ii view: lots going up at Persimmon but not the share price

First-half results to 30 June

• Revenue up 14% to £1.5 billion
• Adjusted pre-tax profit up 11% to £164.9 million
• Underlying operating profit margin of 13.1%, up from 13%
• Net cash of £123 million, down from £350 million
• Interim dividend unchanged at 20p per share

Guidance:

• Continues to target full-year 2025 build completions of 11,000 and 11,500, up from 10,664 in 2024
• Continuing to target a full-year operating profit margin of 14.2% to 14.5%
• Continuing to target a medium-term operating margin of 20%

Chief executive Dean Finch said:

"I am pleased that we have continued to grow in the first half of the year despite challenging market conditions and with affordability still an important constraint. Our average sales price, sales, completions, planning approvals, active sites and forward order book are all up, many against industry trends, showing that our strategy including a focus on self-help has continued to deliver. 

"Given our strong progress with building safety remediation, we anticipate being able to review our capital allocation policy when the programme of works is substantially complete."

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ii round-up:

Persimmon (LSE:PSN) operates from 29 UK regional offices and three offsite manufacturing facilities where it makes items ranging from timber frames and roof systems to bricks and tiles.  

Its brand names are Persimmon Homes, Charles Church and Westbury Partnerships. Employing just around 4,700 people, it completed 10,664 new homes in 2024, up from 9,922 in 2023.  

For a round-up of these latest results announced on 13 August, please click here. 

ii view:

Started in 1972, Persimmon today employs over 4,700 people and is a constituent of the FTSE 100 index. Headquartered in York, it achieved an average selling price of £284,047 during this latest period, up from £268,499 in 2024, with home completions expected to rise to between 11,000 and 11,500 this financial year. Group competitors include Barratt Redrow (LSE:BTRW), Taylor Wimpey (LSE:TW.) and Bellway (LSE:BWY). 

For investors, ongoing global trade tariff uncertainty and possible rising unemployment could temper customer demand. Concerns for UK government debt levels and possible UK Budget tax rises should not be ignored. Cost pressures such as increased employer national insurance contributions are now being battled, while a forecast one-year price/earnings (PE) ratio above the 10-year average may suggest the shares are not obviously cheap. 

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To the upside, forward sales of £1.25 billion, up from a previous £1.12 billion suggest decent customer demand. Expanding operations to manufacture materials such as bricks and tiles are currently estimated by management to save it around £5,500 per plot in build costs. Land purchases made over the last three years now support management’s medium-term ambition to increase the profit margin to 20% from 13.1% currently, while the government’s push to ease planning restrictions is ongoing. 

In all, a forecast dividend yield of over 5.5% should continue to please income investors, with a consensus analyst estimate of fair value of over £14 per share pointing to ongoing optimism in the City. 

Positives

• Government push to ease planning regulations
• Previous sector consolidation

Negatives

• Uncertain economic outlook
• Reduced net cash held

The average rating of stock market analysts:

Buy