Persimmon Plc · LSE:PSN
Persimmon — H1 2012 Earnings Presentation
41 slides from Persimmon's earnings presentation, Aug 21, 2012
Slide 1: Results Presentation 21 August 2012
Results Presentation 21 August 2012 40
Slide 2: Agenda
Agenda Results Presentation 21 August 2012 Page Presented by • Chairman’s overview 1 Nicholas Wrigley • Review of operations 3 Mike Farley • Outlook 11 Mike Farley • Financial review 13 Mike Killoran • Summary 20 Nicholas Wrigley Appendices 1 to 11 21 - 38 Results Presentation 21 August 2012
Slide 3: Chairman's overview - Performance highlights
Chairman’s overview - Performance highlights • Excellent start in the delivery of the new strategy – strong increase in underlying pre-tax profits to £98.7m, up 65% – further development of free cash generation, £135.2m cash held on balance sheet – good growth in return on capital employed to 10.1%
Slide 4: Chairman's overview
Chairman’s overview • Key features of long term strategy – £1.9bn of surplus capital to be returned over next nine years, £6.20 per share – first payment of £226.5m (£0.75 per share) planned to be made June 2013 – sales volume expansion will reflect market conditions – business scale will allow most
Slide 5: Review of operations
Review of operations Page • Group overview 4 • Land holdings & replacement 8 • Current trading 9 • Outlook 11 Results Presentation 21 August 2012 3
Slide 6: Review of operations - Group overview
Review of operations - Group overview • Comprehensive outlet network maintained - c. 65 new sites opened • c. 2% increase in average house size - 1,125 sqft • Maintained focus on affordable traditional product – 31% houses sold under £150,000 (national average 26%) – 16% apartments sold (national av
Slide 7: Review of operations - Group overview
Review of operations - Group overview Continued margin expansion and free cash generation H1 2012 H1 2011 Change Underlying performance: Unit completions 4,712 4,439 + 6% Average selling price * £173,343 £162,647 + 7% Operating profits ** £98.1m £64.2m + 53% Operating margin ** 12.2% 9.0% + 3.2% Pre
Slide 8: Review of operations - Group overview
Review of operations - Group overview Product Profile - 6 months ended 30 June 2012: Unit Completions Average selling Average price Plots owned and Plot count completions change price * change under control change 1,080 + 21% £157,658 (2%) 17,579 + 0% Persimmon North 23% 27% 965 (7%) £185,016 + 11%
Slide 9: Half Year Sales Profile
Review of operations - Group overview Half Year Sales Profile 1,500 1,250 Completions (No.) 1,000 750 500 250 - H1 10 H2 10 H1 11 H2 11 H1 12 H1 10 H2 10 H1 11 H2 11 H1 12 H1 10 H2 10 H1 11 H2 11 H1 12 H1 10 H2 10 H1 11 H2 11 H1 12 H1 10 H2 10 H1 11 H2 11 H1 12 North Division Central Division South
Slide 10: Review of operations - Land holdings & replacement
Review of operations - Land holdings & replacement • High quality land bank further strengthened • 5,779 plots added in the half year - c. 55% in southern markets • c. 34% of plots added from strategic land interests • 63,786 plots owned and under control - c. 6.4 years consented land bank - c. 40%
Slide 11: Review of operations - Current trading
Review of operations - Current trading • Excellent start to 2012: – Visitor levels c. 7% ahead of prior year – First half weekly private sales reservations rate up c. 18% on last year – Historically low cancellation rates maintained at c. 18% • Site activity: – c. 60 sites to open in second half 201
Slide 12: Review of operations - Current trading
Review of operations - Current trading • Strong Spring season resulting in improved forward sales position • Traditional seasonality - weekly private sales reservations c. 5% ahead of prior year from 1 July 2012 Half Year Forward Sales Units ASP Revenue June 2012 5,565 £139,023 £773.7m June 2011 5,0
Slide 13: Outlook - Overall market
Outlook - Overall market • Wider European economic issues continue to impact on UK housing market • Mortgage availability remains the key market constraint • Government backed 5% deposit NewBuy mortgage pricing improving • Anticipate continued stability in pricing - housing starts at low levels • Na
Slide 14: Outlook – Strategic objectives to be fulfilled
Outlook – Strategic objectives to be fulfilled • Land replacement activity reinforcing high quality asset base • Capital discipline will assist faster growth in returns – outlet network to be maintained at c. 380 active sites – WIP turn to be maintained at 4x • Forward land remains focused on tradit
Slide 15: Financial review
Financial review Page • Trading overview 14 • Land holdings at 30 June 2012 17 • Balance sheet 18 • Cash generation 19 Mike Killoran, Group Finance Director Results Presentation 21 August 2012 13
Slide 16: Financial review - Trading overview
Financial review - Trading overview • 65% growth in underlying pre-tax profits Adjusted trading (for NRV, shared equity fair value charge and goodw ill im pairm ent) H1 2012 H1 2011 Adjusted Exceptional Total % of revenue Adjusted Exceptional Total % of revenue Revenue (adjusted) £816.3m- £816.3m- £
Slide 17: Financial review - Trading overview
Financial review - Trading overview • Underlying operating margin of 12.2% increased from 9.0% for the prior year • Underlying performance: 2012 2011 2011 2011 H1 FY H2 H1 Gross margin 16.7% 14.5% 15.3% 13.7% Operating expenses (5.5%) (5.1%) (5.1%) (5.2%) Other operating income 1.0% 0.6% 0.6% 0.5% O
Slide 18: Financial review - Trading overview: operating profit history
Financial review - Trading overview • Operating profit history - further growth in underlying profit delivery 140.0 131.2 130.0 1.7 1.7 120.0 (0) (0.6) 1.3 1.3 110.0 0.4 0.4 97.7 100.0 91.5 70.7 Reported Operating Profit (£m) 4.5 4.5 90.0 87.3 80.0 73.1 74.6 70.0 46.9 9.5 12.0 60.0 10.5 50.0 22.7 40
Slide 19: Financial review - Land holdings at June 2012
Financial review - Land holdings at 30 June 2012 • Cost to revenue percentage of owned & controlled plots of 18.5% (Jun 11: 19.4%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2011 Jun 2012 Change Jun 2012 Dec 2011 Plo
Slide 20: Financial review - Balance sheet
Financial review - Balance sheet • Net assets c. £83m higher than June 2011 at £1.9bn • Land expenditure profile: H1 H2 FY 2009 £127m £49m £176m 2010 £94m £108m £202m 2011 £139m £134m £273m 2012 £142m est. £200m est. £342m • Work in progress of £463.8m (Jun 11: £420.9m) – positioned to support stron
Slide 21: 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 2012 + 166.7(est.) + 55.0(est.) + 111.7 + 300 + 250 2011 + 119.4 + 66.0 + 53.4 + 200 2010 + 225.6 + 80.8 + 144.8 2009 + 356.8 + 227.8 + 129.0 £m
Slide 22: Summary
Summary • Our markets remain challenging • Strong start to execution of the new strategy • Cash margins set for further growth • Cost control and efficiency remain a top priority • Consented land bank and strategic land portfolio will support high quality growth • Well on track for first payment of
Slide 23: Appendices
Appendices − Appendix 1 - Strategy - Capital return programme − Appendix 2 - Financial record: Income Statement Balance Sheet − Appendix 3 - Half yearly profit & loss − Appendix 4 - Income Statement - Cost recoveries − Appendix 5 - Trading performance - Business split − Appendix 6 - Trading performa
Slide 24: Appendix 1: Strategy – Capital return programme
Appendix 1: Strategy – Capital return programme • Surplus capital of c. £1.9bn (£6.20 per share) 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 June 2019 110 332.2 June 2020 115 347.3 June 2
Slide 25: Appendix 2: Financial record - Income Statement
Appendix 2: Financial record - Income Statement Underlying performance: Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Unit completions 4,657 9,384 4,439 9,360 4,712 Turnover * £776.6m £1,569.5m £712.8m £1,535.0m £806.7m Average Selling Price ** £168,936 £169,339 £162,647 £166,142 £173,343 Operating profit * £6
Slide 26: Appendix 2: Financial record - Balance Sheet
Appendix 2: Financial record - Balance Sheet Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Shareholders' funds £1,702.2m £1,744.0m £1,810.5m £1,839.3m £1,893.9m (Borrowings)/Cash * (£122.1m) (£51.0m) (£15.2m) £41.0m £135.2m Gearing * 7% 3% 1% 0% 0% Net asset value per share 565.1p 579.1p 601.1p 608.6p 625.7p W
Slide 27: Appendix 3: Half yearly profit & loss
Appendix 3: Half yearly profit & loss Underlying performance: 2012 2011 2011 H1 H1 Change FY Unit completions 4,712 4,439 273 9,360 Turnover * £806.7m £712.8m £93.9m £1,535.0m Operating profit * £98.1m £64.2m £33.9m £153.0m Operating margin * 12.2% 9.0% 3.2% 10.0% Interest & finance costs £2.2m £6.1
Slide 28: Appendix 4: Income Statement - Cost recoveries
Appendix 4: Income Statement - Cost recoveries Performance reconciliation - H1 2012: Reported Underlying Adjusted (pre-exceptional) Add back: Add back: Include: Goodwill Shared Exceptional impairment equity items fair value Revenue £806.7m £806.7m £9.6m £816.3m Land costs (£196.5m) (24.3%) (£196.5m)
Slide 29: Appendix 4: Income Statement - Cost recoveries
Appendix 4: Income Statement - Cost recoveries Underlying performance per plot: 2012 2011 2012 2011 H1 H1 Change H1 H1 Change Revenue * £171,206 £160,583 + 6.6% 100.0% 100.0% Land costs (£41,711) (£37,895) + 10.1% (24.4%) (23.6%) (0.8%) Build and other direct costs (£100,970) (£100,747) + 0.2% (58.9
Slide 30: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2012 2011 H1 H1 Change No. No. Units Persimmon Core 2,838 2,717 + 4% Charles Church 1,123 867 + 30% Partnerships 751 855 (12%) Total 4,712 4,439 + 6% £ £ Average Selling Price * Persimmon Core 171,703 166,538 + 3% Charles Churc
Slide 31: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2012 2011 H1 H1 Change £m £m Gross Profit ** Persimmon Core 78.0 60.3 + 29% Charles Church 46.4 25.2 + 84% Partnerships 10.0 11.9 (16%) Total 134.4 97.4 + 38% Gross Margin ** Persimmon Core 16.3% 13.6% + 2.7% Charles Church 17.
Slide 32: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 30 June 2012 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 267 148,700 (9%) 4,453 Scotland 282 166,369 + 6% 4,006 North West 317 143,997 (6%) 5,293 North East 295 148,807 (10%) 6,071 North Divi
Slide 33: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 30 June 2012 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Birmingham 452 148,270 + 8% 6,237 Shires 284 202,870 + 4% 3,306 Eastern 455 170,303 + 14% 6,244 Central Division 1,191 169,707 + 11% 15,787 30 J
Slide 34: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 30 June 2012 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Southern 332 144,295 (9%) 11,970 Western 536 159,925 + 16% 4,312 Wales 200 145,825 + 1% 4,493 South Division 1,068 152,426 + 4% 20,775 30 June 2
Slide 35: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 30 June 2012 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 1,292 213,399 7,401 30 June 2011 1,079 194,790 7,153 Change + 20% + 10% + 3% * Calculated from nominal value of turnover (before f air value charge on shared
Slide 36: Appendix 7: Analysis of unit sales
Appendix 7: Analysis of unit sales By Price Band (Private) By House Type (All) 29% 23% De tache d Ove r £250,000 29% 14% 21% Se m i-de tache d 18% 24% £200,000 to £249,999 20% 23% Tow nhous e 31% 27% £150,000 to £199,999 35% 32% Apartm e nt 16% 26% Le s s than 1% £150,000 Bungalow 31% 0% 0% 10% 20%
Slide 37: Appendix 8: Balance Sheet
Appendix 8: Balance Sheet 2012 2011 2011 H1 H1 Change FY Work in progress £463.8m £420.9m + £42.9m £427.8m Land £1,404.0m £1,516.2m (£112.2m) £1,484.2m Land creditors £196.4m £166.4m + £30.0m £199.7m Part exchange stock £47.3m £36.4m + £10.9m £39.1m Shared equity debt £186.9m £137.2m + £49.7m £164.0
Slide 38: Appendix 9: Cash flows
Appendix 9: Cash flows H1 12 H1 11 £m £m Operating cash (before working capital movements) 104.0 68.9 Investment in working capital: Decrease in gross land 81.9 71.6 Decrease in land creditors (3.3) (29.4) Net land divestment 78.6 42.2 Increase in WIP, part exchange and showhouses (42.6) (6.2) Other
Slide 39: Appendix 10: Mortgage approvals for house purchase
Appendix 10: Mortgage approvals for house purchase 150 Average monthly approvals: 86,500 Approvals - Volume ('000) 100 Dec 2009: Dec 2011: 59,000 53,000 50 Jun 2012: Dec 2010: 44,000 Average monthly 42,000 approvals since Nov 2008: beginning of 2008: 27,000 47,800 0 Ju Ju Ju Ju Ju Ju Ju Ju Ju Ju Ju
Slide 40: Appendix 11: New housing starts
New Housing Starts ('000) 0 25 50 75 100 125 150 175 200 2001 2002 2003 2004 2005 2006 2007 Source: NHBC Housing Market Report July 2012 Annual Housing Starts (2001-2011) 2008 Results Presentation 21 August 2012 2009 2010 2011 New Ho u sin g Starts ('000) 0 2 4 6 8 10 12 J an-09 Feb-09 38 Mar-09 App
Slide 41: 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