Persimmon (PSN) sales slide despite focus on quality

Shares are trading close to a 2 year low as Brexit looms over the sector.

Article updated: 4 July 2019 10:00am Author: Graham Spooner

  • Total revenues fall 4.4% as fewer homes are completed.
  • Company has a renewed focus on quality after problems highlighted by customers.
  • Persimmon can still offer healthy dividends however we view the shares as no better than a Hold for medium to high risk investors.

Independence Day usually means a quieter time for the London market. Persimmon, the largest UK housebuilder, came out with a trading update leading to a 2.1% fall in early trading. The shares are already trading close to a 2 year low with the Brexit cloud still looming over the sector.

The company has had to increase its focus on quality and service to customers after problems were highlighted with some of its new houses. This in turn has impacted on completions and sales, with completions lower over the first 6 months at 7,584 compared to 8,072 in the same period last year. The average selling price rose slightly to £216,950.

The CEO believes the initiatives taken on increasing the quality are showing ‘early signs of bearing fruit’. While the outcome of Brexit will be a key factor for the sector's prospects, we increasingly believe that the growth rates for the sector have already peaked.

Our View on Persimmon - Hold

Despite the potential for the company to still offer healthy dividends, we view the shares as a Hold for investors will to accept a medium to higher level of risk.

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Graham Spooner

Investment Research Analyst

Graham started out as a fully authorised dealer on the Stock Exchange trading floor and for various banks, before becoming an FCA-approved investment adviser. Now a respected voice in the media, Graham’s share tips and comments on the markets are frequently sought by the national press.