Persimmon CEO Fairburn to step down; Q3 forward sales up 9%

Housebuilder Persimmon said on Wednesday that chief executive Jeff Fairburn will step down at the end of the year following outrage over his £75m bonus, as it reported "positive" market conditions in the third quarter.

The company, which has appointed current group managing director David Jenkinson as interim CEO, said "the distraction around his remuneration from the 2012 long-term incentive plan scheme continues to have a negative impact on the reputation of the business" and Fairburn's ability to continue in his role.

Persimmon said in a separate statement that sales in the period since it reported half-year results on 21 August have been 3% ahead of last year's strong comparatives. The group said it is now fully sold up for the current year and has around £987m of forward sales reserves beyond 2018, up 9% on this time last year.

"Resilient consumer confidence and continued mortgage lender support have provided positive market conditions, with mortgage approvals for the third quarter ticking up from levels seen in the first two quarters of the year.

"Mortgage interest rates remain attractive and Persimmon continues to focus on providing new homes at affordable price points across the UK. Indeed, provision of housing to lower income families remains an important component of the group's sales mix, with over 2,000 new homes being delivered to our housing association partners in the financial year to date."

The company also said that in response to customer feedback, it is investing in the development of its own ultrafast, full fibre to the home broadband service for its new home customers which aims to be available on moving day. The new business, called Fibrenest, is already providing a broadband service to new customers on 15 sites with plans in place for further rollout.

At 0900 GMT, the shares were up 1.5% to 2,392p.

Russ Mould, investment director at AJ Bell, said a disastrous TV interview in which Fairburn uncomfortably failed to acknowledge the issue of his bonus may well have been the final straw for the housebuilder.

"His inability to handle a question from a reporter last month helped breathe new life into the story, when a stock answer would probably have batted the issue away.

"The slight irony to all this is that Fairburn leaves a business in pretty good shape, with today’s accompanying third quarter trading update suggesting the business is on track to hit full year forecasts.

"Any new appointment is likely to find his pay and incentives closely scrutinised and may face a less supportive backdrop than Fairburn enjoyed."

Canaccord Genuity noted that the shares have sold off recently and said the trading commentary reads generally reassuringly.

"We would not expect any radical shift to the group's strategy for the foreseeable future with the departure of Jeff Fairburn. The departure of the CEO should remove the distraction and allow the group to move on from its controversial LTIP programme. The group continues to be in good shape and the shares offer attractive dividend yield of circa 10%."

Meanwhile, Shore Capital said Persimmon is a strong business regionally and will not be adversely affected by the CEO change.

"We do not believe that the CEOs position has been any material drag on the stock valuation. A small bounce possible today but we would expect the shares to remain close to our fair value."