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Interim Results

Persimmon pre-tax profit increases

22 August 2017 07:23

Persimmon said profit before tax increased 30% to £457.4m (2016: £352.3m) in the first half of 2017.

HIGHLIGHTS:

- Revenue up 12% to £1.66bn (2016: £1.49bn)

- Legal completions increased 8% to 7,794 (2016: 7,238) - an additional 556 new homes delivered

- Average selling price of £213,262 up 4% (2016: £205,762)

- Further expansion of underlying operating margin to 27.6% (2016: 23.8%), an increase of 380bps

- Return on average capital employed increased by 33% to 47.3% (2016: 35.6%)

- 9,319 plots of new land secured in the period bringing consented land bank to 98,712 plots

- Continued success in securing planning consent for the Group's strategic land bank with 3,308 plots converted in the period, 35% of the new plots acquired

Net free cash generation of £284.5m in the period (2016: £229.9m)

- Net cash of £1,120.4m at 30 June 2017 (2016: £462.0m), prior to £339.5m capital return paid on 3 July 2017

- Basic earnings per share increased 30% to 119.5p (2016: 92p)

- Current forward sales 15% ahead at £2.005bn (2016: £1.747bn)

- Return of surplus capital under the Capital Return Plan of 25p per share (£77.1m) paid 31 March 2017 in addition to the scheduled payment of 110p per share (£339.5m) paid after the balance sheet date on 3 July 2017

- Commitment to return surplus capital of at least 110p per share to shareholders each July until 2021

OUTLOOK

The housing market across our regions remains confident and consumer sentiment is resilient.

The potential headwinds of higher inflation are being mitigated by healthy employment levels and a competitive but disciplined mortgage market.

Customers are finding good levels of support from mortgage lenders who have approved c.195,000 loans during the second quarter of 2017, a very similar level compared with the same period last year despite the heightened uncertainties associated with the result of the recent UK General Election.

With our extensive network of sales outlets across the UK offering attractive house types at affordable prices, we expect to see the normal seasonal increase in sales interest from customers as the summer holidays come to an end in early September.

Since 30 June we have opened 22 new outlets for sales whilst 42 existing outlets have fully sold through. We plan to open a further c. 80 new outlets through to the end of the year, including the 25 outlets where we are already pushing forward with our build programmes and which will commence sales release in early September.

The group's current 355 active outlets will be added to as these 25 outlets are released for sale over the next few weeks (2016: 375 active outlets).

We will continue to invest in bringing new land into production promptly to expand the group's outlet network to offer new homes to as many local communities as possible.

We look forward to engaging with the government on its Housing White Paper consultation process over the coming months, specifically in relation to planning improvements.

Management are aiming 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.

Persimmon's performance over the first half of 2017 has been excellent. By focussing on the consistent execution of our strategy over recent years, the group is in an enviable position to adapt to changing market conditions and to take advantage of market opportunities as events unfold.

We remain mindful of the risks the group faces. We will continue to concentrate on delivering the best possible outcomes for our shareholders based upon maximising the cash efficiency of the business and continuing to invest in the group's high quality land bank.

CEO Jeff Fairburn said: "The successful execution of the Group's long term strategy continues to support excellent trading results as seen again in the first half of 2017.

"Our focus on meeting market demand to deliver high quality sustainable growth in each of our 29 regional businesses is delivering excellent outcomes for our customers, our shareholders, and all our stakeholders."

"The market remains confident. Customer interest in our developments remains strong with encouraging levels of interest through both our websites and our sales outlets as we trade through the quieter summer weeks.

"Our private reservation rate over recent weeks is c.2% ahead year on year.

"Whilst we remain vigilant to changes in market conditions we also recognise we are in a strong position to take advantage of opportunities that arise. We are looking forward to a good autumn sales season.

"With a high quality land bank, very strong balance sheet and excellent forward sales the Group has built a platform for its future success."

Story provided by StockMarketWire.com

Related Company: PSN

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