Housebuilder stocks: Persimmon bounces back with share price rise
As Persimmon assures shareholders that it will be returning back to business as usual shortly, the housebuilding giant saw its share price rise as markets opened on Monday.
While all sectors of the UK economy have taken a beating as a result of the Covid-19 shutdown, the country's £110 billion construction industry has proven to be one of the worst affected in recent weeks.
With economic activity grinding to a halt, and consumer spending reducing to a mere trickle, the UK's biggest housebuilding companies have faced a particularly bleak future as the country's real estate sector has effectively been suspended since late March.
However, messages coming from Persimmon, the biggest housebuilder in the country, this morning suggest that the UK's beleaguered construction sector may finally be reaching a turning point. Let's take a closer look at the situation so far and see why Persimmon has experienced an unexpected bounce as markets opened in London.
You can trade shares commission-free with IG. Find out more
Persimmon assures shareholders of its resilience
Although Persimmon's modest gains when markets opened do not look like they will hold, it's clear that the company has been buoyed by recent reassurances the company made to shareholders. They have released figures this morning showing that the first 11 weeks of 2020 before the lockdown were some of the best in the company's history, with year-on-year sales more than 10% higher than they were at the same time period in 2019.
Perhaps more strikingly, they claimed that, although sales have since fallen, customer inquiries have remained strong, citing this as an indication that the long-term resilience of the industry remains in good shape. In further efforts to reassure shareholders, Persimmon has said that they will be launching a phased return to work for their thousands of employees imminently.
Although the full details of their plans are yet to be released, it has been confirmed that they will be using what they are calling 'Covid-19 Return-to-Work Passports' to identify employees who can safely return to work on their building sites up and down the country.
The company also announced that they have not taken advantage of the UK government's job retention scheme and are currently making no plans to do so. The average cost of a Persimmon home has also continued to grow throughout the year so far, reaching £244,500 per home, compared to £237,850 this time last year.
Will Persimmon's restart be seen elsewhere?
Persimmon's announcement of a phased restart has the potential to ripple through equities markets today, as shareholders will likely be asking whether other companies of a similar nature will be activating such plans.
A return to physical work is something that is decidedly not on the agenda for the vast majority of FTSE-listed companies at the moment, but Persimmon's announcement today may change all of that. Other companies in similar sectors, such as the housebuilding giants Barratt Developments and Taylor Wimpey, may see their own prospects rise if they too begin to consider reactivating their operations in a similar way to Persimmon.
The construction industry is one that largely benefits from workers being outdoors and in an environment where social distancing is relatively easy to maintain, which suggests that housebuilding could be one of the first UK industries to return to normality. Of course, this also depends on whether customer interest remains as strong as Persimmon claims it is.
Persimmon has been on the road to recovery since the big crash in early March, and these recent developments suggest that it could emerge from this year in decent shape.
How to trade housebuilder shares
Where do you stand on UK housebuilders? Will Perismmon’s reactivation be seen elsewhere? You can trade long or short with IG:
- Create an account or log in to our world-class trading platform
- Type ‘Persimmon’ in the search bar to find the shares
- Choose your position size
- Click ‘buy’ to go long, or ‘sell’ to go short
- Confirm your trade
If you’d rather practise trading first, open a demo account to start paper trading with $200,000 in virtual funds.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.