Persimmon's revenue sacrifice and Quiz continues to disappoint

“Markets nervously awaited the signing of the initial US/China trade deal with slight weakness in Asian markets and very little movement on the UK market,” says Russ Mould, investment director at AJ Bell.

“Investors are slightly concerned about Treasury Secretary Steve Mnuchin saying the US would retain tariffs on Chinese goods until the second phase of the trade agreement was completed. The timing of phase two is a big unknown given how long the first phase took to sort out.

“Understandably this nervousness weighed on shares in commodity producers and saw investors turn to pharmaceutical stocks in the hope they will be more reliable in the current market environment."

Persimmon

“The key spring selling season for housebuilders may be even more important to Persimmon this year.

“The volume and forward sales of its homes are both down and in order for volumes to stabilise the company has some work to do when activity ramps up.

“The company has sacrificed revenue by slowing down the process of making houses in order to ensure more attention is paid to build quality and customer care.

“In truth it had little choice after the Government raised questions over its eligibility for the lucrative Help to Buy scheme due to the issues faced by Persimmon customers and the huge bonus paid to its former CEO Jeff Fairburn.

“The results of an independent review published in December, suggesting the company had built shoddy and potentially unsafe homes, merely ratcheted up the pressure on management.

“Rebuilding the company’s reputation will take time and investment, although at least the company has a strong balance sheet to lean on.

“The group’s core market of first time buyers in the Midlands and north of England continues to benefit from a competitive mortgage market as well as the relative affordability of properties and house price growth in these regions.”

Quiz

“Quiz by name, quiz by nature. Everyone now asks the same question to the retailer: why is trading consistently poor? The company has issued yet another update showing declining sales albeit managing not to suffer a profit warning because expectations were already so low.

“The retailer reported sales growth from its own websites but revenue from third party website partners remains weak. That suggests its clothes are not standing out from the crowd and its problems may simply lie in its creative department.

“It’s proposition is to sell clothes for people’s memorable occasions. For investors who have suffered a huge fall in the share price – down 90% since joining the stock market in July 2017 – the only memorable thing about the business is its inability to generate value for shareholders.”

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