In the housebuilding sector, there are two high profile departures today following the announced retirement of Redrow (RDW) founder and executive chairman Steve Morgan and Persimmon (PSN) chief executive Jeff Fairburn.

A recent furore and intense media attention over Fairburn’s generous bonus of £75m, cut from £100m, resulted in his ‘mutually agreed’ exit.

Managing director David Jenkinson will temporarily take over the helm from the end of the year until a permanent successor is found.

‘NOTHING TO CHANGE’ ON FAIRBURN EXIT

Shares in Persimmon nudged 0.7% higher to £23.65 despite a strong trading update with £987m in forward sales reserved beyond 2018 as Brexit fears don’t appear to be holding potential buyers back.

Canaccord Genuity analyst Aynsley Lammin says the departure of Fairburn should not change Persimmon’s strategy and should allow the housebuilder to move on from the controversy.

Lammin argues a lack of exposure to Central London and higher prices have kept the group in good shape.

AJ Bell investment director Russ Mould warns that Fairburn’s predecessor is likely to be scrutinised heavily, particularly over pay and incentives.

LONDON REMAINS WEAK FOR REDROW

At Redrow, Morgan is retiring at the end of March 2019 10 years after returning to the business.

He will be succeeded by chief executive John Tutte.

In the latest trading update, the company reports that high stamp duty taxes and Brexit uncertainty has put off potential house buyers in London.

Outside of the capital, demand was good in regional areas with most sites sold well in advance according to Redrow.

Shares in Redrow declined 3.4% to 545.8p as investors focused on bad news around the London market and the departure of Morgan.

WHY MORGAN WILL BE MISSED

Davy Research’s Colin Sheridan believes Morgan’s departure will be viewed as a negative by investors, although he does hold 21% of the shares in Redrow and another 7% through his foundation.

Mould says Morgan helped Redrow navigate the financial crisis and revive trading, which was supported by low interest rates and the Help to Buy Scheme.

Since Morgan’s return in March 2009, Mould says he achieved a 482% total return for shareholders.


Issue Date: 07 Nov 2018