THE ISSUE: BUDGET BOOST
PERSIMMON is Britain’s second-largest homebuilder with a diversified footprint across the country. The run-up to the British budget led to a 20% fall in the share price, which was common across the sector, but the budget was largely favourable, specifically the increase of capital gains tax to 28%, rather than 40%. The group has a long-dated land bank that has been aggressively written down in value, a solid management and has avoided a rights issue during the crisis.
THE BOSS: MICHAEL FARLEY
MICHAEL FARLEY, chief executive, joined the company in 1983. He developed the group’s business in the English midlands, was appointed as chief executive of the southern division and then in 2006 he became boss of the group. His tenure saw an aggressive acquisition strategy, with more than £1 billion (€1.2 billion) spent before the crisis. In the past two years, he has implemented debt reduction of more than £750m along with a 50% reduction in the workforce.
THE ANALYST: PRAMIT GHOSE, BLOXHAM
Advertisement
MAINTAINING its reputation as a blue-chip UK homebuilder, Persimmon is one of the few not to have raised equity during the slump. Nonetheless, if no large land acquisitions are made, we expect the group to be largely debt-free by the end of the year. It has the largest strategic land bank in the sector. The stock trades on a price-to-net asset value of 0.78 times, which appears harsh given its conservative model and management. Buy on weakness.
Share price: 380.5p Market cap: £1.173 billion Forecast EPS: 18p Forecast dividend: 0 Leading shareholders: Aberdeen Asset Management 11.2%, Allianz 6%, Axa 4.96%, Blackrock 4.86%, DH Davidson 4.84%