Persimmon and Associated British Foods

“Donald Trump’s decision to delay increasing tariffs on Chinese goods has helped to lift stock markets around the world. It is therefore no surprise to see companies with exposure to Asia leading the UK market. “Top risers in the FTSE 350 include investment trust Fidelity China Special Situations, mining companies and financial services group Prudential. “Investors appear to be betting that China won’t be subject to more punishing tariffs or that it can come to an amicable agreement with the US,” says Russ Mould, Investment Director at AJ Bell.

Persimmon

“The poisoned legacy of the frankly astonishing £75m pay award to its former chief executive Jeff Fairburn continues to haunt housebuilder Persimmon if weekend press reports are any guide.

“There is speculation that Persimmon’s contract to sell houses under Help to Buy, one of the big catalysts for the wider sector in recent years, could be taken away thanks to concerns over the running of the company held by housing minister James Brokenshire.

“If these rumours prove accurate it would be a damaging blow for the company given that around 50% of the homes it built in 2018 were sold through the scheme.

“It’s not just Fairburn’s pay packet, and that of other senior directors at Persimmon, which is behind the scrutiny of the business. The company is also apparently under the microscope for build quality and for having homes with rising leasehold charges which makes them hard to sell on in the future.

“This shows the importance of paying more than lip service to good governance and corporate social responsibility. These things really matter and can have a significant impact on the success or failure of a company over the longer term.

“It also demonstrates the risks of being overly reliant on Government support which can then be unilaterally withdrawn.”

Associated British Foods

“Overall there are no major shocks from Associated British Foods’ trading update which is exactly what the market currently wants from someone exposed to the fragile retail sector.

“Although Primark isn’t immune to consumer spending weakness, fortunately it hasn’t experienced a large downturn in trading and is managing to keep its chin up in a difficult market.

“However, it is disappointing to see that Germany continues to be a real problem for the business.

“While the troubles aren’t ‘new’ news, it seems odd that the proposition isn’t resonating with this geographical segment of shoppers. The fact that the country is experiencing economic weakness should really play to Primark’s strengths given its low pricing point.

“More encouraging is progress in the US which has traditionally been a tough market for British companies to crack.

“One should not forget that Associated British Foods is more than just a fashion retail story. It also produces sugar and is involved in the grocery market through brands such as Twinings and Ryvita.

“This conglomerate approach provides some diversity and acts as a cushion should one part of the business be doing less well than the others.”

These articles are for information purposes only and are not a personal recommendation or advice.