Investors are reassured by a third quarter trading update from housebuilder Persimmon (PSN) which suggests, despite the uncertain backdrop in the UK, sales picked up as normal in the autumn. The shares advance 2.6% to £23.34.
The update itself, not unusually for a Q3 statement, was light on detail in terms of margins and pricing but management note consumer confidence has remained resilient, ‘despite the continued uncertainties around the timing and nature of the UK's withdrawal from the EU’.
As part of its plan to improve build quality and customer care, Persimmon is holding back the release of new homes to the market until construction is at a more advanced stage. This reduced the number of sales reservations that earlier release would have delivered and resulted in 5% lower average active sales outlets year-on-year, at around 350 sites.
The company also continues to sanction additional investment to improve quality and service, having allocated £140m in the first half.
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Shore Capital analyst Robin Hardy says: ‘Margins cannot be sustained, we believe, if there is a concerted effort to improve quality and the decision to push ahead with the customer retention policy (buyers can hold back 1.5% of the selling price as a surety against putting problems right quickly) is likely to cause a permanent dip in returns.’
His counterpart at Canaccord Genuity Aynsley Lammin says: ‘Overall a reassuring and in-line update with no material changes to consensus expectations expected overall.’
And Bovis Homes (BVS) gains 0.5% to £11.69 as it agrees a £1.1bn takeover of Galliford Try’s (GFRD) housing and regeneration division. The deal, which doubles the size of the housebuilding operation at Bovis, is set to complete 3 January 2020.