Pete Redfern, Chief Executive, commented:
“In 2016 we delivered an excellent performance set against an uncertain political and economic environment that stabilised in the final quarter. The outlook for 2017 is for ongoing stability and incremental price growth, which is a healthy backdrop for our business and our customers.”
Good progress made towards all medium term targets for the period 2016-2018
- Target total of £1.3 billion of dividends to be paid in cash to shareholders over the period
- £355.9 million paid in 2016 (2015: £308.4 million)
- c.£450 million declared for 2017 (subject to shareholder approval)
- Target average annual return on net operating assets** of 30%
- 30.7% in 2016 (2015: 27.1%)
- Target average operating profit* margin of c.22%
- 20.8% in 2016 (2015: 20.3%)
2016 Group financials
- Completed a total of 14,112 homes, including Spain, up 4.8% (2015: 13,470), excluding joint ventures
- 10.9% increase in UK total average selling price to £255k (2015: £230k), excluding joint ventures
|Operating profit* £m||764.3||637.0||20.0%|
|Profit before tax and exceptional items £m||733.4||603.8||21.5%|
|Profit for the year £m||589.3||489.8||20.3%|
|Adjusted basic earnings per share pence††||18.1||14.9||21.5%|
|Basic earnings per share pence||18.1||15.1||19.9%|
|Tangible net asset value per share pence†||88.6||83.5||6.1%|
|Net cash £m||364.7||223.3||63.3%|
UK current trading and outlook
We have made a very good start to 2017 and are encouraged by robust trading and levels of demand. The UK housing market fundamentals remain good with strong customer confidence in our core geographies.
The market is underpinned by a competitive mortgage market and low interest rates. Customer interest remains high, with website visits solid and customers continuing to register interest in forthcoming developments and progress their home purchase plans. Whilst the wider London market remains robust, prime central London is softer, as previously highlighted, however, house prices are stable, and there are good levels of underlying demand.
The net private sales rate for the year to date (w/e 19 February 2017) has increased to a very strong 0.91 (2016 equivalent period: 0.77).
We continue to focus on building a strong order book for the future. As at 19 February 2017, we were c.49% forward sold for private completions for 2017, with a total order book value of £1,978 million (2016 equivalent period: £2,030 million), excluding joint ventures. This order book represents 8,573 homes (2016 equivalent period: 8,409). 58% of Central London private completions for 2017 are forward sold, as at 19 February 2017 (2016 equivalent period: 76%).
We expect underlying build cost increases during 2017 to be at a similar level to 2016, at around 3-4%.
The publication of the Housing White Paper in February 2017 recognises the importance of housing to the UK and the part all housebuilders can play in the economy. Whilst some of the detail is of course to be finalised, we welcome the measures set out in the White Paper which are balanced and aim to sustainably increase the delivery of much needed homes.
The early signs of stability and resilience of the market following the EU Referendum, which were encouraging, continued and we believe the risk of material impact from this in the short term has significantly reduced. In line with our strategy, we will continue to closely monitor market risks, particularly around long term mortgage cost. However we believe that a cautiously regulated market and low interest rate environment is likely to prolong the period of stability that we are seeing in the UK housing market.
We have a clear strategy and a strong focus on where we can add further value to the business. In this way, we are confident that we can adapt to all market conditions from a position of strength and perform well, underpinning our value proposition to shareholders and other stakeholders. We remain fully committed to the Dividend Policy set out in May 2016 and our objective to provide a consistent and reliable income stream for investors. Our focus remains on adding value and steady, sustainable growth as we maximise efficiency through operational excellence and discipline on our sites and throughout our business.
* Operating profit is defined as profit on ordinary activities before net finance costs, exceptional items and tax, after share of results of joint ventures.
** Return on net operating assets is defined as 12-month rolling operating profit divided by the average of the opening and closing net operating assets, which is defined as net assets less net cash less net tax balances, excluding any accrued dividends.
*** Return on capital employed is defined as a 12-month rolling operating profit divided by the average of the opening and closing capital employed.
**** Operating cash flow is defined as cash generated by operations before tax, interest paid, and exceptional cash flows on a rolling 12-month basis.
† Tangible net assets per share is defined as net assets before any accrued dividends excluding goodwill and intangible assets divided by the number of ordinary shares in issue at the end of the period.
†† Adjusted basic earnings per share represents earnings attributed to the shareholders of the parent, excluding exceptional items and tax on exceptional items, divided by the number of shares in issue during the period.
†* Net operating asset turn is defined as total revenue divided by the average of opening and closing net operating assets. Based on rolling 12-months.
Note: Performance of the Group is monitored internally using a variety of statutory and alternative performance measures. Alternative performance measures are used where they are considered to provide more clarity of underlying trading or in monitoring performance against strategy. Definitions of the alternative performance measures and a reconciliation to the equivalent statutory measure are detailed on page 41.