the National House-Building Council (NHBC) show how far the sector has to go.

While the NHBC stats show new home registrations by housebuilders reached their highest monthly total for more than three years in March with 13,307 new homes, properties for the Olympic Athletes’ Village accounted for 2,800 of these. The sales rise was a 21 per cent increase year-on-year.

But the quarterly figures covering January to March show a far less buoyant trend in the North. New home registrations in Yorkshire plunged 37 per cent to 1,192, compared with a year ago.

Persimmon last week reported stable pricing and increasing sales – an enviable position in this market. But as one analyst put it, the group is “defying gravity” in regional markets. The picture in Yorkshire was replicated in the Midlands, the North East and the North West, which according to the NHBC numbers all reported hefty quarterly falls in new homes.

Persimmon may have weathered the worst of the construction downturn, but Blackfriar believes it’s outperforming an industry that’s still in intensive care.

LIKE him or loathe him, you’ve got to admire Peter Gyllenhammar’s canny investment strategy.

In years of investing on the Alternative Investment Market, the Swedish activist shareholder may have made enemies, but he has also made a considerable fortune.

Mr Gyllenhammar, who has stakes in Yorkshire’s Abbeycrest and Leeds Group, this week described his strategy of picking shares trading at a considerable discount to net asset value.

“My favourite target is the company that could potentially become the last blacksmith in town – such as the last provider of high-quality woollen yarn,” he said.

“They are typically asset-based mature manufacturing companies and these are mostly based in the North. They have suffered from repeated downturns in their business. That’s when the institutions drop the stock.

“That has led to the share price coming down to the level that they come up on my radar.”

In other words, he sees value where few others do.

Long-term investors in Bradford-based fibres group Chapelthorpe will no doubt take issue with his insistence that the 25p per share, £5.1m offer he made for the £88m turnover group was fair.

They were forced to sell up last year despite the group’s independent directors admitting it undervalued Chapelthorpe, and an analyst describing it as “miserly”.

“What can I do other than make the offer?” said Mr Gyllenhammar. “People started to complain. Should I then offer a higher price? I think I have behaved very prudently.

“I’m a strong believer in the free market and democracy as long as people behave in an appropriate and prudent manner.”

While Mr Gyllenhammar’s aggressive investment strategy may be unpalatable to some, it’s undeniably effective.