Persimmon builds up margins

Persimmon’s operating margin rose 380 basis points to 27.6 per cent, thanks to better cost management and continued investment in high-quality land. The improved performance was also reflected in a 47.3 per cent return on average capital employed, against 35.6 per cent in the corresponding period in 2016. Net cash flow at £207m reversed from an outflow at the 2016 half year, leaving net cash at £1.1bn (up from £462m), bolstering the capital return plan. In total, the group has paid around £1.5bn to shareholders since the plan’s inception in 2012. Persimmon aims to return “at least” 110p per share every July until 2021, delivering “superior levels of shareholder value and cash generation” throughout the housing cycle.

The payment plan’s end coincides with that of the government’s 'help to buy' (HTB) scheme. Mr Killoran notes that HTB “has cross-party support”; he expects it to continue through to 2021 and “possibly beyond”. Housebuilders argue that without a replacement scheme, first-time buyers could struggle to afford a home.

Persimmon had detailed planning consent for just over half of the 98,712 plots in its consented land bank as at 30 June. That said, its planning teams are working with local authorities to accelerate bringing land through the planning system. And in keeping with the National Planning Policy Framework requiring local authorities to meet housing needs five years ahead, the group continues to invest in land plots for the future.

Management has focused on preventing overlap between its private sales brands, Persimmon and Charles Church. Mr Killoran notes Charles Church is now more of an “executive housebuilder” for larger house types. Both brands increased their sales prices, Charles Church by 9.4 per cent to £347,819.

Analysts at Peel Hunt give adjusted pre-tax profit of £994m, leading to EPS of 261p for the full year, against £783m and 206p in 2016.