The Group delivered a robust trading performance in the first half of 2016
Persimmon’s results for the first six months of 2016 reflect robust revenue growth, further improvement in operating profitability, excellent free cash generation, and a very strong balance sheet.
Market conditions through the first half of 2016 were positive. The Group increased total revenues by 12% year on year to £1,489.3 million (2015: £1,332.5 million). Sales volumes increased by 6% to 7,238 new home legal completions (2015: 6,855) with an average selling price 6% higher at £205,762 (2015: £194,378). Profit before tax increased by 29% to £352.3 million (2015: £272.8 million), underlying operating margin* improved a further 330bps to 23.8% (2015: 20.5%) and cash balances of £462.0 million were held at the end of June (2015: £278.0 million).
Average selling prices have increased year on year for both the Group’s private sale brands. The average Persimmon price rose by 6% to £206,334 and for Charles Church by 16% to £317,827. The increase in Charles Church average pricing reflects the continued focus on delivering higher value new homes in premium locations.
The Group’s strategy of controlled profitable growth is supported by well-judged investment in high quality replacement land. Our priority is to maximise the value of our developments for customers, shareholders and other stakeholders, by delivering a sustainable mix of new homes in attractive locations across the UK in increasing numbers, as markets allow.
The Group’s underlying return on average capital employed** improved year on year by 29% to 35.6% (2015: 27.5%) and underlying basic earnings per share* for the first six months of 2016 of 93.3 pence increased by 19% over the prior year (2015: 78.6 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. Strong cash generation is the essential ingredient enabling shareholders to receive capital that is considered surplus to the reinvestment needs of the business. 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.
In line with the disciplines of our strategic objectives we have been increasingly selective in acquiring new land through the first half of the year. The Group acquired a total of 7,108 new plots of land across 38 sites including 2,856 plots converted from our strategic land bank in 15 locations. In addition, we added c. 550 acres of land to our strategic land portfolio which totalled c.17,500 acres at 30 June 2016.
The Group owned and controlled 93,519 plots in its consented land bank at 30 June 2016 (June 2015: 92,404 plots) with c. 45% previously held by the Group as strategic land.
* stated before goodwill impairment (2016:£4.0m, 2015:£3.8m)
** 12 month rolling average stated before goodwill impairment