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Persimmon unveils bumper three-year dividend package
Housebuilder Persimmon pledged to pay out double its previously promised surplus cash via bumper dividends over this and the next two years as it reported profits growth and encouraging recent sales.
Legal completions of new homes during 2017 increased 5% to 16,043 and the FTSE 100 company's average selling price increased 3.2% to £213,321.
With an 18% increase in cash generation to £806m that swelled net cash to £1.3bn at 31 December, up from £913m a year before, Persimmon announced it will make three additional capital return payments of 125p per share in 2018, 2019 and 2020. These new additional returns will be paid as an interim dividend in late March or early April each year.
The first 125p payment will be made on 29 March as an interim dividend for 2017, on top of the scheduled final dividend of 110p per share on 2 July 2018. All in all, the total value of the capital return plan should therefore rise to £4.1bn or £13.00 per share, more than double the original plan value of £6.20.
On revenue up 9% to £3.42bn, profits were boosted by operating margin widening significantly to 28.2% from 24.8% and to 28.8% in the second half, enabling a 25% increase in underlying profit before tax to £977.1m. Underlying basic earnings per share jumped 26% to 258.6p.
In the first eight weeks of the 2018 spring season, the company has seen "encouraging levels of customer activity" and a private sales rate per site 7% higher than last year. Current total forward sales, including legal completions taken so far in 2018, are £2.03bn, 7.5% ahead of the previous year.
The average selling price of private sales is £234,106, 2.0% higher than at the same point last year, and pricing conditions were said to "remain firm".
Persimmon, which acquired 17,301 plots of land acquired in the year, with 8,296 plots successfully converted from its strategic land portfolio, said it was "well placed to deliver a further increase in new home construction across the UK in 2018 where the local planning environment allows" and had been "focused on making an early start on as many new development sites as possible" in 2018.
Directors acknowledged the continued constraint on the availability of skilled trade resources and some key materials but said it continued to take what action it can in-house. This included making first deliveries from its own brick manufacturing plant at Harworth, near Doncaster during the year and the decision has also been taken to add a new roof tile plant during 2018 that should begin suppling its building projects in 2019.
The Space4 timber frame construction technology made "an important contribution" to expanding in-house manufacturing capabilities and further investment will be made in the technology in coming years. Investment will also be increased skills, though it can take three to five years for trade trainees to acquire the required high standard of construction skills.
Management also pointed to "increased uncertainties" associated with the government's ongoing implementation of Brexit, but that the housing market was being supported by mortgage offers that remain attractive.