Persimmon: we’ll only seek shareholder cash for takeover

Mike Farley, the chief executive of Persimmon, has indicated that the firm will be the only major housebuilder not to go to shareholders for cash – unless it needs to fund an acquisition.

The rest of the big players have done rights issues in recent months to raise money to buy land, but Farley said Persimmon had no need to increase its fire-power, despite suggestions the land market was bottoming.

He said: “You need that sort of cash in one go when you make an acquisition and that is the most likely scenario. We would only do it if there was a specific need. In the normal run of the market we can run the business in the normal way.”

Farley has been tight-lipped about whether, and why, Persimmon would do a rights issue, despite coming under increased pressure in the City in recent weeks as the only listed volume housebuilder not to have gone to shareholders for cash (see table, below).

Robin Hardy, an analyst at KBC Peel Hunt, said the company would need cash to replenish stock because of the difficulty in developing old land at a profit and the uncertainty over house price inflation.

He said: “It’ll be forced into a rights issue at some point rather than replace land on a plot by plot basis because that will mean it takes years to get back to decent margins.”

Farley dismissed the suggestion and pointed to the £600m headroom Persimmon had on its £1bn debt facility. “We have the firepower and the margin is there with a seven-year landbank, so I don’t accept it’s inevitable.”

Persimmon has a track record of acquisition-fuelled growth, having bought Beazer Homes for £537.5m in 2001 and Westbury for £643m in 2005.

Despite its history, Farley said Persimmon was not in talks with anyone. “I don’t think there will be a situation in the next few months where there will be much activity. Until we know where the mortgage market is going it’s difficult to make decisions.”