Persimmon plc (PSN) Ordinary 10p

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Persimmon’s full-year revenue jumped 17% higher to £3.8bn. The uplift was driven by a 12% increase in completions to 11,905 new homes, and a 4% rise in average selling prices to £278,203.

Underlying pre-tax profits rose 13% to £446mn (£440mn expected).

Free cash flow fell from an inflow of £57mn to an outflow of £8mn, due to a rise in inventory. The net cash position fell from £244mn to £102mn.

In 2026, assuming the conflict in Iran is short, the group expects to complete between 12,000-12,500 new homes. Underlying pre-tax profits are expected to land in line with current market forecasts, pointing to growth of around 5% to £470mn.

A final dividend of 40p per share was announced, taking the full-year total to 60p (2024: 60p).

The shares rose 9.9% in early trading.

Our view

Persimmon’s full-year results showed good progress, with both revenue and profits growing at double-digit rates. 2026 is shaping up well too, with positive momentum in sales rates and average selling prices in the early weeks of the year, which saw the shares jump higher on the day.

More broadly, performance has improved after a tough period a couple of years ago, and revenue trends have been encouraging over the past 24 months. Since Persimmon’s houses are typically priced around 19% 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. And 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.

2026 guidance looks achievable in our eyes, but relies on the current conflict in Iran being fairly short-lived. The situation has already pushed oil prices higher and dampened expectations for rate cuts this year. A prolonged conflict would pose a risk to buyer affordability and could lead to the growth outlook being scaled back.

The balance sheet remains in decent shape, but building safety charges and peak levels of capital expenditure could see the group slip into a small net debt position this year. We’re not overly concerned for now, and expect cash flows to improve again next year. There’s currently a prospective dividend yield of 5.5% on offer, but as always, shareholder returns aren’t 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 delayed rate cuts and economic headwinds could hamper the sector's ability to ramp back up to 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.

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.

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