Shares in house builder Persimmon surged 12 per cent higher on Tuesday after the group reported underlying profits rose by a quarter to £977.1 million last year.
The 25 per cent hike in profit for 2017 was helped by a year-on-year 9 per cent increase in revenue to £3.42 billion and an 8 per cent jump in cash generation to £806 million.
Performance throughout the year was ‘excellent’ according to Nigel Mills, the group’s senior director and acting chairman.
The group reported a 7.5 per cent increase in forward sales of £2.03 billion and ended the year with a net cash position of £1.3 billion
‘Since the launch of the group’s new strategy in 2012 the group has increased new home completion volumes by more than 70 per cent and invested around £3.18bn of cash in land while simultaneously returning around £1.49bn of surplus capital to shareholders.
‘The start to the spring sales season in 2018 has been encouraging with the group’s private sales rate per site being 7 per cent higher than last year at this point. The further increase in the capital return plan demonstrates the board’s confidence in the group’s prospects.’
Shareholders were rewarded for their patience during the bonus furore which surrounded boss Jeff Fairburn’s ‘excessive’ £177 million pay out with the announcement of an additional special dividend payment over the next three years.
The additional special dividend will take the total dividend pay out to £13 a share by 2021, twice the size previously hinted at by management.
Henry Croft, a research analyst at Accendo Markets, said it was a good move to recognise shareholders given the amount that had been earmarked for management bonuses.
‘Alongside an unchanged 110p final dividend, it takes Persimmon’s total dividend pay-out to 235p per share, which equates to a whopping 8.5% yield, the best the FTSE 100 currently has to offer income seekers, and ahead of peers Barratt Developments (7.9%) and Taylor Wimpey (7.1%),’ Croft said.
He added: ‘Amid ongoing controversy over the size of CEO Fairburn’s personal pay packet, choosing to reward loyal shareholders almost as handsomely is being met with understandable positivity.
‘Moving forwards, whether peers choose to match Persimmon’s bold pledge will be a pivotal dilemma for a sector potentially on the front line of Brexit uncertainty.’
Boss Jeff Fairburn (pictured) faced calls to resign until eventually deciding to take half the bonus he was originally offered and claims he will donate a undisclosed sum to charity. The pay out would have marked one of the largest in UK corporate history
The group reported a 7.5 per cent increase in forward sales of £2.03 billion and ended the year with a net cash position of £1.3 billion.
While it recognised problems involving the lack of available skilled trades people and availability of materials, Persimmon said the UK economy had proven to be ‘resilient’ during the uncertainty of Brexit.
It said: ‘The group is well placed to deliver a further increase in new home construction across the UK in 2018 where the local planning environment allows.
‘Over the opening weeks of the year the group’s site network has remained strong and we are focused on making an early start on as many new development sites as possible.
‘Our significant investment in work in progress carried forward into 2018 provides a platform for further progress in the group’s construction programmes.’