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Persimmon has accelerated its plan to return £1.9bn in capital to shareholders after the UK’s biggest housebuilder by market capitalisation posted a more than 50 per cent rise in profit.
The York-based developer, which paid out the first instalment of its capital return scheme in June at 75p a share, unveiled plans to pay a further 70p in July this year. It also pledged to make payments in 2016 and 2018, meaning Persimmon shareholders now have a guaranteed annual dividend until 2021.
Clyde Lewis, analyst at Peel Hunt, said of the capital return plan: “It would have been sitting on far too much cash, so that’s why they have pulled it forward.”
Persimmon, like all the UK’s big housebuilders, is reaping the benefits of rising sales as the government-backed Help to Buy equity loan scheme unleashes pent-up demand for new homes.
The results came as the British Bankers’ Association on Tuesday published figures showing that the number of mortgages approved for house purchases had hit the highest level since September 2007.
Persimmon had already announced in a January trading update that new house sales in 2013 had risen 16 per cent compared with the year before to 11,500 homes, helping revenues rise to £2.1bn, an increase of 21 per cent on 2012.
Statutory pre-tax profit was up 55 per cent to £337m, Persimmon said on Tuesday.
The developer is also benefiting from rising profitability, with less competition for land from smaller builders, who are struggling to get access to finance.
“That’s the difference this time around – there’s less competition so prices remain affordable,” said Jeff Fairburn, chief executive. “The important point comes when we start to see land prices increase.”
Persimmon’s underlying operating margin rose to 16 per cent in 2013, compared with 12.9 per cent in the year before. It expects this to grow further this year, beyond the 17 per cent target set two years ago.
The builder added that the early weeks of the spring selling season had been “encouraging”, with weekly private sales per site up 22 per cent in the first eight weeks of 2014, compared with the same period of last year.
Persimmon shares were flat at £14.69 in Tuesday morning trading.