For Subscribers

Get the complete article now!

TWST: Can we start with a brief introduction to Persimmon (London: PSN.L) and your core markets?

Mr. White: Persimmon is truly a national house developer. We are what we call a pure house-builder, which means we haven't got any other parts to our business beyond house-building. We're also very much focused on house-building within the UK, where we are one of the largest house builders, having completed around 12,300 units last year. In terms of our reach, we develop from right up in Aberdeen in the north of Scotland, down to the southwest tip of England. We are also in Wales, so we are very much across the length and breadth of the country. Product-wise, our portfolio ranges from very small, one-bedroom units, right up to large 5, 6, and 7 bedroom units offering executive-style housing through our Charles Church premium brand. We have an average selling price of around £150,000 per unit, which puts us into the middle-to-lower range overall. We have been careful to build our business to have exposure to all markets, but simultaneously careful not to be over-exposed to any one market.

TWST: Can you present us with a quick backdrop to the house-building space in the U.K. and give an overall sense of the key characteristics of the market at the moment?

Mr. White: If I could just touch upon this year as a whole for a moment, this year started off a bit sluggish. It was on the back of a fairly strong 2002; certainly the early part of 2002 was very strong -- unprecedented in my view. At the beginning of 2003, however, there was a fair amount of uncertainty and some forecasts indicted that, because 2002 was so strong, we would see some fall off in 2003. That in fact didn't happen, but it impacted volumes in the early months, compounded to a certain degree by the Iraqi war. Since then, we've seen a return to more normal market conditions and, from around May time right up until now, the market has remained pretty strong. The reduction in volumes we saw in the early months of 2003 in comparison to 2002 has been addressed since May and volumes are now very similar to last year. We are experiencing good demand and we've got good visitor levels to our sites around the country. And I think we're no different to the rest of the industry because there is a situation where the potential purchasers are confident. We've got good employment here and interest rates remain historically low, so we're seeing good demand and we don't expect that to change significantly in the run in to the year-end.

TWST: Is it fair to say that the industry is far less cyclical now than it was back in the difficult days of the late '80s and early '90s?

Mr. White: That's right. The environment today is very different and there has been quite a change since those days when we were able to increase volumes to meet demand. In the late '80s, early '90s, our industry was building somewhere over 200,000 houses a year and that dropped off to about 130,000 when the recession came along in the early '90s. Since basically the mid '90s the market has been reasonably good, yet we've consistently built only around 150,000 houses a year, despite the fact that there's been greater demand than that. And I think the cyclicality of the industry has been taken away because we haven't been able to build to the demand; there's far more demand there than there has been supply. The reason for that quite frankly is mainly to do with the planning system which has restricted demand of homes we've been able to bring through and to eventually build.

TWST: Can you walk us through the main goals and objectives you will be homing in on over the next 12 to 24 months?

Mr. White: We will continue our focus on margin improvement. We've moved our operating margin forward from around 15% to 19.5% in the space of about 2.5 years. That’s been achieved as a result of a focus on margin growth rather than chasing volumes. Of course, we aspire to increase our volumes over the long term, but we're not chasing the volume to the extent that it will compromise our margin. We will continue with that focus. We have also, however, increased our land bank to 4.7 years of land at the half-year and we continue to identify good opportunities. So, we are getting ourselves well-placed to further increase volumes as the conditions in the market allows, without, I re-emphasize, compromising our margin. So we are very well placed. We are a company that's got the structure in place and we have a healthy land bank, which is the vital ingredient to building more houses.