Persimmon lifts 2026 home completion target, warns costs could push back margin targets

By Raechel Thankam Job

Aug 6 (Reuters) - British homebuilder Persimmon forecast annual home completions at the top end of its previously stated range, but cautioned that rising Iran-war driven costs could hit margins next year and delay when it reaches medium-term margin targets.

Shares of the FTSE 100 company rose more than 4% on Thursday after it forecast around 12,500 home completions for 2026, with underlying pretax profit in line with market expectations of £454 million ($611 million).

Britain's housing market, already grappling with easing demand, elevated mortgage rates and high inflation, now also faces the rising cost of building materials as energy prices soar because of the Iran war

COST PRESSURES

Reaching Persimmon's medium-term target of a 20% operating margin would be "a big leap", CEO Dean Finch told analysts as macroeconomic pressures could delay the timeline, but he remained confident in the goal.

"I think the strategy we're delivering is working. It's delivering growth," he said.

Persimmon's in-house manufacturing of bricks, roof tiles and timber frames has helped the company, but it warned of an estimated impact of between £40 million and £50 million over the next 18 months from increased inflation.

However, it said it had already identified savings to cover at least half of that hit.

BUCKING SECTOR CAUTION

JPMorgan analyst Zain Beekawa said Persimmon's guidance upgrade should reassure investors at a time when some rivals have cut completions targets.

Unlike Taylor Wimpey and Barratt Redrow, which have scaled back land buying targets, Persimmon has continued to invest in new sites selectively.

"Housebuilders are operating in one of the most challenging markets in recent history, and Persimmon is navigating it well," Quilter analyst Oli Creasey said.

Persimmon's shares have fallen almost 16% so far this year, while Taylor Wimpey has lost nearly 23% and Barratt Redrow 17%.

Persimmon said underlying pretax profit rose 3% to £170.1 million for the six months ended June 30, with completions rising 13% to 5,189 units.

However, Persimmon said buyer enquiries softened in July and open-market sales, excluding bulk deals, slipped below year-ago levels in the five weeks to early August.

($1 = 0.7431 pounds)

(Reporting by Raechel Thankam Job in Bengaluru; Editing by Clarence Fernandez and David Holmes)