PERSIMMON, the York-based national house builder, is one of three leading quoted companies in Yorkshire which have joined the ranks of "the unloved".

Persimmon, along with Richmond Foods, of Leeming Bar, and Kingston Communications of Hull, who between them have market capitalisation of £1.95 billion, are all listed in the latest Top 50 of "unloved companies" published by business advisers RSM Robson Rhodes LLP.

Published each year, the Unloved Companies Index describes companies as unloved because their record of generating cash flow is not reflected by their share price.

When compared to the wider market, an unloved company has grown, and is expected to grow its cash flow, at a faster rate, but its valuation is lower, so it is seen as unloved. Some 94 per cent of companies in the unloved index are listed in the FTSE 250 or smaller.

Last year's Top 10 and Top 50 dramatically outperformed the FTSE 100 and the FTSE 250 in terms of share price growth. The Top 10 outperformed the FTSE 100 by 41 per cent and the FTSE 250 by 11 per cent with the companies seeing rise in values of 11 per cent and 190 per cent. The Top 50 outperformed the FTSE 100 by 40 per cent and the FTSE 250 by 10 per cent.

Other notable companies in this year's index include MFI Furniture Group, LA Fitness, Game Group, Bovis, and Whitbread. The findings reveal that companies within the construction, leisure and retail sectors are disproportionately represented within the Top 50 Unloved Companies Index. This, states Robson Rhodes, may be driven by the view that they are each affected by the willingness of consumers to spend and the expectation of increased interest rates. The potential for significant value growth is regarded as limited.

Neil Crawford, partner at RSM Robson Rhodes in Leeds, said: "Now in its fourth year, the survey continues to explain the frustrations felt by many directors of smaller companies; namely that their excellent cash flow growth is not recognised by the markets in their valuation.

"Companies are warned that poor valuation of otherwise excellent performance may impact on their ability to fulfil funding strategies.

"The unloved companies are, in reality, the hidden gems of the stock market.

"There is little doubt that the companies in the index lose out from the lesser following by analysts and, as a result, institutional investors, who concentrate on the FTSE 100 companies. Company balance sheets are healthy and the management teams are more actively looking to implement growth plans."

Chris Johnson, Persimmon's Yorkshire regional chairman, said: "Poor old us. We were unloved last year too, but why is a mystery. For the past 30 years we have enjoyed unrelenting growth, yet we have been affected by a sectoral thing, particularly for house builders.

"All we can do is keep growing and keep our shareholders happy."

Updated: 10:57 Thursday, March 11, 2004