Persimmon’s new boss today came out fighting as the developer faces a battle to keep its lucrative right to sell homes under the Help to Buy scheme.
The FTSE 100 housebuilder has been fiercely criticised for making huge payouts to executives and faced criticism over shoddy workmanship on poor-quality homes.
It could now lose its contract for the scheme, which was intended to help first-time buyers get on the property ladder but has boosted the firm’s profits in recent years.
New Persimmon chief executive Dave Jenkinson (left), who took over from Jeff Fairburn (right) after he was ousted over a huge bonus, today pledged to improve the firm under his leadership
However, new chief executive Dave Jenkinson today pledged to improve the business under his leadership and bring in ‘new initiatives in customer care’.
The 51-year-old added: ‘A wide range of projects to improve customer satisfaction commenced in late 2018 and the initial results have been encouraging.’
There are concerns over its use of Help to Buy to acquire houses with leases, the treatment of customers and its leadership in the wake of the backlash over pay.
The York-based company handed its former chief executive Jeff Fairburn a £75million bonus last year and saw its 2018 pre-tax profits rise 13 per cent to £1.1billion.
Builders construct homes on a Persimmon development in Coventry in February 2017
Mr Fairburn’s bonus was particularly controversial because Persimmon is seen to have benefited massively from Help to Buy, which is a taxpayer-backed scheme.
How Persimmon was rocked by ‘obscene’ bonus of £131million
Former boss Jeff Fairburn was ousted from Persimmon last November over his ‘obscene’ bonus that at one stage was worth £131million.
The windfall, paid in Persimmon shares, was cut to around £75million before Mr Fairburn, 52, left after a backlash from investors.
Managing director Dave Jenkinson, 51, has been interim chief executive and has now landed the job permanently.
However, he also benefited from the bonus scheme that cost Fairburn his job, scooping £40million.
Persimmon relies on Help to Buy for around half its business and today became the first UK housebuilder to post annual profits above £1billion.
The company also reported annual revenue growth of 4 per cent for last year, reaching £3.74billion.
Legal completions in 2019 are expected to be flat on the previous year at around £2.02billion.
The rise comes after it built 16,449 new homes last year, a rise of 406 compared to 2017. It sold them for an average price of £215,563 – up 1 per cent on 2017.
Of these properties, nearly half, or 7,970, were sold to people using the Government’s Help to Buy scheme – some 288 more compared to 2017.
Market analysts said any move to stop Persimmon using Help to Buy would be ‘a damaging blow for the company’.
Critics of Help to Buy, which is expected to end in 2023, point to it inflating house prices as well as boosting profit margins and executive pay at housebuilders.
Mr Jenkinson will stay on in the chief role permanently after previous boss Mr Fairburn was forced out last November following the outcry over his bonus.
The housebuilder could now lose the Help to Buy contract as housing secretary James Brokenshire prepares a review of the first-time buyers’ scheme.
A source close to the minister said: ‘James has become increasingly concerned by the behaviour of Persimmon in the last 12 months.
‘Leasehold, build quality, their leadership seemingly not getting they’re accountable to their customers, are all points that have been raised by the Secretary of State privately.’
A construction worker lays bricks at a Persimmon site in Cranfield, Bedfordshire, in 2016
Help to Buy allows buyers to put down a 5 per cent deposit on a newly-built home and get a government equity loan for up to 20 per cent, or 40 per cent in London, of the purchase price.
What is Help to Buy?
Under the Help to Buy scheme, the Government gives borrowers a loan of up to 20 per cent of the value of a new-build home or 40 per cent in London.
The buyer can then get a mortgage with just a 5 per cent deposit, and the loans are interest free for five years.
After five years, homebuyers must pay an interest fee of 1.75 per cent of the amount of the Help to Buy loan at the time they bought the property.
This rises each year rises each year after that by the rate of inflation (the Retail Prices Index measurement, or RPI), plus 1 per cent.
For example, if a buyer bought a home for £200,000, they would put up a £10,000 deposit (5%), the Government would give a £40,000 loan (20%), and they would need a £150,000 mortgage from a commercial lender (75%).
An extension of contracts given to housebuilders for the scheme from April 2021 will soon be reviewed by Mr Brokenshire.
Russ Mould, at broker AJ Bell, said any move to stop Persimmon using Help to Buy would be ‘a damaging blow for the company’.
Joshua Mahony, senior market analyst at IG, said: ‘It seems unlikely we will see Persimmon excluded from any future programme, with many of the issues broached by the Government being historical rather than current-day practises.’
A source close to Persimmon said there was ‘a real determination to change’ among the housebuilder’s new management team.
A Persimmon spokesman said: ‘Our performance over recent years reflects the group’s success in growing its construction volumes to meet UK housing need, particularly by offering attractively priced new homes to first- time buyers.
‘Since 2012 we have increased our output by 75 per cent and invested £3.8billion in new land.
‘In late 2018 we announced a range of new customer service initiatives and we are confident that these will improve our performance once they have had time to take effect.
‘We are also making a significant investment in training to address the shortage of skills in the industry.’
A housing ministry spokesman said: ‘This government wants to see more good quality homes that people are proud to buy and proud to live in.
‘We expect all developers to deliver good quality housing, to deliver it on time, and to treat purchasers of new-build homes fairly.’
My shoes went mouldy at back of the wardrobe
Primary school teacher Hannah Perch said her ordeal with a Persimmon-built flat ruined the experience of buying her first home.
When she moved in seven years ago, she held a party to celebrate with her family.
But now just thinking about the flat makes her upset.
Her property, like others in Philmont Court, Coventry, was plagued by mould.
Miss Perch, 27, said: ‘It’s been absolutely awful. I am never going to buy a new-build property again. The idea of the Persimmon executives getting paid these bonuses makes me livid.
‘While they are living in their nice homes, ours is practically falling down.’
Hannah’s mother, Linda, added: ‘Hannah kept saying to me, “Mum, my shoes are going mouldy in the back of the wardrobe.” I said she should open her windows more and she said, “I am, I am.”
‘They kept blaming her but it was building issues. And at the same time all these people at Persimmon making all this money. It is disgusting.’
£40m boss also runs pub called… Shambles!
By David Wilkes
When Persimmon’s new boss Dave Jenkinson spent nearly £800,000 on a pub near his hometown last year, observers were quick to point out how apt its name was: Shambles.
After all, the firm had already faced criticism over shoddy workmanship. And the word spread just as Mr Jenkinson was appointed Persimmon’s interim chief executive after former boss Jeff Fairburn was ousted over his ‘obscene’ bonus which was at one stage worth £131million.
The windfall, paid in shares, was cut to £75million before Mr Fairburn, 52, left after a backlash from investors. Mr Jenkinson, yesterday named its permanent chief executive, was handed shares worth £40million in the same scheme. The pub was said to be the first major personal purchase by any of the Persimmon bosses whose huge bonuses critics say have been subsidised by the taxpayer-funded Help to Buy mortgage scheme.
It gave a rare glimpse into the lavish world inhabited by Mr Jenkinson, 51, a gruff northerner who appears not to fit the usual image of the super-slick, PR-savvy FTSE 100 executive.
Doesn’t fit usual big-wig image
The pub, in the market town of Morpeth, Northumberland, was bought for £663,000 plus VAT of £119,340, without a lender, in March last year by Tonia Holdings Limited.
Mr Jenkinson is the sole director of Tonia Holdings, a real estate company, according to Companies House. Tonia is the middle name of one of his daughters.
Signs in the pub’s windows say it is to be renamed The Townhouse and will re-open soon following refurbishments. Mr Jenkinson, the Northumberland-born son of an engineer, knows the area well.
Since the early 1990s, he has owned a property in the village of Tranwell, an exclusive enclave near Morpeth which is regarded as something of a ‘millionaires’ row’. Wealthy neighbours have included the former Olympic athlete Steve Cram, and several have bought plots of land to build Grand Designs-style homes.
Mr Jenkinson lives there with his long-term partner and their three children, two daughters and a son aged between 14 and 23.
Little is known about his interests outside of work apart from a passion for rugby union, but he is clearly proud of his north-eastern heritage – one of his children is called Tyne.
Having first joined Persimmon in 1997, Mr Jenkinson rose through the ranks to become managing director in 2016, and now chief executive.
When grilled by MPs about why UK housebuilding targets have not been met, he has argued protections on the Green Belt should be rolled back.