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Persimmon reports its full year results this Tuesday. The company is still shrouded in controversy following from the monster pay-out that resulted from the monster long term incentive pay out to chief executive Jeff Fairburn. Yes, this was approved by shareholders, but Fairburn himself seems cut from the sort of cloth that puts shareholders’ teeth on edge.

Perrsimmon seems to have finally got the message, announcing last week that it would be reducing the bonus payouts to Fairburn, along with finance director Mike Killoran and managing director Dave Jenkinson. The company was forced to admit that the lack of a cap on the value of the shares the three men receive was an error, and that a cap of £29 per share had now been applied.

The decision came as shareholders started to voice complaints and threatened to vote against the re-election of some of the company’s directors at the next annual general meeting in April. In particular, the board and Fairburn were singled out for criticism by Aberdeen Standard Investments, Persimmon’s sixth largest shareholder.

Persimmon shares will slide as interest rates bite

Persimmon shares have been losing ground recently. The company is firmly tied to the house building and home buying sector in the UK and the recent decision by the Bank of England to raise interest rates – the first hike in 10 years – coupled with house price inflation and soggy consumer confidence mean that investors are not convinced about Persimmon shares, and to be honest, neither are we.

Persimmon shares have been sliding since the end of last year, from 2778 on 5 January, down to 2394 on 8 February. The shares seem to have arrested the momentum somewhat, with some buying forcing them up in the last couple of weeks. At Friday’s close they were at 2472.

“Persimmon’s views on the wider housing market and its  2018 outlook are therefore likely to be of more interest than the 2017 figures, especially as the firm gave a detailed trading update in January,” says Russ Mould, investment director at AJ Bell.

Persimmon has said it wants to use a £1.3 billion cash pile to fund a 110p/share dividend payment each year out to 2021, and it offered a 25p top up in 2017. This may keep some shareholders loyal, despite the slump in the value.

The Armchair Trader says:

At best Persimmon is a hold. There is pressure on the UK’s existing housing stock, which has forced house prices higher, but now that UK interest rates are beginning to climb, making mortgages more expensive, we think companies like Persimmon may suffer. There are a number of other risk factors sewn into the UK housing story, including inflation and ebbing consumer confidence, and none of these will be good news for Persimmon shareholders if they come home to roost in 2018.


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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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