Persimmon Plc · LSE:PSN
Persimmon — FY2011 Earnings Presentation
51 slides from Persimmon's earnings presentation, Feb 28, 2012
Slide 1: Results Presentation 28 February 2012
Results Presentation 28 February 2012 50
Slide 2: Agenda
Agenda Results Presentation 28 February 2012 Page Presented by • Chairman’s overview 1 Nicholas Wrigley • Strategy 3 Mike Farley • Review of operations 9 Mike Farley • Outlook 17 Mike Farley • Financial review 19 Mike Killoran • Summary 26 Nicholas Wrigley Appendices 1 to 11 27 - 48 Results Presenta
Slide 3: Chairman's overview - Performance highlights
Chairman’s overview - Performance highlights • Consistent improvement against backdrop of challenging conditions – underlying PBT increased by 55% – strong free cash flow resulting in cash balances 2011 2010 Reported Adjustments Underlying Reported Adjustments Underlying Turnover * £1,535.0m £1,569.
Slide 4: Chairman's overview
Chairman’s overview • Strong improvement in profitability – continued operating margin growth – maximisation of selling prices, minimising development costs • High quality land bank – successful delivery of strategic sites • 9% increase in forward sales to c.£927m • Full year total dividend of 10.0p
Slide 5: Strategy
Strategy “Creating sustainable shareholder value for the long term” Mike Farley, Group Chief Executive Results Presentation 28 February 2012 3
Slide 6: Strategy – Capital return programme
Strategy – Capital return programme • Proposal to return £6.20 per share in cash to shareholders over 9½ years • Surplus capital of c.£1.9bn to be returned through a series of substantial dividend payments Pence per share Dividend (p) (£m) June 2013 75 226.5 June 2015 95 286.9 June 2017 110 332.2 Ju
Slide 7: Strategy – Key considerations
Strategy – Key considerations • Key considerations in shaping strategy – set against the backdrop of the current constrained mortgage market – continued margin improvement – increasing cash generated from operations – industry leading work in progress efficiency to be maintained - WIP turn of 4x – m
Slide 8: Strategy – Key considerations (cont)
Strategy – Key considerations (cont) – conversion of strategic land remains a top priority – business scale to allow most effective land replacement – continuous improvement in the development value of the existing land bank – maintain a largely ungeared balance sheet – retain and protect equity bas
Slide 9: Strategy – Key features of future operations
Strategy – Key features of future operations • Sales volume expansion to reflect market conditions and take advantage of existing capacity • Maximise selling prices within a constrained pricing environment • Underlying operating margin to return to 15% - 17% range over medium term • Forward land to
Slide 10: Strategy – Key features of future operations (cont)
Strategy – Key features of future operations (cont) • Capital returned from surplus generated from underlying operational cash flows • Grow return on average capital employed to industry high levels - maintain appropriate capital structure • Greater certainty over value and timing of shareholder ret
Slide 11: Review of operations
Review of operations Page • Group overview 10 • Land holdings & replacement 14 • Current trading 15 • Outlook 17 Results Presentation 28 February 2012 9
Slide 12: Review of operations - Group overview
Review of operations - Group overview • c.140 new sites opened during 2011 • c.1.4% contraction in average house size - 1,115 sqft • Focused on traditional and affordable product – 19% apartments sold (national average: 38%) – 35% houses sold under £150,000 (national average: 28%) • Impact of FirstB
Slide 13: Review of operations - Group overview
Review of operations - Group overview Underlying profitability and cash generation continues to improve 2011 2010 Change Underlying performance: Unit completions 9,360 9,384 - Average selling price * £166,142 £169,339 (2%) Operating profits ** £153.0m £128.7m + 19% Operating margin ** 10.0% 8.2% + 1
Slide 14: Review of operations - Group overview
Review of operations - Group overview Product Profile - 12 months ended 31 December 2011: Unit Completions Average selling Average price Plots owned and Plot count completions change price * change under control change 1,996 + 1% £160,766 (0%) 16,920 (5%) Persimmon North 21% 27% 2,012 (7%) £170,117
Slide 15: Review of operations - Group overview: Half Year Sales Profile
Review of operations - Group overview Half Year Sales Profile 1,500 1,250 Completions (No.) 1,000 750 500 250 - H110 H210 H1 11 H2 11 H110 H210 H1 11 H2 11 H110 H210 H1 11 H2 11 H110 H210 H1 11 H2 11 H110 H210 H1 11 H2 11 North Division Central Division South Division Charles Church Partnerships • S
Slide 16: Review of operations - Land holdings & replacement
Review of operations - Land holdings & replacement • Land bank quality enhanced by further investment • c.14,300 plots acquired in 2011 - c.72% in southern markets • c.48% of plots acquired from strategic land interests • c.6.8 years consented supply - 63,335 plots • c.16,500 acres of strategic land
Slide 17: Review of operations - Current trading
Review of operations - Current trading • Strong start to 2012: − Visitor levels c.10% ahead of prior year over first eight weeks − Cancellation rates remain at low levels (c.18%) − Private net reservation rate per site up c.22% on same period last year • Site activity: − c.60 sites to open in H1 201
Slide 18: Review of operations - Current trading
Review of operations - Current trading • Solid platform for 2012 activity 1 January Forward Sales Units ASP Revenue 2012 4,753 £129,392 £615.0m 2011 4,206 £134,365 £565.1m Movement +13% (4%) +9% Current Forward Sales (inc. first 8 w eeks sales) Units ASP Revenue 2012 6,509 £142,482 £927.4m 2011 5,75
Slide 19: Outlook - Overall market
Outlook - Overall market • UK housing market remains challenging • Government austerity measures impacting on employment • Difficulties in securing mortgage credit remains key constraint • Government backed guaranteed 95% LTV mortgage to be launched this Spring • Draft National Planning Policy Frame
Slide 20: Outlook – Focus on operational improvement
Outlook – Focus on operational improvement • National outlet network - c.60 sites to open H1 2012 • Build advanced in support of 9% increase in forward sales • Strong operational gearing provided by existing national office network • Space4 to provide increased contribution as building regulations i
Slide 21: Financial review
Financial review Page • Trading overview 20 • Land holdings at 31 December 2011 23 • Balance sheet 24 • Cash generation 25 Mike Killoran, Group Finance Director Results Presentation 28 February 2012 19
Slide 22: Financial review - Trading overview
Financial review - Trading overview • Underlying pre-tax profit growth of 55% Adjusted trading (for NRV, shared equity fair value charge and goodw ill im pairm ent) 2011 2010 Adjusted Exceptional Total % of revenue Adjusted Exceptional Total % of revenue Revenue (adjusted) £1,555.1m £1,555.1m £1,589
Slide 23: Financial review - Trading overview
Financial review - Trading overview • Underlying operating margin of 10.0% - statutory operating margin of 10.5% • Underlying performance: 2011 2011 2011 2010 2010 2010 FY H2 H1 FY H2 H1 Gross margin 14.5% 15.3% 13.7% 12.4% 12.5% 12.3% Operating expenses (5.1%) (5.1%) (5.2%) (4.9%) (5.0%) (4.8%) Oth
Slide 24: Financial review - Trading overview
Financial review - Trading overview • Operating profit history - continued growth in underlying profit delivery 140.0 131.2 130.0 120.0 1.3 1.3 110.0 0.4 0.4 100.0 91.5 70.7 Reported Operating Profit (£m) 87.3 90.0 80.0 73.1 74.6 70.0 46.9 9.5 12.0 60.0 4.5 10.5 50.0 22.7 40.0 36.5 23.5 30.0 27.9 20
Slide 25: Financial review - Land holdings at Dec 2011
Financial review - Land holdings at 31 Dec 2011 • Cost to revenue percentage of owned & controlled plots of 18.5% (Dec 10: 19.9%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2010 Dec 2011 Change Dec 2011 Dec 2010 Plot
Slide 26: Financial review - Balance sheet
Financial review - Balance sheet • Net assets c.£95m higher than December 2010 at £1.8bn • Land expenditure profile: H1 H2 FY 2009 £127m £49m £176m 2010 £94m £108m £202m 2011 £139m £134m £273m • Work in progress of £427.8m (Dec 10: £413.5m) − strong control over build rates and costs maintained • Sh
Slide 27: Financial review - Cash generation
Financial review - Cash generation Pre dividend free cash generation (after working capital) Pre dividend free cash generation (£m) + 400 FY H2 H1 + 350 2011 + 119.4 + 66.0 + 53.4 + 300 2010 + 225.6 + 80.8 + 144.8 + 250 + 200 2009 + 356.8 + 227.8 + 129.0 2008 + 239.2 + 325.1 (85.9) £m + 150 + 100 20
Slide 28: Summary
Summary • Continued improvement in underlying margins • Maintained drive towards further cost efficiencies • Strong liquidity and ungeared balance sheet • Excellent asset base • High quality land replacement along with strategic land successes to support further growth • Development of a stronger, l
Slide 29: Appendices
Appendices − Appendix 1 - Financial record: Income Statement Balance Sheet − Appendix 2 - Half yearly profit & loss − Appendix 3 - Income Statement - Cost recoveries − Appendix 4 - Income Statement - 10 year record − Appendix 5 - Trading performance - Business split − Appendix 6 - Trading performanc
Slide 30: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement Underlying performance: 2007 2008 2009 2010 2011 Unit completions 15,905 10,202 8,976 9,384 9,360 Turnover * £3,014.9m £1,755.1m £1,420.6m £1,569.5m £1,535.0m Average Selling Price ** £189,558 £172,994 £160,513 £169,339 £166,142 Operating profit * £657
Slide 31: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet 2007 2008 2009 2010 2011 Shareholders' funds £2,345.4m £1,555.2m £1,623.2m £1,744.0m £1,839.3m Borrowings/(Cash) * £721.1m £600.7m £267.5m £51.0m (£41.0m) Gearing * 31% 39% 16% 3% 0% Net asset value per share 781.4p 518.0p 540.2p 579.1p 608.6p Work in pro
Slide 32: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss Underlying performance: 2011 2011 2010 2010 H2 H1 H2 H1 Unit completions 4,921 4,439 4,727 4,657 Turnover * £822.2m £712.8m £792.9m £776.6m Operating profit * £88.8m £64.2m £66.6m £62.1m Operating margin * 10.8% 9.0% 8.4% 8.0% Interest & finance costs £4.2m £6.1
Slide 33: Appendix 3: Income Statement - Cost recoveries
Appendix 3: Income Statement - Cost recoveries Performance reconciliation - FY 2011: Reported Underlying Adjusted (pre-exceptional) Add back: Add back: Include: Goodwill Shared Exceptional impairment equity items fair value Revenue £1,535.0m £1,535.0m £20.1m £1,555.1m Land costs (£367.6m) (23.9%) (£
Slide 34: Appendix 3: Income Statement - Cost recoveries
Appendix 3: Income Statement - Cost recoveries Underlying performance per plot: 2011 2010 2011 2010 FY FY Change FY FY Change Revenue * £163,999 £167,249 (1.9%) 100.0% 100.0% Land costs (£39,276) (£42,814) (8.3%) (23.9%) (25.6%) + 1.7% Build and other direct costs (£100,900) (£103,672) (2.7%) (61.6%
Slide 35: Appendix 4: Income Statement - 10 year record
Appendix 4: Income Statement - 10 year record Underlying perform ance: 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Unit completions 12,352 12,163 12,360 12,636 16,701 15,905 10,202 8,976 9,384 9,360 Turnover * £1,711.1m £1,883.0m £2,131.3m £2,285.7m £3,141.9m £3,014.9m £1,755.1m £1,420.6m £1,5
Slide 36: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2011 2010 FY FY Change No. No. Units Persimmon Core 5,643 5,795 (3%) Charles Church 1,928 1,803 + 7% Partnerships 1,789 1,786 + 0% Total 9,360 9,384 (0%) £ £ Average Selling Price * Persimmon Core 167,582 172,475 (3%) Charles C
Slide 37: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2011 2010 FY FY Change £m £m Gross Profit ** Persimmon Core 134.1 114.2 + 17% Charles Church 63.7 53.7 + 19% Partnerships 25.2 26.9 (6%) Total 223.0 194.8 + 14% Gross Margin ** Persimmon Core 14.4% 11.6% + 2.8% Charles Church 1
Slide 38: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2011 2010 H2 H2 Change No. No. Units Persimmon Core 2,926 2,850 + 3% Charles Church 1,061 938 + 13% Partnerships 934 939 (1%) Total 4,921 4,727 + 4% £ £ Average Selling Price * Persimmon Core 168,551 173,426 (3%) Charles Church
Slide 39: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2011 2010 H2 H2 Change £m £m Gross Profit ** Persimmon Core 73.8 56.6 + 30% Charles Church 38.5 30.1 + 28% Partnerships 13.3 12.5 + 6% Total 125.6 99.2 + 27% Gross Margin ** Persimmon Core 15.2% 11.6% + 3.6% Charles Church 15.7
Slide 40: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2011 2010 H1 H1 Change No. No. Units Persimmon Core 2,717 2,945 (8%) Charles Church 867 865 + 0% Partnerships 855 847 + 1% Total 4,439 4,657 (5%) £ £ Average Selling Price * Persimmon Core 166,538 171,556 (3%) Charles Church 21
Slide 41: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2011 2010 H1 H1 Change £m £m Gross Profit ** Persimmon Core 60.3 57.6 + 5% Charles Church 25.2 23.6 + 7% Partnerships 11.9 14.4 (17%) Total 97.4 95.6 + 2% Gross Margin ** Persimmon Core 13.6% 11.6% + 2.0% Charles Church 13.6% 1
Slide 42: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2011 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 475 156,027 (4%) 4,216 Scotland 591 161,472 + 6% 3,956 North West 522 153,722 + 10% 5,225 North East 489 156,710 (4%) 5,733 North
Slide 43: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2011 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Birmingham 1,073 134,404 (10%) 4,906 Shires 515 197,598 + 4% 3,289 Eastern 1,046 152,617 (1%) 6,061 Central Division 2,634 153,992 (4%) 14,2
Slide 44: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2011 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Southern 704 156,001 (7%) 4,504 Western 977 159,979 (5%) 11,931 Wales 386 144,329 (2%) 3,896 Westbury Partnerships 207 96,647 + 28% 1,187 So
Slide 45: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2011 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 2,375 202,617 8,431 31 December 2010 2,113 209,989 6,873 Change + 12% (4%) + 23% * Calculat ed f rom nominal value of t urnover (bef ore f air value char
Slide 46: Appendix 7: Analysis of unit sales
Appendix 7: Analysis of unit sales By Price Band (Private) By House Type (All) 28% 20% Detached Over £250,000 26% 13% 19% Sem i-detached 17% 22% £200,000 to £249,999 19% 21% Tow nhouse 33% 27% £150,000 to £199,999 33% 38% Apartm ent 19% 28% Les s than 2% £150,000 Bungalow 35% 1% 0% 10% 20% 30% 40% 5
Slide 47: Appendix 8: Balance Sheet
Appendix 8: Balance Sheet 2011 2010 Change Work in progress £427.8m £413.5m + £14.3m Land £1,484.2m £1,575.8m (£91.6m) Land creditors £199.7m £195.8m + £3.9m Part exchange stock £39.1m £32.8m + £6.3m Shared equity debt £164.0m £115.2m + £48.8m (Cash)/Borrowings * (£41.0m) £51.0m (£92.0m) Gearing * 0
Slide 48: Appendix 9: Cash flows
Appendix 9: Cash flows H111 H211 FY11 FY10 £m £m £m £m Operating cash (before working capital movements) 68.9 94.5 163.4 137.7 Investment in working capital: Decrease in gross land 71.6 33.3 104.9 138.3 (Decrease) / Increase in land creditors (29.4) 33.3 3.9 11.9 Net land divestment 42.2 66.6 108.8
Slide 49: Appendix 10: Mortgage approvals for house purchase
Appendix 10: Mortgage approvals for house purchase 150 Average monthly approvals: 87,400 Approvals - Volume ('000) 100 Dec 2009: 59,000 Dec 2011: 53,000 50 Dec 2010: Average monthly 42,000 approvals since Nov 2008: beginning of 2008: 27,000 47,500 0 D D D D D D D D D D D D D D D D D D D D ec ec ec e
Slide 50: Appendix 11: New housing starts
New Housing S tarts ('000) 0 25 50 75 100 125 150 175 200 2001 2002 2003 2004 2005 2006 2007 Annual Housing Starts (2001-2011) Source: NHBC New House-Building Statistics (Q4 2011) 2008 Results Presentation 28 February 2012 2009 2010 2011 N e w H o u s in g S t a rts ( '0 0 0 ) 0 2 4 6 8 10 12 14 16
Slide 51: Disclaimer Important Notice
Disclaimer Important Notice Certain statements in this results presentation are forward looking statements. Forward looking statements involve evaluating a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those stat