• Morningstar Rating: ★★★★★
• Economic Moat: None
• Morningstar Uncertainly Rating: High
What We Thought of Persimmon’s Earnings
Persimmon’s PSN full-year results came in slightly above market expectations, building on the positive trading update in January. With 2025 guidance largely in line with our expectations, including completions guidance of GBX11,000-GBX11,500 versus our GBX11,300 forecast, our fair value estimate and moat rating are unchanged.
After announcing in January that weekly private sales for 2024—a closely watched metric by investors—improved to 0.7 per active outlet, up from 0.58 in 2023, management indicated a strong start to 2025. Through the first nine weeks of 2025, Persimmon’s net private sales rate per outlet per week was 0.67 compared with 0.59 in the same period in 2024, a 14% increase. Furthermore, the private average selling price is 3% higher and the forward order book is 27% higher than 2024.
Near-term margin pressures such as inflation and regulation remain concerns. Management noted that inflation from 2022 and 2023 weighed on 2024 margins, even as inflation was much lower during the year. It expects to keep build cost inflation in the low single digits in 2025.
Meanwhile, margins should benefit over time from the development of more recently acquired land and by leveraging their integrated model, as in the case of making their bricks. It reaffirmed its medium-term 20% operating margin target on the assumption that these efforts pay off and that home and land prices eventually reflect regulatory costs and inflation.
Although both could remain headwinds in the near term, it is leaving underlying operating margin guidance of 14.2%-14.5%, implying only a modest improvement from 14.1% in 2024. Our fair value assumes operating margins steadily approaching 20% during our 10-year explicit forecast.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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