Not the finished design (From York Press)

Are they serving us well?? Is this the Hiscox insurance firm that has its headquarters in the lightly regulated opaque offshore tax haven Bermuda,so to avoid paying as much corporate tax as possible? So Don’t be distracted by the smokescrren of the ghastly building instead ask them about their corporate tax bill and the profits they make.

E=MC2,

You make a valid point. Their tax bill does seem to fluctuate wildly. In their latest six-month accounts they made a pre-tax profit of £125m and only paid £1m tax !

Here is another thought provoking comparison:-

Hiscox employ around 1,250 in 27 offices around the world, nine in the UK, and who have made just over £1 billion in profits in the last five and a half years.

Contrast this with Persimmon Homes who have their head office in York since they were founded in 1976, and employ 2,432 plus thousands of subcontractors in the UK, and Barratt Homes who also have an office in York who employ 4,500 plus thousands of subcontractors in the UK. These two companies in the last five and a half years have lost between them around £500m.

One of these companies are being given a subsidised land deal for their offices in return for 300 jobs, whilst the others are forced to provide land subsidies for the councils affordable housing requirements which stop them building in York or increasing jobs here ?

One makes a fortune, by insuring high end assets, pays little tax in the UK on its profits, and is rewarded. The others jointly build over 20,000 homes each year, lose a fortune, and employ ten times as many people as the company being given the concessions.

Is there some misplaced loyalty and discrimination here ?

Scarlet Pimpernel wrote:
E=MC2, You make a valid point. Their tax bill does seem to fluctuate wildly. In their latest six-month accounts they made a pre-tax profit of £125m and only paid £1m tax ! Here is another thought provoking comparison:- Hiscox employ around 1,250 in 27 offices around the world, nine in the UK, and who have made just over £1 billion in profits in the last five and a half years. Contrast this with Persimmon Homes who have their head office in York since they were founded in 1976, and employ 2,432 plus thousands of subcontractors in the UK, and Barratt Homes who also have an office in York who employ 4,500 plus thousands of subcontractors in the UK. These two companies in the last five and a half years have lost between them around £500m. One of these companies are being given a subsidised land deal for their offices in return for 300 jobs, whilst the others are forced to provide land subsidies for the councils affordable housing requirements which stop them building in York or increasing jobs here ? One makes a fortune, by insuring high end assets, pays little tax in the UK on its profits, and is rewarded. The others jointly build over 20,000 homes each year, lose a fortune, and employ ten times as many people as the company being given the concessions. Is there some misplaced loyalty and discrimination here ?

Can you clarify this, please? When you say Persimmon and Barratt have 'lost' £500m, do you mean their profits are down by £500m or that they have actually *lost* £500m. The only information I could find on this are:

http://www.thisismon
ey.co.uk/money/marke
ts/article-2200668/N
ewBuy-scheme-helps-B
arratt-Homes-158-ris
e-profits.html


"Builders’ shares have soared this year, with Barratt up 82 per cent. The company said in July that full-year pretax profits would rise 158 per cent to £110million."

and

http://www.cnplus.co
.uk/sectors/housing/
persimmon-profits-su
rge-by-65pc/8634627.
article

"Persimmon has reported a 65 per cent rise in pre-tax profit for the first half of 2012, with margin topping 12 per cent, it revealed this morning. Underlying pre-tax profits increased to £98.7 million in the six months to 30 June, compared with £59.7m in the same period last year, as revenue increased 13 per cent to £806.7m (2011: £712.8m)."

SteadyOn,

I will answer your question at the risk of provoking accusations of going off topic, because, I feel it is important given that the media and housebuilders are talking up the numbers and not acknowledging the undrlying weakness in the sector.

Firstly, the £500m net loss for these two companies (Persimmon & Barratt) is the collective, cumulative pre-tax figure of results since the 2008 credit crunch.

Barratt and Persimmon jointly lost around £1.5 billion during a two year period, mainly due to 'exceptionals' which included, impairment of, land values, work in progress and finished stock.

In the last four years the top twenty housebuilders in the UK had a collective turnover of £49billion, and made a collective net loss of £4.6billion. In the last year the collective turnover was £11.7billion and collective net pre-tax profit of £619million, which is just over 5%. The previous year's collective profit was £79million. The media and the large housebuilders have trumpeted these latest results because, by comparison to the year before, it is a substantial increase. What they do not tell you is that 5 of the 20 firms still made a loss, and one, Berkeley made over a third of the total profit on a turnover of less than 10% of the collective total, reflecting the strength of the London market where Berhkeley are the biggest and most successful developer by a massive margin. The underlying figure that is also undisclosed, and the most important measurement in terms of investment, is the return on equity. I haven't got the exact figure for the 20 companies collectively, but, from my knowledge of Barratt and Persimmon, estimate this to be less than 5%, possibly as low as 2% or 3%. Contrast this with the target return on equity figure that most in the sector aspire to and set as a viability hurdle, which is 20% or more, and this shows you the underlying weakness and fragility of the sector.

Expressed in another way, if the top 20 companies make the same level of profit and turnover, it will take them another eight years before they cancel out the losses incurred during the credit crunch. That is twelve years where these companies balance sheets have not grown, excluding any additional investors cash through rights issues. In real terms through inflation they will have actually lost value.

What other industry will have gone through the same decline and financial devastation other than the banks who have been bailed out by the taxpayer, and are now making big profits again ?

Why are housebuilders hammered by regulatory burden, when they are in a critical condition and will remain so until there is regulatory roll-back ?

This is the truth behind the hype, and the hike in share prices is a reflection of the increase in profits, not the profits themselves.

Any dismissive comments by left wing haters of greedy developers, come from people who are ignorant of the economics of this sector. They are not qualified to make informed objective criticism.

For information: I am a veteran developer and investor in this sector with 37 years experience, with significant research experience.

Steadyon,

BTW, you mentioned Barratt's profits had soared by 82%. Their pretax profit for the year to June 2012, was in fact £100m on a turnover of £2.2billion - a profit of just over 4% and a return on equity of 3.3%. Their average PTP and ROE for the 18-year period between the last two recessions (91-08) excluding the years where the exceptional losses were incurred, were 10.6% and 21% respectively.

Barratt, despite having reduced their bank debt from £1.5billion in 2009 to £343m by the end of 2012 paid finance charges of £49m on these borrowings, plus a further £40m of imputed interest on deferred land payments, and other financing costs. This is on a relatively low 16% gearing. If they increased their gearing to 50%, to say increase turnover, the additional interest payments would wipe out their profits altogether. This is another indication of the poor health of the sector, and why housing volumes will not grow until finance costs reduce, and profits grow back to normal levels. The sector needs de-risking to allow profit to grow that will then attract finance at manageable interest levels. The only solution is regulatory roll-back, as land price deflation will not be enough on it's own.

Letter about the HIscox design of the building. Comments about their tax and housing. Well, there;s only one thing left to say about this and it has something to do with bikes. I'm just not sure what yet...

Property developers are trusted less than former News of the World journalists. Never believe a word they say.

The figures I have quoted are from published, audited accounts. It is a criminal offence to falsify this information, and anyone attempting to discredit this financial data is showing their ignorance.