York-based house building giant Persimmon plc said it expects 2024 underlying profit before tax to be “around the upper end of market expectations” as it published a trading update ahead of its final results, which will be released on March 11, 2025.
The company’s shares rose as much as 5% in morning trading in London.
Persimmon said it delivered a total of 10,664 homes in 2024, up 7% year-on-year, ahead of market expectations. This growth was driven by an 18% increase in private home completions to 9,075, with 1,589 partnership homes delivered in the period (2023: 2,241).
The company’s private average selling price was slightly ahead of the prior year at £287,150 (2023: £285,774). Partnerships average selling price increased by 6% to £161,900, resulting in a 5% increase in the blended average selling price to £268,500.
“We expect full-year underlying profit before tax for 2024 to be around the upper end of market expectations (£349m to £390m) with underlying operating margins similar to last year, in line with previous guidance,” said Persimmon.
“Our forward sales position has increased by 8% to £1.15bn compared to the prior year (31 December 2023: £1.06bn), showing the value of our three strong brands (Persimmon Homes, Charles Church and Westbury Partnerships).
“Of this £653m relates to private forward sales (31 December 2023: £499m), up 31% including bulk sales (+16% excluding bulk sales), with a private average selling price of c.£276,850 (31 December 2023: c.£266,100).”
In its outlook, Persimmon said: “We are pleased with the progress we have made in developing our capabilities and we entered 2025 with an improved forward order book and strong land bank. Our Boxing Day campaign has started well driving strong levels of enquiries and visitors to our website.
“However, we are mindful of evolving macroeconomic and geopolitical uncertainties, including the timing of future interest rate changes, and the effect that they may have on our market and consumer confidence in the short-term.
“The strength of our land bank and our focus on cost control and efficiency continue to differentiate the business as we manage sector-wide challenges, including expected low single digit build cost inflation, the effects of the national insurance increase and regulatory changes such as to stamp duty and the proposed Building Safety Levy.
“The ongoing investment we have made in our unique vertical integration model helps us to manage these cost pressures and provides security of supply.
“The disciplined investment that we have made in land and effective management of the planning system is seen in our increasing outlet base, which grew by 5% at the start of the year compared to the previous year. The government’s welcome changes to the National Planning Policy Framework, while likely to take some time to fully make a difference, further support our medium-term ambition to expand our outlet base to over 300.
“Overall, Persimmon is well positioned for 2025 and will continue to deliver high-quality affordable homes for our customers.”
Persimmon CEO Dean Finch said: “We performed well through 2024 delivering 7% growth in completions, ahead of market expectations.
“We expect to report an underlying operating margin in line with the prior year, as previously guided, with 2024 underlying profit before tax expected to be around the upper end of market expectations.
“Customer enquiries and sales rates have been consistently ahead of the prior year since the spring selling season.
“Persimmon has worked hard and is well positioned for the future, supported by the land and planning investment we have made in recent years, our vertical integration capabilities and our excellent teams. This investment, coupled with the government’s ambitious planning reforms which demand more of the high-quality, affordable homes which are Persimmon’s core strength, supports our growth ambitions in the medium-term.”
REACTION:
Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club: “Persimmon delivered on its promises to shareholders in 2024, growing new home completions above expectations and keeping a tight rein on costs. As a result it expects profit to come in at the top end of its expectations.
“Demand for new homes has held up reasonably well, aided by lower mortgage costs, and Persimmon enters 2025 with an improved order book. However, the outlook for the housing market has become increasingly uncertain.
“The recent spike in bond yields on the back of the Autumn Budget suggests interest rates will not come down as much as previously hoped. The script has changed. As a result, mortgage rates seem likely to rise in the coming months, spelling more bad news for first time buyers.
“With low single digit cost inflation expected for housebuilders in 2025, they cannot afford house prices to go into reverse. But the odds of that happening have increased since the Autumn Budget. This leaves the housing market precariously positioned as we begin the new year.”
Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “Persimmon’s 2024 trading round-up showed it’s sitting on solid ground, despite the group having faced its fair share of struggles in recent years. From their peak, both volumes and operating margins have fallen much harder than the broader sector.
“But Persimmon looks to have turned a corner. New home completions and average selling prices both exceeded market expectations, up around 7% and 5% respectively last year, as buyer demand was consistently higher throughout 2024. That’s given the group a solid platform to build on over the rest of 2025.
“Looking ahead, the order book is in a healthy position at an impressive £1.1bn, giving decent near-term revenue visibility. The potential of rising build cost inflation had been an area of concern heading into these results, but the low single-digit outlook for 2025 is a challenge that Persimmon should be able to navigate with ease. Its in-house materials business is a key differentiator from peers and should offer the necessary protection from this.
“Despite all the positive news, recent macroeconomic and geopolitical uncertainties haven’t been favourable. The timing of future interest rate changes and the impact they may have on consumer confidence could have a big impact on how quickly a recovery in the housing market materialises. But with a large land bank, low average selling prices and the valuation sitting some way below its long-run average, this could mark an opportunity for long-term investors.”