Persimmon delivered a strong performance in 2016.
The Group continued to execute its long term strategic plan, concentrating on delivering disciplined high quality growth.
The new build housing market experienced continued recovery in industry output during 2016, supported by good levels of consumer confidence and strong support from a disciplined mortgage market. Total revenues increased by 8% year on year to £3,136.8 million (2015: £2,901.7 million). The Group delivered 15,171 homes to customers across the UK, an increase of 599 on 2015. The Group’s average selling price of £206,765 was 3.8% higher (2015: £199,127). Underlying profit before tax* increased by 23% to £782.8 million (2015: £637.8 million), underlying operating margin* improved a further 290bps to 24.8% (2015: 21.9%) and cash balances of £913.0 million were held at the end of the year (2015: £570.4 million).
Key to supporting the Group’s strategy to deliver disciplined high quality growth is opening new development sites swiftly following receipt of an implementable planning consent and then progressing a build programme to secure rates of new home construction to meet market demand. The Group opened 255 new sales outlets during 2016 (2015: 252). Legal completions from these sites supported a further improvement in gross margins.
The Group’s underlying return on average capital employed** improved year on year by 23% to 39.4% (2015: 32.1%) and underlying basic earnings per share* of 205.6 pence increased by 19% over the prior year (2015: 173.0 pence).
Persimmon’s long term strategy is to sustain the delivery of superior shareholder value 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 we generated £681 million of free cash before capital returns during the year (2015: £483 million) whilst also acquiring 18,709 plots of new land across 86 high quality locations. Our strategic land portfolio contributed 11,268 plots in 41 locations to this total.
Over the last two years we have opened five new housebuilding businesses to support the growth of the Group taking advantage of market share opportunities to do so. Having completed the first five years of the plan, Group operational performance is well ahead of our original expectations.
In February 2016 we increased our Capital Return commitment to our shareholders by 45% to £2.76 billion, or £9.00 per share, to be paid over the ten year period to June 2021. On 1 April 2016 the Group paid the fourth instalment under the Capital Return Plan of 110 pence per share, or £338 million, bringing the total returned to date to £1,071 million, c. £550 million more than was originally planned by that date.
The Board has completed its review of the availability of surplus capital of the Group and is pleased to announce a further increase in the Capital Return Plan of 25 pence per share to be paid on 31 March 2017. This additional payment of surplus capital will be a first interim dividend in respect of the year ended 31 December 2016 paid to shareholders on the register on 10 March 2017. In addition, the Board is pleased to confirm the scheduled payment of 110 pence per share will be made on 3 July 2017 as a second interim dividend with respect to the financial year ended 31 December 2016, to shareholders on the register on 16 June 2017.
As a result the Capital Return Plan to 2021 has now been increased by 49% to £9.25 per share.
* stated before goodwill impairment (2016: £8.0m, 2015:£8.3m)
** 12 month rolling average stated before goodwill impairment