Persimmon looks to boost build quality after robust numbers, and PageGroup at mercy of candidate confidence levels

“On Budget day the positive performance of the FTSE 100 may help put a little more pep in Chancellor Rishi Sunak’s step as he makes the journey from Number 11 Downing Street to the House of Commons,” says AJ Bell Investment Director Russ Mould.

“Pre-Budget leaks have raised hopes for an extension to the significant support provided to the UK economy by Sunak so anything short of this could result in some disappointment.

“Hotels group Whitbread topped the FTSE 100 leaderboard amid suggestions the furlough scheme and business rates holiday will both be extended, supporting a hard-pressed leisure and hospitality sector.

“Beyond the UK the US moved closer to bringing its own package of state support to fruition with the $1.9 trillion Covid relief bill just awaiting sign off from the Senate.

“European markets were also on the front foot, despite a sell-off in the US overnight. Oil prices edged higher and commodity traders will be keenly awaiting tomorrow’s key OPEC meeting for news of any changes to output from members of the oil producers’ cartel.”

Persimmon

“In many respects results from Persimmon are the starter ahead of the main course later today when Chancellor Rishi Sunak is expected to deliver another tasty morsel of government support for housebuilders in the form of a first-time buyer mortgage guarantee scheme.

“There may also be an extension to the stamp duty holiday which helped supercharge Persimmon’s recovery from the property market’s deep freeze upon the first lockdown.

“There were some eye-catching details in Persimmon’s full year numbers, not least the fact it is sitting on more than £1 billion of cash in the bank and that it saw a material increase in average selling prices last year despite the impact of the pandemic.

“Clearly results were affected by restrictions and build rates only returned to pre-Covid levels by July 2020 but Persimmon is mindful that in its scramble to catch up it not neglect build quality after a somewhat chequered past on these issues.

“Persimmon’s decision to boost its team of quality controllers to more than 60 by the end of 2021 should be seen in this context as it looks to ensure that it lives up to a pledge to ‘build right, first time, every time’.

“Recently appointed CEO Dean Finch is obviously keen to bolster Persimmon’s ESG credentials across the board – introducing the living wage and looking to apply its principles in its wider supply chain and across its development partnerships while also adopting tougher environmental targets.

“Finch clearly hopes Persimmon can move from bad boy to head boy status in the sector, after its historic governance, construction and customer care issues.”

Pagegroup

“The big news headline ahead of the Budget announcement is the fact that the furlough scheme is going to be extended until September, providing welcome relief to the nation that the Government is still going to offer support during hard times.

“This doesn’t necessarily send a positive message to recruitment companies such as PageGroup. It suggests that the country is still in a fragile state which could affect candidate confidence and thus reduce the flow of people taking the plunge and looking for a new job.

“Some companies may be regaining confidence as they look to the future and take a view on the likelihood of earnings growth in 2021 and beyond, which could include hiring more staff. However, the fact that the furlough scheme is being extended could continue to make many people already in jobs nervous about wanting to look for a new opportunity.

“They may prefer stability and some sense of job security over taking the risk of moving somewhere else for fear there could be economic setbacks which threaten their position if they’re new in a job.

“Those still being furloughed are likely to work for leisure and hospitality industries where job opportunities are scarce.

“PageGroup’s results make for ugly reading but they are history and investors are more concerned about the future. Candidate confidence is very important for its ability to revive earnings growth and anecdotal evidence suggests it’s too early to say the tide is truly turning for recruiters in the UK as there is a lack of decent candidates for various industries.

“Admittedly PageGroup is a global business and so various countries will be at different stages in the cycle in terms of their recovery. In its favour is the fact there seems to be a lot of change at the top for companies, with businesses realising they need fresh thinking from their leadership as they enter a new stage of their life. PageGroup is particularly strong in finding people for senior job roles.”

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