Canaccord Genuity hikes target price on Persimmon

Canaccord said Thursday's update from Persimmon highlighted the strong operational performance of the group and its successful return to work in the face of "a challenging backdrop".

The Canadian broker highlighted that Persimmon had seen "a very quick and smooth" return to site, with build rates now back at normal levels - albeit with some margin pressure.

Canaccord also acknowledged that sales rates had been "very encouraging" and while there remains the macro risk of sales rates and pricing weakening into 2021 as unemployment increases, it felt the early signs were promising.

"The group has positioned itself well to take advantage of the near-term rebound in sales by building up its WIP position and enacting a swift return to work," said Canaccord.

The analysts stated that first-half profits would be sharply lower due to the lockdown but expected the group would see "a better bounce back in profit" in the second half relative to others in the industry, assuming sales rates and pricing hold up.

"In addition, the balance sheet remains very strong with circa £830m of cash at the end of June, which should improve further to December as more completions are delivered," said Canaccord, which added that it now has more confidence in Persimmon's final 110p dividend per share being reinstated later in the year.