Persimmon (PSN) is on track to make another £1 billion in profits this year despite being criticised for providing substandard homes. The company was rocked by a scandal over a £75 million bonus for disgraced former boss Jeff Fairburn, has defied the housing market slowdown and is this week poised to report £500 million in pre-tax profits for the first six months of the year. But smaller firms are struggling to compete in a housing market which has ground to a halt. The Mail on Sunday can reveal that in recent days a smaller luxury housebuilder, Newcourt Residential, collapsed after facing ‘severe cashflow issues’. Persimmon has failed to shake off concerns about the quality of its homes amid anger over multi-million pound bonuses for its executives and senior managers since it became the first housebuilder to make £1 billion in profits last year. Last week, the company launched a consultation with customers, employees, suppliers and councils to try to improve its damaged reputation. City analysts expect Persimmon’s margins – currently around 30% – to slide as it spends more money on its homes.
The chairman of Saga (SAGA) has confronted a powerful activist investor who is trying to break up the company. The Mail on Sunday can reveal that Saga boss Patrick O’Sullivan has held crunch talks with Elliott Advisors since it bought a 5% stake in the company a month ago. The US activist – renowned for its ruthless boardroom tactics – snapped up the stake after a major profit warning made Saga’s shares plunge 37%. Elliott is understood to want Saga to split its travel and insurance businesses. However, analysts are not convinced that a break-up would be a good move for Saga. Edward Morris, from JP Morgan, pointed out that Saga benefits from selling multiple products under one brand. He warned that the travel and insurance divisions may be less valuable as individual companies.
A mystery predator is said to be circling Britain’s biggest estate agent. City sources said a potential buyer is weighing an offer for Countrywide (CWD), the company behind Hamptons International, John D Wood & Co. and Bairstow Eves. Prior to floating on the stock market in 2013, Countrywide was owned by US private equity firms and hedge funds. Apollo, the Wall Street private equity titan led by Leon Black, paid £1 billion for Countrywide at the peak of the credit boom in 2007. Eighteen months later, the company’s lenders – which included US distressed debt fund Oaktree Capital – took control of the estate agent via a financial restructuring. They floated Countrywide at £3.50 a share six years ago, valuing the business at £750million. The firm is now valued at just £78million, partly due to the tough times the industry has had since the referendum. A takeover bid for Countrywide would be a huge ‘contrarian bet’.
The bosses of Burford Capital (BUR) were last night facing questions about how much money they have extracted from the embattled legal firm as they fight back against allegations that they misled investors over its financial health. The litigation finance company, which has come under heavy attack from American hedge fund Muddy Waters, refused to say how much it had paid chief executive Christopher Bogart and chief investment officer Jonathan Molot since 2012. However, The Mail on Sunday can reveal that the pair made £15 million in fees in the three years prior to that from advising the main listed company over which legal cases to finance. In 2012, they also received shares worth £200 million at today’s price in an ownership shake-up. They sold some of them for nearly £120 million last year.
Property tycoon Robert Tchenguiz has built a substantial shareholding in FirstGroup (FGP) in a move reminiscent of his time as a buccaneering corporate raider in the run-up to the financial crisis. Tchenguiz now owns a 3.2% stake in the embattled bus and rail company, which last week won the West Coast rail franchise in partnership with Italy’s Trenitalia. Before the 2008 crisis, he was one of Britain’s biggest activist shareholders, known for agitating for corporate shake-ups and launching takeover bids – in 2006 Tchenguiz’s investment vehicle R20 attempted a debt-backed £4.6 billion takeover bid for All Bar One owner Mitchells & Butlers.
MIDAS SHARE TIPS: Recession fears, stock market wobbles and investors rushing to find a safe haven – could be worth a look? Midas verdict: Mark Twain allegedly described a gold mine as: ‘A hole in the ground with a liar standing on top of it.’ Sadly, too many mining firms seem to fit that description. Pure Gold, however, is made of better stuff. The mine exists, the money is there to build it and the company is run by highly experienced industry veterans. The group also counts mining giants AngloGold Ashanti and Newmont Goldcorp as shareholders. The shares are 41p and should go higher as Pure Gold moves towards production. Buy.