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Persimmon

Persimmon is being extravagantly generous again

In the news recently for its extravagant generosity to senior management, the board reminded the market this morning it has also been pretty generous returning the windfall money from the "Help to Buy" scheme to shareholders

Costly house
In 2018, the group's private sales rate per site is 7% higher than last year

Persimmon PLC (LON:PSN) has been in the news of late for its generosity, and it was at it again today, increasing its capital return plan.

Fuelled by the government's “Help to Buy” campaign, which paradoxically has had the effect of pushing up house prices to the benefit of  house-builders and the detriment of those looking to buy, the group has announced a further increase in its capital return plan.

Additional payments of 125p per share will be made each year for the next three years, increasing the total value of the plan by 375p to £13 a share; when it was originally announced, the plan was to return 620p per share.

The additional returns will be paid as an interim dividend in late March/early April each year, starting this year on March 29.

READ: Persimmon anticipates full-year pre-tax profits “modestly ahead of market consensus”

Persimmon's revenue in 2017 rose 9% to £3.42bn from £3.14bn the year before, as legal completions rose to 16,043 new homes from 15,171 and the average selling price increased by 3.2% to £213,321 from £206,765.

Underlying profit before tax rose to £977.1mln from £782.8mln; Liberum Capital markets had forecast £970mln.

The group held £1,302.7mln of cash at the end of the year, up from £913.0mln the year before.

READ: Persimmon's chairman to retire, senior independent director quits in row over executive pay scheme

Nigel Mills, who is the group's acting chairman after Nicholas Wrigley walked the plank following a dispute over an executive incentive scheme that was deemed in some circles to be obscenely generous, said the group's performance in 2017 had been excellent.

“The group's focus on high-quality growth, coupled with capital discipline, has accelerated the delivery of our strategic objectives and generated record returns for our shareholders," he noted.

"The start to the spring sales season in 2018 has been encouraging with the group's private sales rate per site being 7% higher than last year at this point,” Mills said.

Liberum noted that this was better than sector peer Barratt Developments' 5% growth (excluding London).

Hargreaves Lansdown said the house-builder is doing so well “it’s sending a wall of cash back to shareholders”.

“No surprise then to see the market roar its approval in early morning trading,” the broker said.

Shares in the FTSE 100 share were up 13% at 2,811p in early deals, 71p above Liberum's price target.

Quick facts: Persimmon

Price: £19.10

Market: LSE
Market Cap: £6.08 billion
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