Improving the quality and service delivered to our customers remains our top priority.
Delivering a good quality new home for our customers and providing high levels of customer service throughout the home buying process is the top priority for the business. The Group is investing in a number of initiatives in its drive to increase customer service levels, including providing customers with more accurate moving in dates. We have continued to adopt a more focused approach to the timing of releasing new homes for sale in higher demand areas, both on selected new sites and for some plots on existing sites.
To complement our approach with respect to later sales release we have continued to make progress with our build programmes in order to provide customers with improved availability of new homes at more advanced stages of construction, with an additional £142m invested in work in progress. This commitment to greater investment in work in progress resulted in the Group having the equivalent of c. 6,150 new homes of construction inventory at 30 June, an increase of 19% than at the same point last year. Indeed, to further support our drive for continued improvement in build quality, we are introducing an additional team of construction quality inspectors who will work independently of our site management teams to ensure the homes built for our customers are of the high quality standard we require.
In July we introduced the industry leading Persimmon retention scheme for our customers. Listening to feedback from our stakeholders we have improved its design to cover any faults identified by our customers up to a week after moving into their new home.
From the launch of our long-term strategy at the start of 2012 to 30 June 2019 the Group has delivered c. 104,800 new homes across the UK. Over the same period the Group has invested c. £2.5 billion in local communities including the delivery of over 17,900 new homes for lower income families to our housing association partners. The Group’s investment of c. £4.0 billion in new land and the opening of c. 1,450 new outlets since the start of 2012 demonstrates our continuing commitment to delivering the new homes that local communities need across the UK.
Persimmon’s results for the first half of 2019 reflect the strength of the Group’s positioning in a resilient UK housing market. Profit before tax was £509.3 million (2018: £516.3 million) with an underlying new housing operating margin1 of 31.0% (2018: 29.7%). The Group has continued to invest in work in progress of £1,024.0 million (2018: £749.6 million) to support improvement in customer satisfaction levels and future new home delivery. Cash balances of £832.8 million were held at the end of June (December 2018: £1,048.1 million) and the owned and controlled land holdings totalled 95,086 plots (December 2018: 99,088 plots).
The Group’s total revenues for the first half of the year were £1,754.0 million (2018: £1,835.8 million), with new housing revenues of £1,645.3 million (2018: £1,742.0 million) being 5.6% lower than last year. The Group sold 7,584 new homes in the first half (2018: 8,072) at an average selling price of £216,942 (2018: £215,813).
The Group remains focused on building good quality homes at a range of prices offering customers great choice and has experienced good demand across the regions. Sales to private owner occupiers in the first six months totalled 5,963 new homes (2018: 6,577), a reduction of 614 homes, whilst sales to our housing association partners were 1,621 new homes (2018: 1,495), an increase of 126 homes. The average selling price of the Group’s private market sales was £242,912 (2018: £238,773), an increase of 1.7%. Of the Group’s total private sales of 5,963 homes, 56% were sold across our northern businesses (2018: 53%). The Group delivered over £196 million of new homes to housing associations in the first half (2018: £172 million) at an average selling price of £121,413 (2018: £114,807) providing continued strong support to the creation of mixed and sustainable communities across the UK, which represented 21% of the Group’s total sales (2018: 19%). The volume of sales achieved by the Persimmon brand was 5,470 homes (2018: 5,808). Charles Church achieved 493 home sales (2018: 769).
The Group’s total gross margin for the first half was 31.7% (2018: 30.8%), with our new housing gross margin at 33.8%2 (2018: 32.4%). The level of new housing gross margin in the first half reflects the ongoing investment being made in the Group’s customer care resources and processes which has contributed to the reduction in housing gross margin from 34.1% in the second half of last year. The Group’s customer care spend in the first half of the year increased by c. 40% over last year, reflecting this investment. The Group’s margins are supported by its high quality consented land holdings with land cost recoveries in the first half of 13.9% of housing revenues (2018: 15.0%). At 30 June the Group’s cost to revenue ratio3 for its owned land holdings of 75,444 plots was 13.1%. The Group’s continued investment in its customer satisfaction improvement initiatives, including the construction quality inspection team, will place the business in a strong position moving forwards. The Group’s total gross profit for the first half was £555.5 million (2018: £565.1 million).
Underlying operating profit1 for the Group was 1.6% lower than last year at £510.1 million (2018: £518.2 million). The Group’s underlying new housing operating margin1 of 31.0% was 130 basis points ahead of last year (2018: 29.7%).
The Group generated 122.9 pence of total capital value (before capital returns)4 in the first six months of the year (2018: 118.2 pence). Total capital returns of 235 pence per share recognised in the period resulted in a decrease in reported net assets per share at 30 June of 115.2 pence to 890.8 pence from 1,006.0 pence at 31 December 2018. Underlying return on average capital employed5 as at 30 June was 40.5% (2018: 41.7%). Underlying basic earnings per share1 for the first six months of 2019 of 130.6 pence reduced by 4.2% compared to the prior year (2018: 136.3 pence). Return on equity6 was 31.0% for the twelve month period to June 2019 (June 2018: 30.2%).
The Group’s balance sheet is strong. At 30 June the Group held cash reserves of £832.8 million (December 2018: £1,048.1 million) reflecting further investment in work in progress carried at £1,024.0 million (December 2018: £881.8 million) and a reduction in land creditors to £484.0 million (December 2018: £548.0 million). In March we concluded the renewal of the Group’s £300 million Revolving Credit Facility with strong support from the Group’s five relationship banks. This facility has a five year term to 31 March 2024 and forms an important element in the Group’s working capital resources and flexibility.
The Group owned and controlled 95,086 plots in its consented land holdings at 30 June 2019 (December 2018: 99,088 plots) with c. 50% previously held by the Group as strategic land. Within these land holdings, the Group owned 46,775 plots on sites with detailed planning consent, which are all under development. In addition to its consented land the Group owns and controls c. 15,950 acres of strategic land including a number of allocated sites. We continue to work in collaboration with planning authorities and local communities to help bring these sites through the planning system as quickly as possible.
1 Stated before goodwill impairment (2019: £4.1m, 2018: £4.4m)
2 Stated on new housing revenues of £1,645.3m (2018: £1,742.0m) and gross profits of £555.5m (2018: £565.1m)
3 Land cost value for the plot divided by the anticipated future revenue of the new home sold
4 Movement in total equity before dividends on equity shares divided by the average number of shares in issue during the period
5 12 month rolling average stated before goodwill impairment and includes land creditors
6 12 month rolling profit after tax generated from the average of the opening and closing total equity for the 12 month period