Persimmon PLC (LON:PSN) was supported by continued housing demand and rising prices in 2016 as the house builder achieved a 23% increase in annual pre-tax profits.
Underlying pre-tax profit rose to £782.8mln in the year to 31 December 2016 from £637.8mln the prior year.
Revenue grew 8% to £3.14bn from £2.90bn as the number of legal completions increased by 599 new homes to 15,171 and the average selling price edged up 3.8% to £206,765.
The company will pay an interim dividend of 25p per share and a second interim dividend of 110p per share.
Net cash increased to £913.0mln at 31 December from £570.4mln at the end of 2015 on the back of Persimmon’s 2012 strategy to improve cash generation and maintain capital discipline.
Since launching its strategy, the FTSE 100 group said it has increased its sales volumes 60% and spent £2.6bn buying more than 98,500 plots of land. It has also returned more than £1.0bn of excess capital to shareholders.
Persimmon announced a further increase to its capital return plan by £77mln, or 25p per share, taking the total value of the plan to £9.25 per share.
The house builder said it is in a “good position” to deliver further growth in 2017 with forward sales rising 9% to £1.89bn from £1.74bn and a continued gain in selling prices. Underlying gross margins increased by 240 basis points (2.4 percentage points) to 27.8%.
Looking ahead, the group believes it will be buoyed by growth in mortgage lending, low borrowing costs and support from the government to build more homes.
The UK economy has proved resilient since the Brexit vote last June, Persimmon added, but the company is “mindful” of the risks arising from the uncertainties surrounding the UK’s formal exit from the European Union.
The government plans to trigger Article 50, the formal Brexit process, by mid-March.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "The UK’s house builders have had the wind at their back for some time now, with the government Help to Buy scheme boosting transaction numbers, while a chronic housing shortage has pushed prices up too.
"Looking forward, the UK housing market shows little sign of pausing for breath in its steady upward climb, and low interest rates are likely to remain supportive for the foreseeable future. This should enable the house building sector to continue to make profitable progress, unless a sharp economic downturn materialises."
Shore Capital expects pre-tax profit of £797mln in fiscal year 2017, above a "cautious" consensus forecast of £775mln. The broker said the caution in the consensus is due to concerns about house prices, policy impact and sustainability of reported margins.
There is a risk that margins will trend back towards 24-25% since house price inflation has slowed and cost inflation has re-accelerated, Shore Capital said.
"Overall, the shares are likely to reflect at least the 25p of additional income and the 2% beat in the price despite trading at around 8% above our fair value of 1900p," it said.
"We have been on a 'buy' recommendation since July but unless we see a reasonable case for a forecast upgrade or signs that the surplus cash will be put to use for either a larger dividend or an acceleration of growth we may have re-consider our stance."
Shares reversed early gains, falling 0.57% to 2,013.36p in late morning trade.
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