Shares in housebuilder Persimmon (PSN) rallied 10% to £13.48 after the company confirmed FY26 earnings would meet expectations. The firm’s shares had dropped over 20% in the two weeks leading up to today’s announcement.
Positive guidance
The company said current market conditions were ‘supportive’ for the new-build market, with real wage growth and increased mortgage availability. In the first nine weeks of FY26, net private weekly sales per outlet rose 9% to 0.73 units.
In addition, the average private selling price rose 6%, so the forward order book at 1 March was 9% higher £1.25 billion. Total forward sales as of 1 March were up 6% to £1.8 billion.
While visibility is limited, the firm hopes to deliver between 12,000 and 12,500 completions this year. However, all forecasts are based on the Middle East conflict and its impact being short-lived.
In that scenario, FY underlying pre-tax profit is seen in line with forecasts while operating profit may be towards the top of the range. The current consensus is for pre-tax profit of £470 million and an operating profit of £486 million to £517 million.
‘Strong platform for growth’
For FY25, Persimmon reported a 12% increase in completions to 11,905 units and a 16% increase in revenue to £3.3 billion. Average prices rose 4% to £278,200 while build cost inflation was stable and is expected to remain flat this year.
Underlying operating profit increased 17% to £472 million, with a margin of 14.3% against 14.1% previously. However, total cash was down £142 million to £117 million due partly to higher remediation and interest charges.
CEO Dean Finch said demand remained good from the BTR (buy-to-rent) sector despite a generally ‘challenging’ market. The firm’s brands, land bank and operational improvements ‘position Persimmon well to grow into the medium term’ added Finch.
After a 20% sell-off leading up to today’s results, there was always a good chance the shares would bounce. Guiding to the top of the range for operating profit is never a bad thing, either.
Much still depends on the macro environment, however, and whether buyer confidence holds up. While energy prices have reversed some of their gains, consumer prices are still likely to rise which will delay rate cuts.
We note with interest the substantial drop in year-end cash and the flat dividend for FY25. Moreover, there is no hint of a buyback as the priority is to allocate cash to growing the business and paying remediation costs.
Read the press release here: https://www.persimmonhomes.com/corporate/investors/
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