Persimmon Plc · LSE:PSN
Persimmon — H1 2013 Earnings Presentation
43 slides from Persimmon's earnings presentation, Aug 20, 2013
Slide 1: Results Presentation 20 August 2013
Results Presentation 20 August 2013 42
Slide 2: Agenda
Agenda Results Presentation 20 August 2013 Page Presented by • Chairman’s overview 1 Nicholas Wrigley • Review of operations 3 Jeff Fairburn • Outlook 12 Jeff Fairburn • Financial review 14 Mike Killoran • Summary 23 Nicholas Wrigley Appendices 1 to 10 24 - 40 Results Presentation 20 August 2013
Slide 3: Chairman's overview - Performance highlights
Chairman’s overview - Performance highlights • Further progress towards delivery of strategic objectives − operating margin target achieved 18 months ahead of plan − 40% increase in underlying profit before tax − continued growth in ROACE to 14.1%, up 40% H1 2013 H1 2012 Change Underlying performanc
Slide 4: Chairman's overview
Chairman’s overview • Delivery of further increases in output − 7% increase in volume and 12% increase in Group revenues in the period − 21% increase in forward order value for future periods • Very strong free cash generation • Future growth supported through substantial investment in new land • £2
Slide 5: Review of operations
Review of operations Page • Group overview 4 • Strategic land 8 • Consented land 9 • Current trading 10 • Outlook 12 Results Presentation 20 August 2013 3
Slide 6: Review of operations - Group overview
Review of operations - Group overview • Strong national outlet network maintained - 90 new sites opened • Focus on family housing nationally − over 60% of sales priced below £200,000 − c. 90% of sales are traditional house types • Improvement in customer demand − mortgage availability has improved a
Slide 7: Review of operations - Group overview
Review of operations - Group overview • 300 bps increase in operating margin • 40% increase in underlying operating profits • 38% increase in cash inflow from operations H1 2013 H1 2012 Change Underlying performance: (restated †) Unit completions 5,022 4,712 + 7% Average selling price * £180,465 £17
Slide 8: Review of operations - Group overview
Review of operations - Group overview Product Profile - 6 months ended 30 June 2013: Unit Completions Average selling Average price Plots owned and Plot count completions change price * change under control change 1,663 + 3% £158,248 (3%) 25,294 + 6% Persimmon North 33% 36% 1,319 + 7% £206,981 + 13%
Slide 9: Review of operations - Group overview: Half Year Sales Profile
Review of operations - Group overview Half Year Sales Profile 2,500 2,000 Completions (No.) 1,500 1,000 500 - H1 11 H2 11 H1 12 H2 12 H1 13 H1 11 H2 11 H1 12 H2 12 H1 13 H1 11 H2 11 H1 12 H2 12 H1 13 North Division South Division Partnerships • Strong national coverage • Further sales momentum throu
Slide 10: Review of operations - Strategic land
Review of operations - Strategic land • Strategic land promotion remains a key priority Large • The new planning regime is proving strategic sites pulled through during 2013 supportive for allocations Large • BUT securing implementable detailed strategic interests acquired consents remains challengi
Slide 11: Review of operations - Consented land
Review of operations - Consented land • Continued significant new investment in acquiring high quality land − £236m of land payments made in the half year (H1 2012: £142m) − 7,538 new plots added to land bank (H1 2012: 5,779 plots) • 70,716 plots owned and under control (Dec 2012: 68,200 plots) • 11
Slide 12: Review of operations - Current trading
Review of operations - Current trading • Solid progress: − visitors to site 15% stronger than prior year − cancellations remain low - c. 16% for half year (H1 2012: c. 18%) − weekly private sales reservation rates are over 30% ahead of prior year since Help to Buy launch • Site activity: − further 8
Slide 13: Review of operations - Current trading
Review of operations - Current trading • Excellent position to achieve growth objectives Half Year Forward Sales Units ASP Revenue June 2013 6,236 £148,050 £923.2m June 2012 5,565 £139,023 £773.7m Movement +12% +6% +19% Current Forward Sales (inc. 7 w eeks post half year) Units ASP Revenue August 20
Slide 14: Outlook - Overall market
Outlook - Overall market • UK economic challenges remain • Housing market sentiment improving • Increasing support from mortgage market - − May and June mortgage approvals over 20% ahead year on year − reduction in mortgage interest costs • Beneficial impact of Help to Buy scheme • Achieving starts
Slide 15: Outlook - Execution of strategic objectives
Outlook - Execution of strategic objectives • Focus on basics of good housebuilding to deliver future growth • Production being driven forward in response to improved demand − strong investment in new outlet openings − investment in construction increased − Space4 output growth − further development
Slide 16: Financial review
Financial review Page • Trading overview 15 • Operating profit bridge 16 • Cost recoveries 17 • Operating efficiency 18 • Land holdings at 30 June 2013 19 • Balance sheet 20 • Cash generation 21 • Underlying operating profit and cash flow 22 Mike Killoran, Group Finance Director Results Presentation
Slide 17: Financial review - Trading overview
Financial review - Trading overview • Profitability continues to improve with the execution of operational plans Adjusted trading (for NRV, shared equity fair value charge and goodw ill im pairm ent) H1 2013 H1 2012 (restated †) Adjusted Exceptional Total % of revenue Adjusted Exceptional Total % of
Slide 18: Financial review - Operating profit bridge
Financial review - Operating profit bridge • Good volume growth and strong control over development costs 160 21.5 136.3 140 9.2 4.6 120 12.5 97.7 100 £m 80 60 40 20 0 H1 12 Operating Volume increase ASP increase Gross Profit Net Operating H1 13 Operating Profit (restated) improvement Expense increa
Slide 19: Financial review - Cost recoveries
Financial review - Cost recoveries • 300 bps increase in gross margin to 19.7% • 200 bps improvement in land cost recoveries to 22.4% • Tight build and direct cost controls evident - 100 bps contribution to margin gain • 24% increase in gross profit per unit sold to £35,375 Underlying performance pe
Slide 20: Financial review - Operating efficiency
Financial review - Operating efficiency • Underlying operating margin of 15.1%, up 3.0% on prior year 2013 2012 2012 2012 H1 FY H2 H1 (restated †) (restated †) (restated †) Gross margin 19.7% 17.5% 18.3% 16.7% Operating expenses (5.5%) (5.2%) (4.9%) (5.6%) Other operating income 0.9% 0.6% 0.2% 1.0%
Slide 21: Financial review - Land holdings at June 2013
Financial review - Land holdings at 30 June 2013 • Cost to revenue percentage of owned & controlled plots of 18.3% (Jun 12: 18.5%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2012 Jun 2013 Change Jun 2013 Dec 2012 Plo
Slide 22: Financial review - Balance sheet
Financial review - Balance sheet • Focus on capital efficiency − substantial capital return of £228m paid in June via B/C share scheme − shareholders equity c. £120m lower than at December 2012 • Substantial increase in land spend to £236m (H1 2012: £142m) to support future value delivery • Work in
Slide 23: Financial review - Cash generation
Financial review - Cash generation Pre dividend/capital return free cash generation (£m) * Pre dividend/capital return free cash generation (after working capital) + 400 FY H2 H1 + 350 2013 + 130.0 (est.) + 50.6 (est.) + 79.4 + 300 2012 + 178.0 + 66.3 + 111.7 2011 + 119.4 + 66.0 + 53.4 + 250 2010 +
Slide 24: Financial review - Underlying operating profit and cash flow
Financial review - Underlying operating profit and cash flow • Continuation of operating profit growth allows investment for the future • Acceleration of capital return enabled by strong cash generation 150 120 32.1 90 143.0 3.6 127.4 104.0 60 94.5 £m 68.9 30 - (4.1) (23.1) (30) (59.5) (60) H1 2011
Slide 25: Summary
Summary • The Group is well on course in pursuit of its strategic objectives • Volume growth is being delivered • Investing in the business to support sustainable growth • Target operating margin range achieved well ahead of schedule • Cash generation strong and increasing • Capital discipline reinf
Slide 26: Appendices
Appendices − Appendix 1 - Strategy - Capital return programme − Appendix 2 - Financial record: Income Statement Balance Sheet − Appendix 3 - Half yearly profit & loss − Appendix 4 - Trading performance - Business split − Appendix 5 - Trading performance - Divisional split − Appendix 6 - Analysis of
Slide 27: 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 to shareholders - Pence per share (p) Capital return (£m) June 2013 (Paid) 75 227.9 June 2014 10 * 30.4 June 2015 85 258.3 June 2017 110 334.2 June 2019 110 334.2 June 2020 115 349.4 June
Slide 28: Appendix 2: Financial record - Income Statement
Appendix 2: Financial record - Income Statement Underlying performance: Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 (restated †) (restated †) (restated †) (restated †) Unit completions 4,439 9,360 4,712 9,903 5,022 Turnover * £712.8m £1,535.0m £806.7m £1,721.4m £899.9m Average Selling Price ** £162,647 £166,
Slide 29: Appendix 2: Financial record - Balance Sheet
Appendix 2: Financial record - Balance Sheet Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Shareholders' funds £1,810.5m £1,839.3m £1,893.9m £1,993.7m £1,873.6m Borrowings/(Cash) £15.2m (£41.0m) (£135.2m) (£201.5m) (£48.1m) Gearing * 1% 0% 0% 0% 0% Net asset value per share 601.1p 608.6p 625.7p 658.2p 616.6p W
Slide 30: Appendix 3: Half yearly profit & loss
Appendix 3: Half yearly profit & loss Underlying performance: 2013 2012 2012 H1 H1 FY (restated †) Change (restated †) Unit completions 5,022 4,712 + 310 9,903 Turnover * £899.9m £806.7m + £93.2m £1,721.4m Operating profit * £136.3m £97.7m + £38.6m £222.5m Operating margin * 15.1% 12.1% + 3.0% 12.9%
Slide 31: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split Underlying performance: 2013 2012 H1 H1 Change No. No. Units Persimmon Core 2,982 2,838 + 5% Charles Church 1,140 1,123 + 2% Partnerships 900 751 + 20% Total 5,022 4,712 + 7% £ £ Average Selling Price * Persimmon Core 179,803 171,703 + 5% Charles Chur
Slide 32: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split Underlying performance: 2013 2012 H1 H1 Change £m £m Gross Profit ** Persimmon Core 102.8 78.0 + 32% Charles Church 57.2 46.4 + 23% Partnerships 17.7 10.0 + 77% Total 177.7 134.4 + 32% Gross Margin ** Persimmon Core 19.4% 16.3% + 3.1% Charles Church 2
Slide 33: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2013 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 288 131,733 (11%) 4,647 Scotland 351 159,068 (4%) 5,161 North West 303 148,967 + 3% 5,159 North East 316 152,307 + 2% 6,264 Midlands 4
Slide 34: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2013 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Shires 594 196,591 + 8% 6,685 Southern 740 159,051 + 10% 12,592 Western 304 204,461 + 28% 5,278 Wales 198 160,788 + 10% 5,206 South Division 1,8
Slide 35: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2013 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 1,256 231,648 11,015 30 June 2012 1,292 213,399 7,401 Change (3%) + 9% + 49% * Calculated from nominal value of turnover (before fair value charge on shared
Slide 36: Appendix 6: Analysis of unit sales
Appendix 6: Analysis of unit sales By Price Band (Private) By House Type (All) 14% 21% De tached Ove r £250,000 32% 17% 20% Sem i-de tached 20% 25% £200,000 to £249,999 22% 21% Tow nhouse 32% 35% £150,000 to £199,999 31% 36% Apartm e nt 11% 31% Le s s than 2% £150,000 Bungalow 30% 0% 0% 10% 20% 30%
Slide 37: Appendix 6: Analysis of unit sales - Product mix
Appendix 6: Analysis of unit sales - Product mix 1% 1% 1% 1% 1% 1% 0% 1% 0% 2% 100% 11% 16% 14% 90% 21% 18% 22% 22% 28% 35% 80% 36% 32% 70% 31% 30% 30% 32% 35% 60% 37% 32% 21% 50% 32% 25% 24% 24% 40% 23% 20% 20% 17% 20% 30% 17% 13% 20% 31% 32% 28% 29% 23% 25% 23% 22% 21% 10% 19% 0% 6mths to 6mths to
Slide 38: Appendix 6: Analysis of unit sales - Price range
Appendix 6: Analysis of unit sales - Price range 100% 10% 12% 13% 13% 13% 13% 14% 16% 17% 90% 16% 80% 16% 19% 20% 19% 22% 20% 21% 22% 70% 60% 29% 32% 30% 32% 50% 37% 35% 34% 34% 31% 40% 30% 45% 20% 40% 38% 36% 31% 30% 31% 29% 30% 10% 0% 6mths to June 6mths to 6mths to June 6mths to 6mths to June 6mt
Slide 39: Appendix 7: Balance Sheet
Appendix 7: Balance Sheet 2013 2012 2012 H1 H1 Change FY Work in progress £460.9m £463.8m (£2.9m) £443.1m Land £1,538.4m £1,404.0m + £134.4m £1,495.7m Land creditors £229.7m £196.4m + £33.3m £239.9m Part exchange stock £50.4m £47.3m + £3.1m £58.6m Shared equity debt £211.5m £186.9m + £24.6m £202.9m
Slide 40: Appendix 8: Cash flows
Appendix 8: Cash flows H1 13 H1 12 £m £m Operating cash (before working capital movements) 143.0 104.0 Investment in working capital: (Increase) / Decrease in gross land (41.9) 81.9 Decrease in land creditors (10.2) (3.3) Net land divestment (52.1) 78.6 Increase in WIP, part exchange and showhouses
Slide 41: Appendix 9: Mortgage approvals for house purchase
Appendix 9: Mortgage approvals for house purchase 150 Average monthly approvals: 84,800 Approvals - Volume ('000) 100 Dec 2009: Dec 2011: Jun 2013: 59,000 52,000 58,000 50 Dec 2010: Dec 2012: 43,000 56,000 Average monthly approvals since Nov 2008: beginning of 2008: 27,000 48,800 0 Ju Ju Ju Ju Ju Ju
Slide 42: Appendix 10: New housing starts
New Housing Starts ('000) 0 25 50 75 100 125 150 175 200 2002 2003 2004 2005 2006 2007 Source: NHBC Housing Market Report (July 2013) 2008 Annual Housing Starts (2002-2012) 2009 Results Presentation 20 August 2013 2010 2011 2012 New Housing Starts ('000) 0 2 4 6 8 10 12 40 Jan-10 Appendix 10: New ho
Slide 43: 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