Persimmon delivered a strong performance in the first half of 2017.
The Group continued to successfully execute its long term strategic plan, concentrating on delivering disciplined high quality growth.
The new build housing market performed well during the period, supported by resilient consumer confidence and support from a competitive but disciplined mortgage market. Total revenues for the period increased by 12% to £1.66 billion (2016: £1.49 billion). The Group delivered 7,794 homes to customers across the UK during the first half of 2017, an increase of 8% on 2016. These homes had an average selling price of £213,262 (2016: £205,762). During the first half of 2017 profit before tax increased by 30% to £457.4 million (2016: £352.3 million) and cash balances of £1,120.4 million were held at 30 June 2017 (2016: £462.0 million).
The Group’s underlying operating margin* improved by 380bps to 27.6% in the six months to 30 June 2017 (2016: 23.8%). This is the result of our continuous drive to invest in high quality land, opening up these new sites as promptly as possible and growing our regional businesses’ build and sales delivery whilst exercising strong control over our costs.
The Group’s return on average capital employed** for the first half of 2017 increased by 33% to 47.3% (2016: 35.6%) and basic earnings per share increased by 30% to 119.5p (2016: 92.0p).
Persimmon’s long term strategy is to sustain the delivery of superior shareholder value and cash generation through the housing cycle. This value will accrue by growing the business to optimal scale whilst exercising disciplined well-judged capital investment at the right time through the cycle. The Group’s strategy prioritises cash efficiency and capital discipline through the cycle. As a result our liquidity remains strong and net free cash generation (before Capital Return Plan payments) was £284.5 million in the six months ended 30 June 2017 (2016: £229.9 million). In the same period the Group also invested £369 million in land, acquiring 9,319 new plots of land, including 3,308 plots converted from our strategic land bank.
During the first half of 2017 the Group returned 25p per share of surplus capital to shareholders and subsequently returned a further £1.10 per share on 3 July 2017. To date, total surplus capital of £4.85 per share has been returned to shareholders under the Group’s Capital Return Plan. The remaining Capital Return is scheduled to be paid in equal installments of £1.10 per share over the next four years to 2021.
In recent years we have opened five new housebuilding businesses to support the growth of the Group. Our most recent business, Persimmon Homes Nottinghamshire based in Mansfield, opened in January 2017 and has made a good start to trading by delivering 170 new homes in the first half of 2017. The Group now has 29 regional businesses delivering new homes across the UK.
We aim to maintain the sustainable growth of the business and will increase build activity to reach our optimal scale in each of our regional markets. We will continue to invest in the management of our build programmes and improve the availability of newly built homes for our customers. We anticipate our cash generation will remain strong.
* stated before goodwill impairment
** 12 month rolling average stated before goodwill impairment