The construction firm is about to publish its first results since boss Jeff Fairburn left. It could be a good time to clean house
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 long-term 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.