Persimmon delivered a robust performance in the first half of 2018.
The Group continued to successfully execute its long term strategic plan, concentrating on delivering disciplined high quality growth. We delivered 8,072 new homes to customers across the UK, an increase of 278 new homes compared to last year. These homes had an average selling price of £215,813 (2017: £213,262). To further support the sustainable growth of the Group we opened our new Suffolk business based near Ipswich at the start of the year. The Group now has 30 regional businesses delivering newly built homes to customers right across the UK.
Trading through the first six months of the year was strong. Total Group revenues increased by 5% over the prior year to £1,835.8 million (2017: £1,753.5 million), with new housing revenues increasing by 5% to £1,742.0 million (2017: £1,662.2 million). With the Group’s growth in sales, total gross profits have increased 11% year on year to £565.1 million (2017: £507.3 million).
The Group’s underlying new housing operating margin* of 29.7% was 210 basis points ahead of last year (2017: 27.6%). Against the second half of last year our underlying new housing operating margin* progressed by 90 basis points reflecting continued tight control of costs and strong operational leverage.
The Group’s underlying return on average capital employed** improved year on year by 14% to 53.8% (2017: 47.3%) and underlying basic earnings per share* for the first six months of 2018 of 136.3 pence increased by 12% over the prior year (2017: 121.2 pence).
With the ongoing expansion of industry output, pressures in the supply chain with respect to cost and availability of certain materials have continued. The availability of traditional skilled trades also remains tight. The Group continues to take steps to better support its build programmes and is managing to contain the inflationary pressures in the supply chain well. The increased utilisation of the Group’s standard house types, the increasing use of the Group’s in-house manufactured brick and improving direct overhead efficiency as each regional business grows to its optimal scale, are all supporting cost efficiencies. A key feature of the Group’s strategy launched in early 2012 is to return capital that is considered surplus to the reinvestment needs of the business back to shareholders through the cycle. Total surplus capital of £7.20 per share, or c. £2.2 billion, has now been paid to shareholders. The further scheduled return of capital of £5.80 per share is planned to be paid over the next three years to 2021.
From the launch of our long-term strategy at the start of 2012 to 30 June 2018 the Group has delivered c. 88,800 new homes across the UK, increasing the number of new homes delivered to customers by over 70%. We have also invested c. £3.5 billion in new land and opened 1,285 new sales outlets whilst returning a total of c. £2.2 billion of surplus capital to shareholders, £1.4 billion more than was originally planned by this point.
The financial strength of the Group, resulting from the successful execution of the Group’s strategy over recent years, places Persimmon in a strong position to adapt to changes in market conditions and to take advantage of opportunities as events unfold. We remain vigilant with respect to the risks that the Group faces and we will continue to concentrate on delivering the best possible outcomes for shareholders and the Group’s other stakeholders.
* stated before goodwill impairment
** 12 month rolling average stated before goodwill impairment