Persimmon PLC (LON:PSN) chief executive David Jenkinson has handed in his notice as the housebuilder reported flat profits and said it was not going to step up its capital return plan.
Having already posted a year-end update showing a 4% fall in housing volumes and flat average selling prices, the FTSE 100 group said revenues came out 2.4% lower at £3.65bn and profit before tax down 5% to £1.04bn.
Persimmon has been working hard in the past year at rebuilding its reputation after several years where its houses developed a reputation for poor build quality and punitive leasehold terms and its board of directors a reputation for excessive pay and bonuses.
So far in 2020, the group has built up a current forward sales book of just under £2bn and average private sales rate in the first eight weeks of the new year were roughly 7% higher than the prior year at 0.88.
With a cash balance of £844mln at the end of December, the promised total capital returns of £2.35 per share in 2020 will be extended at the same level in 2021.
The board said it was “mindful of the increased uncertainties regarding the outlook for the UK economy” and so it believes it is “appropriate” for the group should keep hold of a cash balance of circa £700mln.
Jenkinson, who was promoted from managing director when previous boss Jeff Fairburn left the company after an outcry over his £75mln salary, will remain as CEO of Persimmon until a new successor is appointed.
Chairman Roger Devlin said Jenkinson had “the full support of the board and will continue to do so until he leaves”, hailing his role in the development of “a new Persimmon” with a “resetting” of the business culture and the introduction of new customer care and quality initiatives.
Added attention on weaknesses
Persimmon PLC (LON:PSN) unexpected news about the departure of its boss turned attention to potential weaknesses in the builder’s annual results.
The FTSE 100 group said chief executive David Jenkinson was going to leave after 23 years at the company, including just one year as CEO.
Analysts, including at UBS and broker Liberum, said that the news was unexpected.
While he remains with the business until a successor is identified, the market seemed unsettled by the news.
With Jenkinson having only been promoted from managing direct last year, the UBS analysts were of a similar sentiment: “We think a further CEO change creates unexpected level of uncertainty.”
They added: “We believe investors might watch carefully if Persimmon's industry leading margins could eventually revert towards the sector average.”
It was also noted that housing completion volume guidance for the coming year was also “soft”.
Liberum noted that despite the £844mln of cash on the balance sheet, “there is no incremental capital return” over the stated £2.35 per share in 2020 and 2021.
On the plus side, Liberum's analysts said that Persimmon's build quality issues, which had apparetnly threatened its place on the government's Help to Buy Scheme, have now been "largely resolved" and the year had seemed to have started well.
"The shares trade at 3.1x Dec20E price to book, a deserved premium to the sector given its industry leading returns and yielding 8%, which is especially attractive given the strong balance sheet," the analysts said in a note to clients.
Shares in Vistry fell 6% to 2,883p by later afternoon on Thursday.