Building More, Banking Less

Half-year results for the six months ended 30 June 2026, published 6 August 2026. Persimmon reports in sterling; all per-share figures are in pence unless stated.

Persimmon builds and sells new homes in the UK. The revenue line is simple arithmetic: the number of homes legally completed in the period multiplied by the average selling price achieved on them. In this half that was 5,189 completions at an average selling price of £285,752, producing new housing revenue of £1.48bn.

Those completions split into two very different streams. Private sales — homes sold to individual buyers, this half at an average price of £310,464 — carry the higher margin. Homes built for housing association partners are sold in blocks under contract; they are useful volume and useful cash turn, but they carry lower margins. The mix between the two is the single biggest swing factor in the profit line, and this half it moved the wrong way.

On costs, the company points to structurally lower build costs, a vertically integrated platform and procurement scale as its mitigation against build cost inflation — that is, it manufactures and buys a great deal of what it puts into a house itself, rather than paying whatever the open market asks. That is the defence being relied on against the inflation the company is guiding for in 2027.

Right from the outset the company states that market conditions remain challenging, with affordability constraints and build cost pressures affecting the sector. Against that backdrop, new home completions increased by 13% to 5,189, a very good figure.

The new home average selling price was not quite so good, up 1% on the first half of last year to £285,752 per house. It's not a disaster because the figure is still up, but it doesn't exactly speak to robust upward pressure. On the private side the picture is a bit better: the private average selling price rose 2.6% to £310,464, which speaks a little more towards improvement in what they were able to sell properties for.

Persimmon — half-year results, six months to 30 June

The underlying operating margin slipped from 13.1% down to 12.8%, which is a little bit disappointing. The company puts the fall down to a higher proportion of lower-margin homes for its housing association partners, some increased incentives on private sales, and the impact of residual embedded build cost inflation together with new cost pressures in the period.

Housing association output went from 13.4% to 17.9% of total completions — 928 homes, up 50% on the year — and these houses carry lower margins. Volume and revenue have grown, but in the less profitable area of the business.

Underlying operating profit still rose 10% to £189.1m on the extra volume. The reason underlying profit before tax only increased by 3% to £170.1m — which is a bit lower than I would have hoped for, given the level of new housing revenue increases — is the finance line. The net finance charge went from −£7.1m to −£19.0m as the balance sheet swung from net cash into net debt.

Something that I don't like is that net cash slipped from a positive £123m to a −£165m — a swing of £288m. That's quite negative to me. I don't want to see the net cash position go into the negative at all. That's not very good, really.

Something also worth being aware of is that the company is giving away a significant level of dividends, yielding 5.2%. Although no one seems keen on reducing a dividend now — it's seen as a very bad sign in the market — I continue to feel that when cash is feeling this light, they really should be reducing that dividend to cover for it.

The net private sales rate for the half increased by 7% to 0.75 per outlet per week (0.64 excluding bulk sales), and in the five weeks since the period end it was running at 0.72 against 0.68 the year before. Against the rest of the sector that's a strong showing.

Net private sales rate — latest reported, by company

Latest reported rates; periods differ by company. Persimmon and Taylor Wimpey report calendar half-years, Barratt Redrow and Bellway report June and July year-ends, Crest Nicholson a half-year to April.

Persimmon sits at the top of the pack alongside Taylor Wimpey — and Taylor Wimpey's rate is falling year on year while Persimmon's is rising. Bellway and Crest Nicholson are seeing rates soften.

The private forward order book — the value of homes already reserved or contracted but not yet legally completed, so revenue that is largely already secured — is up by 5%. That is a meaningful and good amount, not stellar, but pretty good, and it is now sitting at £1.31bn.

On guidance, the company now expects around 12,500 completions for the full year, which is at the upper end of its previous guidance, with underlying profit before tax in line with market expectations (the company-compiled consensus — the average of analysts' forecasts, gathered by the company itself — is £454m).

The company is also guiding that it anticipates additional inflationary pressure in 2027, including as a result of the conflict in the Middle East, with its structurally lower build costs, vertically integrated platform and procurement scale providing mitigation that may not fully offset the impact. I don't really doubt that — it would make sense.

Three things decide this investment, and none of them are the headline completions number.

• The mix, not the volume: completions rose 13%, but housing association output rose 50% and now takes 17.9% of the total. Growth in the lower-margin stream flatters volume and dilutes margin at the same time.
• The cash line: a £288m swing into net debt is already costing £11.9m more a year in finance charges, and it is the reason profit before tax grew 3% on 10% operating profit growth. Whether that reverses, and whether the dividend is trimmed to help it reverse, is the swing factor.
• Where the sector is in its cycle: volumes are quite low compared with their historic figures, margins are weak and sales are not as good as they could be. These are factors that are not about to change particularly quickly.

I continue to believe that Persimmon is a well-run operation, which is why the marginal negativity about build cost inflation, and the real volume growth coming from housing association work, is slightly disappointing. Nonetheless, reported earnings per share did rise by 19.5%, and on this projection I would anticipate full-year profitability at around 98.2p per share for the year, an 11% uplift on last year's figure.

Taking this year's anticipated earnings of 98.2p per share with a growth rate going forward of 8%, you come up with my base level valuation of 1,288.38p — a value opportunity of +12.7% against the current share price of 1,143.50p.

Something I have mentioned before is the longer valuation I look at. I think the company could, in three years' time, be returning volumes and margin to the business at a level that I anticipate would hit a post-tax profit of £561m — at the current shares in issue, an earnings per share level of 174p. Assuming from that level onwards an average growth rate of 7%, which I think is achievable in the longer term, but discounting the result by −35% because of the length of time it's going to take to get there.

It could take another three years to reach those kinds of figures, so I give it a relatively very high risk factor at 53%, and over that period a probability of 65% that it can achieve those figures. Together these calculations give an upper valuation of 1,411.49p, which is a +23.4% value opportunity.

It is difficult to judge where the housebuilders are currently because they're very much in a lull. These results are not actually bringing me much positivity, because of the cash flow issues the company seems to be suffering, and the timescale for my expectation has shifted a little.

VALUATION SNAPSHOT

Base valuation, shown alongside for comparison: 98.2p anticipated earnings, 8% growth, 8.0× multiple, no uplift or reduction → 1,288.38p, a value opportunity of +12.7%.

• The cash position deteriorates further: net cash has already swung £288m into a £165m net debt position, and that alone added £11.9m to the annual finance charge. Another half in the same direction takes more out of profit before tax.
• The dividend is defended rather than covered: the company is giving away a significant level of dividends, yielding 5.2%, and no one seems keen on reducing a dividend now because it's seen as a very bad sign in the market. Paying it out of a light cash position is the risk.
• Build cost inflation lands harder than the mitigation: the company itself guides to additional inflationary pressure in 2027, including as a result of the conflict in the Middle East, and says its structurally lower build costs, vertical integration and procurement scale may not fully offset the impact.
• The mix keeps shifting to lower-margin work: housing association output rose from 13.4% to 17.9% of completions. If that continues, volume growth keeps translating into weaker margin rather than more profit.
• The lull persists: volumes are quite low compared with historic figures, margins are weak and sales are not as good as they could be, and these are not factors that are about to change particularly quickly.
• Time risk on the long valuation: it could take another three years to reach £561m of post-tax profit, which is why the result is discounted by 35% and carries a 53% risk factor and only a 65% probability. There's a risk factor with housebuilding in the interim period as to where it all heads.

• The balance sheet returns to net cash: I don't want to see the net cash position go into the negative at all. Getting back the other side of zero would take out both the finance charge drag and my main objection to these results.
• The dividend is rebased to cover the cash: when cash is feeling this light, they really should be reducing that dividend to cover for it. Doing so would read as discipline rather than weakness to me.
• Volume growth comes from private rather than housing association work: the same 13% completions growth, weighted to the higher-margin stream, would put the operating margin back above 13.1% and change the quality of the earnings entirely.
• The three-year path arrives sooner: the £561m post-tax profit and 174p earnings level reached faster would justify a smaller than −35% reduction and a lower than 53% risk factor, and the value opportunity moves up with it.
• 2027 cost inflation is absorbed: if the vertical integration and procurement scale do fully offset the pressure the company is flagging, the margin assumption behind the long valuation gets firmer.