Bloomberg News

Persimmon CEO Retires as Homebuilder Reports Revenues Growth

January 08, 2013

Persimmon Plc (PSN), the U.K.’s largest homebuilder by market value, said Chief Executive Officer Mike Farley will step down after 30 years at the company.

Farley, who has been CEO for seven years, will be replaced by Jeff Fairburn, the York, England-based company said in a statement today. Revenue in 2012 rose to 1.72 billion pounds ($2.77 billion) from 1.54 billion pounds in 2011, it said.

“I intend to continue with the strong discipline that we have got in place,” Fairburn, who has been with Persimmon for 23 years, said in an interview. “I will continue to see strategic land being promoted and brought through.”

Margins are expanding after the housing market’s collapse in 2008 forced homebuilders to slash costs to compensate for a slump in demand. At the same time, they exploited falling prices to snap up land cheaply. U.K. home values are little changed over the past 18 months as a lack of homes for sale supports prices while restricted mortgage lending and a weak economic recovery deter buyers.

Persimmon targets an underlying operating profit margin of 15 percent to 17 percent compared with a 13 percent margin in 2012. The company owned and controlled 68,000 plots of land approved for development at the end of the year compared with 63,335 a year earlier.

Persimmon’s cash balance was around 200 million pounds at the end of last year, compared with 41 million pounds a year earlier, according to the statement.

Cash Positive

“The big win for us is the cash position,” Farley, who turns 60 in June, said in a phone interview. “We are generating as much cash as anybody in the industry.”

The homebuilder expects sales to those buying their first home to increase as the U.K.’s spring selling period begins. The company said it will be allowed to use the government’s FirstBuy financial guarantee program for an additional 3,000 properties.

Though U.K. mortgage approvals rose to the highest in 10 months in November, Persimmon is unlikely to increase the number of homes it builds, according to Fairburn, who will replace Farley in April.

“Until such time where there is significantly better money in the system for mortgages, our volumes are going to be subdued unfortunately,” Fairburn said by telephone. “We just want to see a mortgage market that functions for the buyer.”

Home completions increased 6 percent to 9,903 and average prices gained 6 percent to 173,400 pounds from a year earlier, the company said in the statement.

The outlook for this year’s housing market is mixed, with Hometrack Ltd. expecting a 1 percent decline and the Royal Institution of Chartered Surveyors and Rightmove Plc (RMV) both seeing a 2 percent increase.

To contact the reporters on this story: Chris Spillane in London at cspillane3@bloomberg.net; Dalia Fahmy in Berlin at dfahmy1@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net


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