3 days ago
Persimmon PLC (PSMMF) (H1 2025) Earnings Call Highlights: Strong Growth Amidst Industry Challenges
Underlying Profit Before Tax (PBT): Increased by 11%.
Outlets: Increased by 4% against industry trends.
Underlying Earnings Per Share (EPS): Increased by 3% to 36.8p.
New Home Completions: Up 4%.
Average Selling Price (ASP): Increased by 8% to GBP 284,000.
Housing Revenue: Increased by 12% to over GBP 1.3 billion.
Gross Profit: Increased by 11% to GBP 262 million.
Gross Margin: Maintained at 20.1%.
Underlying Operating Profit: Increased by 13% to GBP 172 million.
Operating Margin: Increased by 10 basis points to 13.1%.
Cash Generated Before Working Capital Movements: GBP 183 million.
Return on Capital Employed: Increased to 11.2%.
Net Cash: GBP 123 million at June end.
Building Safety Provision: Stands at GBP 208 million.
Interim Dividend: Declared at 20p, in line with last year.
Forward Order Book: Up 9%, with private orders up 11%.
Warning! GuruFocus has detected 4 Warning Signs with PSMMF.
Release Date: August 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Persimmon PLC (PSMMF) reported an 11% increase in underlying profit before tax, reflecting strong pricing and rigorous cost controls.
The company achieved a 12% increase in housing revenue, driven by a 4% growth in new home completions and an 8% rise in the average selling price.
Persimmon PLC (PSMMF) maintained a strong balance sheet with net cash of GBP123 million and a gearing ratio of about 8%.
The company's strategic investment in land has resulted in a 7% increase in owned plots with planning, supporting future growth.
Persimmon PLC (PSMMF) has retained its HBF 5-star rating and achieved an 'Excellent' rating on Trustpilot, indicating strong customer satisfaction and service quality.
Negative Points
The company faces ongoing challenges with building safety remediation, with GBP31 million spent so far this year and a total provision of GBP208 million.
Persimmon PLC (PSMMF) is experiencing cost pressures from embedded inflation, which is expected to impact margins through 2026.
The market remains constrained by affordability issues, with no significant demand stimulus expected from the government.
The company's statutory profit before tax was flat due to a GBP16 million exceptional charge related to CMA commitments.
Persimmon PLC (PSMMF) anticipates that regulatory costs and challenges in opening new sites will continue to be a drag on margins.
Q & A Highlights
Q: Can you provide more details on your price and build cost experience, particularly regarding the 5% increase in private ASP in the second half? A: Andrew Duxbury, CFO & Executive Director: We are seeing opportunities to push prices, especially in the North and Scotland, while affordability remains a challenge in the South. We don't forecast ASP growth, but the order book shows robust ASPs. Build cost inflation remains low single digits, as expected. Over time, this inflation will diminish, particularly beyond 2026, as it gradually tapers off.
Q: Could you elaborate on the recent trading environment and your outlook for FY26? A: Dean Finch, CEO & Executive Director: Trading has been good, with a temporary decline in May that quickly rebounded. Pricing has remained robust, and our product quality is strong, particularly with Charles Church. For FY26, we are not expecting significant market changes and are focusing on self-help measures to drive growth.
Q: What are the main drivers of the cost inflation you've experienced since COVID, and what are your plans for capital allocation after completing building safety work? A: Andrew Duxbury, CFO & Executive Director: Cost inflation was driven by energy spikes and material pricing, with inflation running in double digits. This led to a margin squeeze as house price inflation did not match cost increases. Regarding capital allocation, once building safety work is complete, we will have GBP100 million annually to consider for business growth or shareholder returns.
Q: Can you provide more insight into the Charles Church brand and its margin potential? A: Dean Finch, CEO & Executive Director: Charles Church focuses on the affordable premium segment, offering larger products with higher ASPs. By selecting the right markets, we see strong demand and are achieving higher margins. The brand's growth is supported by its appeal to downsizers and its competitive positioning against secondhand markets.
Q: How are you managing the adoption of new construction technologies like the Mauer product and timber frame? A: Andrew Duxbury, CFO & Executive Director: The Mauer product is still in early trials, but it offers potential for faster and more resource-efficient construction. Timber frame adoption is expanding across regions, with positive feedback from teams. The improved quality of timber frame products is helping overcome legacy concerns, and we are seeing increased adoption.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
