Housebuilder Persimmon has revealed it saw a profit growth as the number of house completions also rose four per cent
There is good news for housebuilder Persimmon. The firm said it managed to increase the number of house completions by four per cent last year and deliver a rise in pre-tax profits.
This will undoubtedly be welcome news for the sector. Earlier this month Barratt Developments also revealed it had seen profits grow, although completions dropped. The firm saw an 8.8 per cent increase in the six months to 31 December 2016.
Furthermore, a recent analysis from Barbour ABI suggested housebuilding has dominated construction activity since the start of the year. With new contracts increasing to £6bn it appears the sector is thriving.
Persimmon is the latest housebuilder to benefit from the buoyant market. The firm said the strong housing market had seen its operating margins expand.
Profits increased
The firm said revenue during 2016 increased by eight per cent, hitting £3.14bn compared to the previous year. This lead to a 23 per cent growth in pre-tax profits to £782.8m and a 19 per cent increase in underlying basic earnings per share to 205.6p.
There was also an increase in the operation margin, which hit 25.7 per cent, while the average capital employed grew to 39.4 per cent—up from 32.1 per cent.
At the end of 2016, the housebuilder said it had a net cash of £913m. This was up from the previous year’s figure of £570.4m.
Chairman Nicholas Wrigley said: “The group has now completed the first five years of its long term strategy which remains focused on growing Persimmon into a stronger, larger business while maintaining capital discipline and robust free cash generation.
“Customer activity in the early weeks of the 2017 spring season has been encouraging. The further increase in the capital return plan demonstrates the board’s confidence in the group’s prospects.”
Future plans
Persimmon said it planned to give more cash back to shareholders through its capital return plan to 2021.
It also shared plans to cut its overheads. Chief executive Jeff Fairburn said this would include increasing production at Persimmons’ off-site timber frame business Space 4 and its new concrete brick plant due to launch by April.
The brick factory, located near Doncaster, is expected to produce 80 million bricks a year—two thirds of the demand needed by the housebuilder—and will see the £10m upfront investment paid back in around three years.
Meanwhile, Space 4 will increase production.
Fairburn said: “The Space4 factory has the capacity to increase production to support the construction of around 8,000 new homes each year.
“We are continuing to investigate the further development of the Space4 build processes driven by the design of the group house types, to secure further improvements for the business.”
