And in addition to what "Hang..." said, I think the government would have to make the vote on directors remuneration binding instead of advisory. I know companies that do lose or even have a significant vote against a remuneration package acknowledge the fact and say they will take it into account; I don't ever remember reading a company actually DID change the package. I know some sort of fall-back proviso would have to be made in any legislation but at the moment even if we muster enough votes, the board of any company can effectively ignore it.
I'm puzzled by a lot of things surrounding this crazy bonus scheme that our directors, in their wisdom, voted in (although they are supposed to be working with shareholder interests at heart).
1) I know the Chairman and head of remuneration have resigned because of the sheer generosity of the scheme, but surely they must have known how these bonuses have been building up over the past few years. Couldnt they have acted sooner?
2) Why has Jeff Fairburn, & other beneficiaries, not also resigned in embarrassment at taking such a disproportionate reward for their efforts, or why hasnt he offered to take just a proportion of the bonus, even 25% would still be a nice little earner.
3) Why has the board of directors not determined that the negative press relating to these payments has caused a downturn in the sp. They could actually rectify the situation by persuading the recipients to forego at least some of the bonus payments in order to, in part at least, counteract the sp drop, so actually doing what they are paid for (& receive bonuses for) and work in the interests of the shareholders!
As a shareholder I fear a backlash from the government. Theres nothing they like better than punishing greedy directors, especially when its a vote-winning move. Anyhow, as a consequence and even though Im a very long term holder, I am planning to reduce my holding in PSN by at least 50% over then next few months.
Regarding the disenfranchising of private shareholders due to shares being held in nominee accounts, so making voting on remuneration difficult, I think that it makes little difference, since private shareholdings are such a small overall percentage of most companies total equity. Even if we were all to vote against a remuneration package it would still be voted through because of institutional holdings (pension funds, investment trusts, unit trusts etc), even though most of the underlying beneficiaries are also private investors. IMO there would need to be more radical change along the lines that the weighting of votes from these institutions would be reduced considerably ... dont see it happening of course!
The considerable negative publicity Jeff Fairburn has attracted also makes Persimmon a target of the politicians who may now choose to use Persimmon or the housebuilding sector generally as a bad example of corporate excess particularly given its connection to 'help to buy'. A positive has been turned into a negative.
Thanks for that info I shall make it a priority to email Stephen and make views known.
Perhaps more investors on this board and others should also follow suit to add a bit more impetus to a Shareholder Spring.
It is not exactly Maggie's view of shareholder democracy where a wider pool participate in the capitalist sytem as investors but it might just give us our voice back.
It seems we are not alone in wanting to exert a little more control over the companies we ultimately own as this recent article from Moneyweek argues.
I agree with the sentiments re Director's bonus scheme. The scheme was designed and agreed some years ago, maybe 5 maybe 8 I cant remember and was all linked to the large dividends/return of capital we have been receiving, the cost of the bonuses would have been charged against profits over the intervening 5/8 years. Having said that it was stupid not to have included a cap on the level of bonuses.
With regard to Nominee accounts and votes and receiving annual accounts etc. it does seem to me that we are effectively being disenfanchised.
The organisation to email is The Financial Reporting Council who are responsible for the Corporate Governance Code,the Stewardship Code and many other aspects of corporate reporting. Write to Stephen Haddrill Chief Exec whose email address is; [email protected]
Don't complain about this particular bonus but just how the nominee shareholding system disenfranchises private investors and means that comapny directors cannot be held to account.
You may think this will make no difference, but they get so few comments from real private investors, it will - believe me! Go on it's worth 5 minutes.
charlus "..obscene level of pay that has been granted to CEO and others"
I too was horrified by the huge size of bonuses. A large proportion of shares are owned by institutional investors. They should be more diligent about agreeing to over generous bonus schemes.
PI who own shares through a nominee account can exercise their voting rights by instructing their broker company how they wish to vote. I have done this on several occasions with my broker Charles Stanley Direct. All shares in ISA's I believe are held in nominee accounts.
There is a catch however as at the moment shareholders can vote against a remuneration package but the company is not bound by a vote even if shareholders do vote it down.
I have to say I am very surprised that there has been no comment or discussion on this Board about the obscene level of pay that has been granted to CEO and others.
Even the Chairman and head of the renumeration committee were sufficiently embarrassed by their own incompetance to resign from the Board.
£800m bonuses to be divied up amongst execs with a staggering £109m going to Fairburn alone.
THIS IS OUR MONEY FFS !!
Sadly, as most now have nominee accounts we seem to lose our right to exercise our vote at AGMs and veto outrageous bonus plans.
This is the unacceptable face of capitalism.
I am not a big fan of Government intervention but a simple rule change to allow shareholders with nominee account to retain their right to vote and make their voice heard as owners of the company would surely be a step in the right direction.
"2017 has been a strong year for the stockmarket, but not all investment strategies have done well. Given the bullish conditions, it's probably no surprise that "value" investing in the market's cheapest shares has not generally paid off. But good ..."
"This budget was always going to be especially tricky for the chancellor. Hitting fiscal targets amid wide divisions over Brexit, while also spending more on populist policies to distract voters from Conservative party infighting and dysfunctional ..."
Lots of potentially interesting things going on with house builders right now connected to the budget. These include stamp duty change for first time buyers, potential help to buy changes, changes to planning regulations (use of green belt), government initiatives for more affordable homes etc. Seems to me these could be either really positive for housebuilders or really negative. The sector has been pretty heavily whacked lately despite what I thought were some pretty positive trading statements. Confess I am not optimistic of whats likely to come out in the budget. Like to hear what other people think.
If the government does get rid of help to buy, it'll be for something better for the house buyer. Turkeys don't vote for Xmas.
Until the last 12 months, builders were continually whacked when reporting profit margins and returns on capital that most FTSE 100 companies could only dream of. It hasn't happened so much this year, although Bovis were deservedly punished for their performance.
Why? Because the market always wants them to not just exceed expectations, but to shoot the lights out with every update. For some reason, they (analysts) set the standards very high in this particular sector. Probably because many of them told their clients to steer clear and were made to look foolish for years.
I know lots of investors from these boards and elsewhere that have refused to get involved with the sector during this cycle.
They're quite happy to invest in other companies which are much, much harder to actually fully understand. RDSB, ULVR, RIO, HSBA just to name a few examples off the top of my head. All mid-high dividend, FTSE 100 companies, but hugely complex. They don't mind investing in those.
Housebuilders are relatively straightforward and simple. When there is demand, they up the number of houses they plan to build, when it falls off, they can easily adjust - that's why they sub-contract much of the building work.
This cycle, there has been very little M&A activity in a race to buy growth which saw the last cycle end in disaster as the financial crisis unwound. That still seems to cast a long shadow for many investors, but all they've done is fail to take advantage of the best UK growth story, (cyclical, granted) over the last 40 years. Bar none.
Where I think the builders have been particularly clever is in managing the change from exciting high growth to slower growth, high dividend paying boredom without actually slaughtering the stock price. That transition is usually very painful (for shareholders) and is what almost always happens in such a scenario, no matter the sector. PSN, especially, always plan on the assumption that there will be a housing sector crash at some future point and plan accordingly inc. no long term debt.
I hope I'm not speaking too soon. It could be that the market slaughters the stock price anyway, despite the underlying businesses being fundamentally better than sound. Look at what happened after the Brexit vote, for example (see chart).
That is the problem, I suppose. UK builders (except TW) are wholly exposed to the UK economy, whereas 70% of the FTSE 100 earnings come from abroad. There are only a few companies that are 100% exposed to the UK for their revenue, and the builders certainly fit in that category.
By the way, PSN increased forward sales forecasts AND the government keeps talking about reforming the planning scheme that makes developments such a longer-term proposition, so I think the markets have over-reacted to the 'flat sales' comment in just a single quarter. Overlooking the highest monthly house price rise news for several months that was released on the same day, I noted.
Keep an eye on the P/E is my advice.It has never really got out of hand in the sector this cycle, except perhaps with one or two London specialists. That's what has made them such an obvious buy.
FTSE P/E is currently 23, historic average is 15. Builders are UK-based though, so I would say anything over 20 is too high with all the uncertainty ahead. I'm sure qa Labour government would be hostile to builders making in excess of 20% return on our capital, for example.
sgd, "what has happened during the last 2 months to make you now decide to sell?"
Nothing to do with the company other than the price. I thought there was a good chance I may be able to re-buy before ex-div date thus taking the dividend twice, as it were.
Far more to do with personal accounting reasons, needing to generate cash at some point (I withdraw all my trading profits every year and re-start with the same amount that I have had invested for the last 15-20 years (plus a little bit for inflation).
I do wonder about the reduced number of immigrants coming into the country should the government ever manage to enforce the policy. That will see demand fall off somewhat as Britain returns to an ever ageing population with population static or slowly decreasing.
It may be that enough young, vigorous people who have started families here, or brought them with them, over the last dozen years do stay. Some will, obviously.
I live in Poland though, much of the year, and what I am seeing is more and more people either returning to Poland where the economy is booming, not slowing, or choosing to work in Germany, Italy, France, Belgium, Netherlands, Norway, Denmark just to name those places actually mentioned to me by people in the last few months.
I also see recruiters saying that they cannot fill job positions with employment levels high and little interest from EU persons to come to work here now. People from outside the EU similarly tend not to want to take a cut in wages or have the option to work in an ever growing Eurozone where wages are growing at a rate higher than inflation, despite the much higher unemployment rate.
If there is a slow down in demand numbers, and that comes together with an increasing tendency to rent being met by 'Build-to-rent' providers and the possibility of a sudden glut of student properties being converted to housing if P.M. May gets her way and slashes foreign student numbers, then house prices will slow quite sharply while the market adjusts.
If and when that happens, my first choice for re-buying house-builders is PSN, hopefully at the point the market over-reacts.
Meanwhile, I'm diversifying a little into Build-to-rent, social and affordable housing specialists and some specialist commercial properties. I'm slowly divesting myself of student accommodation specialists (builders and renters) and general housebuilders. Overall, I'm still heavily invested in UK property which ultimately has never let me down over the last 20 years or so.
Nice dividends in housebuilders, but I'm after a much bigger return than that and I can't see too much growth left here now at the recent highs. I could have timed my sale better, of course, but that is why we sell in tranches. We can't time the tops just like we can't time the bottoms.
I do NOT see a house sector crash coming, although each rise in interest rates will hit stock prices and I do think inflation is more stubborn than the B of E believes it is, so there may be more rises than they are anticipating, despite a failing economy. Not a good scenario.
I DO see a market correction sooner or later, of probably 20%-40%, if history is anything to go by. I want enough cash on hand to take advantage of that and now have over 20% of my portfolio in cash (being eaten away at over 3% p.a. by inflation).
I can't wait for the ii account changes when I can convert some of my cash into other currencies, frankly.
So, rambled on a bit, but you get the picture. Sorry for the late reply, I didn't see the quustion until this morning.
I still hold a small tranche of PSN, by the way, which is worth about as much as my whole position was when I finished building it in 2011.
I believe it was flat sales that caused today's sell off. Lot of profit taking going on I expect as SP may have got ahead of real valuation. IMO SP will recover over following months.
From News tab:
Flat sales at Persimmon weigh on housebuilders
By StockMarketWire | Wed, 8th November 2017 - 12:04
Bad news from housebuilder Persimmon (PSN) had a negative read across for the sector, helping to keep the FTSE weighed down at around its opening level of 7,509 by midday.
Persimmon said third quarter sales were flat year-on-year, causing the stock to fall 3.9% to £27.61.
Its peers Barratt Development (BDEV) and Taylor Wimpey (TW.) fell 2.3% and 2.2% to 636.5p and 196.5p, respectively.
almost 4% for saying the business was doing alright, trading in line with expectations.
Glad there was no bad news to report....
I see Barratt also got some stick today so maybe a general housebuilder thing.
Maybe rumours that this Govt. has come to its senses and is going to dump Help to Buy. (or help to stupidly inflate house prices out of reach using taxpayer subsidy, as I prefer to call it).
Earwig, your earlier post indicated a continuing hold so what has happened during the last 2 months to make you now decide to sell? Like you I think that PSN are a very well run company and have done very well for me. I am planning to continue to hold but would like to know whether I have missed something.
Sold half my remaining holding @2699p (holding priced @407p) yesterday. Including divs I figure that to be 780% profit over approx 6 years (several tranches bought and sold in 2010/11 to make up the final position).
I still believe PSN are best of breed, they do gain most from an extended help to buy scheme, they still have no debt and they still have a timetable to pay cash back to shareholders up to and including 2021.
They have consolidated their supply chain with their own brick maker and prefab factory, which protects them somewhat from inflation induced by a weak pound and bringing in supplies from the continent - and possible future tariffs also.
If the price falls back, as share prices tend to, more than the dividend next year (I estimate something like 160pps in total) then I may well re-buy some - but in my ISA this time!
I hope they stick to the day job. Takeovers rarely add value and they have about 7 or 8 years land bank, so no need to buy a land bank "cheaply". BTR is a pretty low ROI business, so I hope they steer clear of that too. Return cash to shareholders, or keep some cash for a rainy day, don't spend it badly. if cash is about 1/8th of market cap I think they should return some.... Or buy in shares, but it is hard to see that they are at a discount to justify that. SL
charlus, "we are in a strong position to take advantage of opportunities as they arise"
Yeah, I noticed that line too, and how much cash they have on hand. My bet is they make some kind of move toward the 'build-to-rent' market, to ease their reliance of difficult-to-get mortgages for future growth.
Another fine set of figures.
Intrigued by CEO comment that "we are in a strong position to take advantage of opportunities as they arise" Or something like that anyway.
Could an acquisition be on the cards?
Glad to see Help to Buy being addressed. The scheme coming to an end with nothing else put in place, despite the extension to 2021, was starting to loom on the horizon as a possible stumbling block.
Well done to Pref and any others who took the opportunity to buy in cheaply. I missed it myself during a hectic travelling schedule, though I still believe we're nearer the end of the cycle rather than starting the beginning of the next, so I would have only been purchasing for a trade.
With the financial crisis truncating the last cycle (and causing the majority of smaller builders to shut up shop and retire) and the Brexit vote causing a false bottom during this cycle, its very difficult to tell where we are.
I'll be surprised if history doesn't repeat itself and we end up with a period of falling house prices and people worrying about negative equity etc followed by a lull and then another period of rocket-fuelled growth. Or, perhaps we're seeing a change in the fundamental make-up of the market and the high levels of ownership in the UK.
We'll have to see. The rocket-fuelled growth may already be starting in the 'build to let' market, but who knows when the government is so determined, at least vocally, to get involved? So far, they still haven't managed to make any difference to the fundamental fact that there is still a short-fall of housing in the UK, especially affordable housing, of around 500,000 to 1 million homes.
It is that simple price, supply and demand curve that drives the share price growth ultimately.
As I was on holiday, I'm only just getting around to posting up the sale of some of my PSN holding back in July.
No particular reason for the sale, although I thought housebuilders may be nearing highs, due to Brexit uncertainties, real wages dropping, costs rising etc. More to the point, really, it enables me to carry on taking profits, always part of my modus operandi, as well as shifting cash into an ISA in the hope of avoiding CGT and dividend taxes in the future.
I sold a little more than 1/5th of my last remaining tranche in PSN, part of the position I built in UK housebuilders through 2010/11 in anticipation of another growth cycle to match those of previous cycles, in which I haven't been disappointed.
PSN, as I also anticipated, started paying dividends again first of the majors. My overall holding had an average of @407p after I averaged UP (something I very rarely do) with my last purchase. At @2380p, this most recent sale represented a profit of 585% over approx 6 years.
In that time I've also collected a total of 485p per share (or 120% if you like. Or you could say the above sale was the equivalent of @2865p for a return of over 700%.
The remaining 4/5ths of my last PSN tranche makes up approx 4% of my total trading portfolio (which is reset to the same amount at the start of each tax year), with 440pps dividend already timetabled through to July 2021, plus any interims they can squeeze on the way (nothing guaranteed, of course).
I've always considered PSN best of breed in the sector, which is why I'm still holding them after having sold the other holdings (in RDW and BDEV) some time ago.
I have traded in and out of many UK housing stocks also, including PSN, BDEV, BVS, TW, BKG, BOOT during the period, but successes are too numerous to mention individually.
I also hold specialist niche builders, usually as REITs, and two smaller companies, TEF and INL which have been more challenging as I bought into them only late in the cycle.
I have no worries about TEF, but INL was a play on social housing being boosted and that is looking less likely to happen and the share price has suffered as a consequence. They also had the misfortune to see a major contractor go under last summer, which delayed delivery of a significant number of units.
With the smaller builders, you have to expect occasional setbacks, but also opportunities, as trading updates aren't smooth in terms of delivery, so the market often prices them down and reduces guidance for the full year. Incorrectly. This creates opportunities, as seen with TEF this year (I predict).
The government has embarked on a review of the Help to Buy housing scheme, which could result in it being wound down or replaced before its scheduled end in April 2021.
The Department for Communities and Local Government (DCLG) has asked the London School of Economics (LSE) to conduct an independent evaluation as part of the review.
The LSE report will be delivered to the DCLG after it has heard the views of interested parties including the Home Builders Federation (HBF), housebuilders and housing charities. Property Week understands that the DCLG is not ruling out options, inc. scrapping the scheme entirely.
Issues under review are believed to include the introduction of a tapering system before the end of the scheme, under which assistance to homebuyers would be gradually reduced in the run-up to April 2021. Housebuilders have been lobbying for tapering to be introduced as an alternative to the cliff-edge proposal, which would see demand drop sharply at scheme end.
The government, which made no mention of Help to Buy in its 2017 election manifesto, is also understood to be considering more stringent criteria for applicants. This could include the scheme being restricted to first-time buyers; a reduction in the max. sale price; or a lowering of the max. household income. Tougher affordability hurdles could also be introduced.
The government may also implement closer independent monitoring of prices charged for Help to Buy properties to ensure they match those of equivalent non-Help to Buy homes.
New housing minister Alok Sharma has yet to declare a position on Help to Buy. We have committed £8.6bn for the scheme to 2021, ensuring it continues to support homebuyers and stimulate housing supply, he said.
We also recognise the need to create certainty for prospective homeowners and developers beyond 2021, so will work with the sector to consider the future of the scheme.
David OLeary, HBF policy director, said the scheme had played a key role in delivering new homes. The future of the scheme is a critical factor in the investment decisions being made by housebuilders up and down the country, he said. The HBF and its members are supporting the governments independent evaluation of the scheme, led by the LSE, which will demonstrate the important role the scheme is playing in driving up the delivery of new homes and getting households on to the housing ladder.
After housebuilder shares fell in early trading this morning, a spokesman for DCLG added: The department regularly reviews the Help to Buy Equity Loan Scheme, with the last review taking place in 2015. To infer from this that the Help to Buy Equity Loan scheme will be cancelled is simply incorrect.
Across England around 30% of private completions have made use of Help to Buy over recent years. In the listed space, the highest exposure is at Persimmon (over 50% of private completions) and lowest at Berkeley (below 5%) and McCarthy & Stone (0 as all retirement homes). Help to Buy creates a distinct advantage for the new build sector, as it allows purchase of new build properties with only a 5% deposit but providing attractive interest rates at below 2%. Purchasing new build with Help to Buy can be 15-20% cheaper than renting and up to 30% cheaper than buying with a 95% LTV mortgage.
Assuming around 40% of private volumes use HTB and these have not incurred a 400-500bps incentive costs, we estimate this would result in a 2% margin impact or 10% of earnings. Volumes could also be impacted. Industry estimates suggest this scheme has resulted in around a 15% boost to volumes.
The final variable which is hard to estimate is the impact on pricing, to the extent new build prices have benefited from the existence of the subsidy. The impact will depend heavily on whether there is an unexpected abrupt end to the scheme or a taper or an end which has long lead times, which would allow the industry
Pretty well convinced personally that this is just a scare story and that there is no way they will pull the HTB scheme before 2021. The DCLG has said it is committed to the programme till then in one of the articles I read. Housebuilders have been lobbying for changes to the scheme to introduce a taper to prevent a cliff edge type end in 2021 which might be an outcome of this review. Might also do something about the leasehold situaton I suspect ?.
Thats my view anyway FWIW - I bought more PSN, BDEV & TW during Fridays dip. Recent results have been stellar.
Can't fault these figs on any metric! Where is the much quoted collapse of housing market?! Separately looks lie the recent rise in general inflation is starting to plateau - so a one off impact so long as wages remain muted, meaning interest rates unlikely to rise.
Halifax House Price Inflation 3.8% up from 3.6%
Average Earnings +2.1% down from 2.2%
Rightmove House Price Index M/M 1.2% up from 1.1%
BBA Mortgage approvals 40.8k expected drop from 40.9k
GDP Y/Y drops to 2% from 2.1%
GDP Q/Q drops to 0.2% when expected to stay flat at 0.3%
Mortgage lending for April = £2.7Bn down from £3.1Bn (March) down from £3.4Bn (Feb)
Mortgage Approvals for April 64.64k down from 66k (Expected to be more or less flat)
House price inflation 2.1% Y/Y 2.5% expected from Nationwide
House price inflation -0.2% M/M -0.1% expected from Nationwide
(There is always a drop in house buying during a general election campaign)
Construction PMI 56 UP from 53.1 when a drop was forecast. This should be positive, BUT, there is a massive skills shortage as EU workers depart for better paid jobs in an improving EU economy. Labour costs are likely exceeding house price inflation, especially with CPI at 2.7% and rising too.
Hardly unexpected given Brexit though, in fact completely predictable. Maybe not to the markets? I really don't know.
Material inflation also, but that's been known for a while and its acceleration after Brexit vote had the sector increase capacity within the UK for brick production and other materials.
stabilo1, "just bought some in a dip ahead of the special ex divi "
It isn't a special dividend, its the normal dividend, as timetabled some years ago. Difficult history to it all, but you can find ample explanation on these boards or the PSN site.
There has been a drop off in the housing sector share prices over the last few days - not exactly certain why. PSN have held up very well, I'm sure because of this dividend coming up.
I'm afraid that not only will PSN drop by the usual amount of the divi on ex-div day, it might take on falls to catch up with the rest of the sector at the same time. It all depends how the sector does between now and Ex-div day.
As it stands, I'd expect a drop of around 170p-250p. I'll continue to hold anyway, so take my prediction as you will.
Am seeing a lot of interest from Contractors and Consultants in UK products as a result of the increased costs of foreign imports. Architects are moaning that their concepts are being destroyed but those responsible for the budgets are happy.
I have given up on my idea of investing in brick manufacturers as I think there is now over supply. Building of flats and as pointed out prefab reduce demand for bricks. Instead I recently bought WJG, "Watkin Jones provides an end-to-end solution in developing large scale, multi occupancy accommodation projects, with a primary focus on the student accommodation market."
I heard of them through Eadwig, thanks, and then researched them and liked the look of them. Now have three companies involved in Student property ESP, DIGS and now WJG (5.8% of portfolio in total).
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