Persimmon plc (PSN) Ordinary 10p

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Persimmon’s average weekly net private sales rate edged 1% higher to 0.74 in the year to 27 April.

The order book value rose 12% to £2.3bn, representing 9,781 new homes. The private average selling price within the order book was around £293,000, up 4%.

Persimmon said that it has no direct exposure to US tariffs and that indirect exposure is expected to be “limited”. The group has not yet seen any impact on its supply chains or sales rates.

Full-year guidance remains unchanged, with the group expecting to complete between 11,000-11,500 new homes.

The shares fell 1.2% in early trading.

Our view

Persimmon’s had a good start to 2025 as sales rates edged slightly higher. With a growing order book and higher average selling prices, the group looks in good shape to deliver a strong performance this year.

This positive sales momentum is feeding down to the bottom line, helping full-year pre-tax profits return to growth last year, after two years of declines. Given Persimmon’s houses are typically priced more than 20% below the newbuild national average, sales tend to be more resilient in times of uncertainty.

Growing revenues should be enough to offset low single-digit build cost inflation this year and help improve profitability. The in-house materials businesses, which we see as a key differentiator, should help on this front too. They give Persimmon quick and cheaper access to key materials. When Persimmon’s able to use its own bricks, tiles and timber, it saves around £5,500 per plot.

Significant pent-up demand for homes in the UK remains unchanged. The new government’s 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 really move the dial for housebuilders.

Persimmon’s robust land bank is a key strength, and it should be a major 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.

Keep in mind that there’s still plenty of macroeconomic uncertainty. The group has no direct exposure to tariffs, given that operations are focused on this side of the Atlantic. And there’s been no knock-on effects to its supply chains or sales rates yet either. But if tariffs cause a global slowdown, we’re likely to see demand for its houses weaken.

The balance sheet was in decent shape last we heard, and improving cash flows should help to support the current 4.9% forward dividend yield. But remember, no shareholder returns are guaranteed.

With green shoots of a recovery emerging in the housing market, there’s scope for an improvement in sentiment towards the sector. Persimmon’s valuation remains well below the long-run average, providing an opportunity for potential long-term investors. But economic headwinds have the ability to 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.

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 Refinitiv. 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. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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