Persimmon’s full-year average net private sales rates were in line with the prior year at 0.70, with performance held back by a slowing market ahead of the UK Budget in November.
Completions were ahead of market expectations, up 12% to 11,905 new homes. Average selling prices were up 4% to around £278,000.
The order book grew by 2% to £1.2bn. The net cash position roughly halved to around £0.1bn, driven by increased land spending and continued shareholder returns.
Full-year underlying pre-tax profit is expected to land at the top end of market expectations (£415-440mn), pointing to growth of around 11%.
For 2026, underlying pre-tax profits are forecast to be in the £461-487mn range. Build-cost inflation is expected to remain at 2025 levels.
The shares rose 2.1% in early trading.
Our view
Persimmon delivered an encouraging full-year update, despite some weakness in the sales market ahead of the UK Budget back in November. Average sales prices are trending higher, and with new home completions landing ahead of guidance, full-year profits look set to come in at the top end of market forecasts.
More broadly, performance has improved after a tough period a couple of years ago, and revenue trends have been encouraging over the past 18 months. Since Persimmon’s houses are typically priced around 15% below the newbuild national average, sales tend to be more resilient in times of uncertainty.
But while profits are improving, a few years of softer sales and higher costs mean the margin environment is still much tougher than it has been for most of the past decade.
Pressures are starting to ease, and top-line growth should offset low single-digit build cost inflation this year. The in-house materials businesses, which we see as a key differentiator, should help on this front, too. They give Persimmon better cost visibility, as well as quicker and cheaper access to key materials. When Persimmon can use its own bricks, tiles, and timber, it saves around £5,000 per plot.
Significant pent-up demand for homes in the UK remains unchanged. The new government is reforming the national planning framework to help remove some of the roadblocks for builders, and it is starting to have a positive impact. But it’ll likely be a while before these changes move the dial for housebuilders.
Persimmon’s substantial land bank is a key strength and should be a beneficiary of easier planning policies when they arrive. Given its low average selling prices and first-time-buyer bias, it would also be well-placed to benefit from any potential government support for homebuyers.
The balance sheet is still in decent shape despite cash on hand being a decent clip lower than a couple of years ago. The dividend was rebased lower in 2022 to reflect the more difficult environment, a reminder that housebuilders are cyclical businesses, so performance tends to ebb and flow. But at current prices, the prospective 4.7% yield looks attractive - though never guaranteed.
With green shoots of a recovery emerging in the housing market, there’s scope for improving sentiment towards housebuilders. Persimmon’s valuation remains well below the long-run average, and the group remains one of our preferred names in the sector. But economic headwinds could delay activity in the sector from ramping back up into full flow.
Environmental, social and governance (ESG) risk
Most housebuilders are relatively low risk in terms of ESG, particularly for those in Europe. However, there are some environmental risks to consider, from direct emissions to the impact of their buildings on the local ecology. The quality and safety of their buildings is also a key risk.
According to Sustainalytics, Persimmon’s management of ESG risk is strong.
The group collects and discloses scope 1, 2, and 3 emissions and has strong emission reduction plans in place. It has also committed to its homes being net zero carbon in use by 2030. However, there’s currently limited disclosure on what percentage of materials are recycled. Disclosures around product and service safety is also lacking.
Persimmon key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.