Persimmon (LON:PSN) reported higher first-half home completions, revenue and operating profit, while cautioning that build-cost inflation, incentives and a larger proportion of housing association sales continued to weigh on margins.
The housebuilder said underlying profit before tax rose 3% to £170 million, while underlying operating profit increased 10% to £189 million. Completions climbed 13% to 5,189 homes, supported by a 7% increase in net private weekly sales to 205 and growth across each of its three brands.
Volume Growth Offsets Margin Pressure
Housing revenue rose to nearly £1.5 billion and gross profit increased to £267 million. However, gross margin declined to 18%, reflecting a greater contribution from affordable housing, higher incentives and build-cost pressures.
Operating margin fell to 12.8% from 13.1%, with the higher housing association mix accounting for about 40 basis points of the decline, according to Andrew. The company said improved volume leverage, lower administrative costs and land-sale profits helped offset other inflationary and incentive-related pressures.
Private completions rose 7% to 4,261 homes, including 548 bulk sales. The bulk-sales figure was below the prior-year period after reservations in the build-to-rent market slowed during the fourth quarter of the previous year. Andrew said the build-to-rent market was now open and that he expected bulk completions to increase in the second half if market conditions remained stable.
Partnership completions to registered providers increased 50% to 928 homes, representing 18% of total completions. First-time buyers accounted for 36% of private sales, or 41% excluding bulk sales. Persimmon said sales to first-time buyers rose 14% from the prior-year first half, compared with 1% growth in the broader market cited from Connells Research.
The group’s blended average selling price on completions increased 1%, while private average selling price rose 3%. It said pricing had been particularly resilient in northern England and Scotland. Incentives on completions were around 5%, compared with 4.5% in the first half of the prior year.
Guidance Maintained at Top End of Volume Range
Persimmon said it now expected to deliver about 12,500 homes for the full year, at the top end of its previous guidance, assuming no material changes in market conditions. It also expects underlying profit before tax to be in line with current expectations.
The company’s total forward order book stood at £1.9 billion, up 3% by value. Its private forward order book increased 5% to £1.3 billion, while the affordable housing order book was £600 million and fully secured for the year.
In the latest five weeks, the private sales rate including bulk sales rose 6% to 0.72 per outlet per week. However, the private rate excluding bulk sales fell to 0.59, which Dean said reflected a slight market softening as well as outlet transitions. He cited possible influences including seasonal conditions, mortgage rates, sentiment and the timing of site openings and closures.
“The July slowdown was small,” Dean said, adding that he did not believe investors should “read too much into it” given the increase in the private forward order book.
Land, Outlets and Three-Brand Strategy
Persimmon averaged 273 outlets during the period, compared with 272 a year earlier, and said it remained on track to open 100 outlets during the year. The company is targeting at least 300 outlets over the next couple of years.
It secured detailed planning permission for 6,123 plots, equivalent to 118% of completions and 21% higher than the previous year. The company said its owned and controlled land bank contained nearly 81,000 plots, while its strategic land bank grew to around 93,000 plots following the June acquisition of land promoter Endurance Estates.
All three brands recorded completion growth: Persimmon Homes rose 7%, Charles Church increased 26% and Westbury rose 22%. Dean said the brands give the group broader access to markets, with Charles Church providing a premium offering and Westbury supporting partnerships with registered providers and build-to-rent customers.
The company maintained its five-star Home Builders Federation status for a fifth consecutive year. Persimmon Homes and Charles Church each held “excellent” Trustpilot ratings of 4.6 stars, according to the presentation.
Cost Inflation and Balance Sheet Focus
Persimmon estimated that cost pressures associated principally with the Middle East conflict could create a £40 million to £50 million cost headwind over the next 18 months. The company said it had identified savings expected to mitigate at least half of that impact, with further work under way on house types, procurement, overheads, value engineering and construction programs.
Dean said the company expected to offset the costs by 2028, aided by a new range of house types that would take time to move through planning and delivery cycles. He said Persimmon’s vertical integration, including its brick, tile and timber-frame operations, was intended to strengthen supply resilience and cost control.
Net debt at June 30 was £165 million, following payments to land creditors and investment in work in progress for second-half delivery. Adjusted gearing, including land creditors, was 18%. Persimmon reiterated its previous year-end net-cash guidance, although it said adjusted gearing could be around 20% at year-end.
The company declared an interim dividend of 20 pence per share and set minimum annual capital returns at 60 pence per share, currently paid entirely as dividends. It said that, over the medium term, lower remediation spending and growth could generate excess cash that may be directed toward additional investment, shareholder returns or share buybacks.
Persimmon spent £24 million on building safety remediation during the first half. It said 79% of known affected developments were either under way or completed, while 95% had been tendered. Its closing remediation provision was £206 million, down £20 million from the beginning of the year.
Management reiterated its medium-term ambition of achieving a 20% operating margin and return on capital employed, saying the target depends on volume growth, improved land margins, stronger sales mix, operating leverage and structural cost advantages rather than solely on an improving housing market.
About Persimmon (LON:PSN)
Persimmon Plc, together with its subsidiaries, operates as a house builder in the United Kingdom. The company offers family housing under the Persimmon Homes brand name; housing under the Charles Church brand name; and social housing under the Westbury Partnerships brand name. It also provides broadband services under the FibreNest brand; and timber frame, insulated wall panels, and roof cassettes under the brand Space4. Further, it offers concrete bricks and roof tile. Persimmon Plc was founded in 1972 and is headquartered in York, the United Kingdom.
