Persimmon Plc · LSE:PSN
Persimmon — H1 2010 Earnings Presentation
44 slides from Persimmon's earnings presentation, Aug 24, 2010
Slide 1: Results Presentation 24 August 2010
Results Presentation 24 August 2010 43
Slide 2: Agenda
Agenda Results Presentation 24 August 2010 Page Presented by ● Chairman’s overview 1 John White ● Review of operations 4 Mike Farley ● Strategy 12 Mike Farley ● Outlook 13 Mike Farley ● Financial review 15 Mike Killoran ● Summary 25 John White APPENDICES 1 to 9 Appendices 1 to 9 26-41 Results Presen
Slide 3: Chairman's overview
Chairman’s overview Underlying performance: H1 2010 H1 2009 Change Turnover * £776.6m £611.8m + 27% Operating profits * £62.1m £10.0m + 521% Pre-tax profits / (losses) * £39.4m (£16.7m) n/a Earnings per share * 12.0p (3.8p) n/a Borrowings ** £122.1m £494.2m (75%) Dividend per share 3.0p Nil n/a Repo
Slide 4: Chairman's overview • Significant improvement in performance
Chairman’s overview • Significant improvement in performance – Volume and price growth across all divisions: • Completions increase by 16% – Improved operating margins: • Selling price gains • Build efficiencies • Tight cost control and leaner structure – Debt reduction continues: • Gearing at 7% –
Slide 5: Chairman's overview • Sound platform for growth
Chairman’s overview • Sound platform for growth – Further beneficial planning consents being pursued: • Comprehensive outlet network maintained • Removal of lower margin units – Substantial land holdings retained: • Long high quality consented landbank • Strategic portfolio to support future returns
Slide 6: Review of operations
Review of operations Page ● Group overview 5 ● Land holdings & replacement 9 ● Current trading 10 ● Strategy 12 ● Outlook 13 Mike Farley, Group Chief Executive Results Presentation 24 August 2010 4
Slide 7: Review of operations – Group overview
Review of operations – Group overview • 25 local offices - dual branding • c.90 new sites opened in the first half - driving fresh sales impetus • Focus on traditional content - apartment units just 22% of total completions (H109: 35%) • Affordability maintained - 36% private homes under £150,000 (n
Slide 8: Review of operations – Group overview
Review of operations – Group overview Achieving growth in operating returns H1 2010 H1 2009 Change Underlying performance: Unit completions 4,657 4,006 + 16% Average selling price * £168,936 £155,524 + 9% Operating margin ** 8.0% 1.6% + 6.4% Net cash inflow from operations £185.6m £152.8m + 21% Gear
Slide 9: Review of operations – Group overview
Review of operations – Group overview Product Profile - 6 months ended 30 June 2010: Unit Annual completions Average selling Annual average Plots owned and Annual plot completions change price * price change under control count change 992 + 16% £160,763 + 10% 17,410 (2%) North Private 21% 29% 1,086
Slide 10: Half Year Sales Profile
Review of operations – Group overview Half Year Sales Profile 1,500 1,250 Completions (No.) 1,000 750 500 250 - H108 H208 H109 H209 H110 H108 H208 H109 H209 H110 H108 H208 H109 H209 H110 H108 H208 H109 H209 H110 H108 H208 H109 H209 H110 North Division Central Division South Division Charles Church P
Slide 11: Review of operations – Land holdings & replacement
Review of operations – Land holdings & replacement • Working hard re legacy sites - good progress in underlying performance • Improved quality of landbank - significant NRV provision release • 4,263 plots added in the first half - over 50% in southern markets • c.30% of acquired plots pulled through
Slide 12: Review of operations - Current trading
Review of operations - Current trading • Slower summer season as expected: • healthy conversion rate despite reduced visitor levels • cancellation rates continue at low levels of c.16% • c.75 outlets planned for H210 – predominantly southern markets • Site activity: • build controlled tightly • WIP
Slide 13: Review of operations - Current trading
Review of operations - Current trading ● H1 sales of £776.6m increased 27% on prior year ● Strong forward sales supports full year expectations: Half Year Forward Sales Units ASP Revenue June 2010 4,886 £144,945 £708.2m June 2009 4,708 £147,345 £693.7m M ovement +4% (2%) +2% Current Forward Sales (i
Slide 14: Strategy
Strategy Clear strategy throughout downturn – key ongoing targets: 1. Margin repair: − detailed appraisal of new site acquisitions − low build costs maintained 2. Cash generation: − close scrutiny of all cash flows − growth in balance sheet capacity 3. Space4 utilisation: − market leading technology
Slide 15: Outlook – Overall market
Outlook – Overall market ● Macroeconomic conditions remain uncertain ● Ready to react to Government comprehensive spending review ● We are well positioned for the current environment: − mortgage constraints and employment uncertainties − very low level of housing starts persists − slower working cap
Slide 16: Outlook – Persimmon positioning
Outlook – Persimmon positioning ● Valuable use of marketing skills and incentives ● Long landbank with excellent planning consents ● Measured investment decisions – based on profit and cash return ● Operational structure capable of delivering volume growth ● Efficient overhead levels supporting sale
Slide 17: Financial review
Financial review Page ● Trading overview 16 ● Net realisable value review 18 ● Land holdings at 30 June 2010 20 ● Balance sheet 21 ● Cash generation 22 ● Debt management 23 ● Capital structure 24 Mike Killoran, Group Finance Director Results Presentation 24 August 2010 15
Slide 18: Financial review – Trading overview
Financial review – Trading overview • Significant increase in reported pre-tax profits Adjusted trading (for NRV , s hare d e quity fair value charge and goodw ill im pairm e nt) H1 2010 H1 2009 Revenue (adjusted) £786.8m £623.0m Cost of sales: land cost (£200.0m) (25.4%) (£147.2m) (23.6%) exception
Slide 19: Financial review – Trading overview
Financial review – Trading overview Underlying performance: 2010 2009 2009 2009 H1 FY H2 H1 Gross margin 12.3% 8.7% 10.3% 6.6% Operating expenses (4.8%) (5.3%) (4.9%) (5.8%) Other operating income 0.5% 0.6% 0.4% 0.8% Operating margin 8.0% 4.0% 5.8% 1.6% Underlying performance presented before goodwi
Slide 20: Financial review – Net realisable value review
Financial review – Net realisable value review • Detailed site-by-site review performed at balance sheet date • Underlying selling price weakness from peak: • 31 December 2008: c.17% plus further c.10% = c.27% • 30 June 2009: c.20% plus further c.7% = c.27% • 31 December 2009: c.18% plus further c.7
Slide 21: Financial review – Net realisable value review
Financial review – Net realisable value review • Provision movement re land with planning: H109 H209 FY09 H110 £m Opening balance 545.8 481.9 545.8 385.6 Utilised (in underlying gross margin) (36.0) (49.4) (85.4) (26.5) Exceptional release: Period plots (13.0) (21.2) (34.2) (10.8) Future plots (14.9
Slide 22: Financial review – Land holdings at 30 June 2010
Financial review – Land holdings at 30 June 2010 • Cost to revenue percentage of owned and controlled plots of 20.7% (Jun-09: 20.6%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2009 Jun 2010 Change Jun 2010 Dec 2009 P
Slide 23: Financial review - Balance sheet
Financial review - Balance sheet ● Net assets c.£155m higher than June 2009 at £1.7bn ● Land expenditure profile (committed): H1 H2 FY 2007 £497m £342m £839m 2008 £243m £114m £357m 2009 £127m £49m £176m 2010 £94m est. £100m est. £194m ● Work in progress of £471.1m (Jun-09: £553.1m) − site investment
Slide 24: Financial review – Cash generation
Financial review – Cash generation Pre dividend free cash generation Pre dividend free cash generation (£m) + 600 FY H2 H1 + 500 2010 + 169.8 est. + 25.0 est. + 144.8 + 400 2009 + 356.8 + 227.8 + 129.0 2008 + 239.2 + 325.1 (85.9) + 300 2007 + 67.0 + 5.8 + 61.2 £m + 200 2006 + 583.1 + 259.4 + 323.7 +
Slide 25: Financial review – Debt management
Financial review – Debt management Net Debt Profile Cash Interest Paid (6-m th) JUN-10 JUN-10 DEC-09 DEC-09 JUN-09 JUN-09 DEC-08 DEC-08 JUN-08 JUN-08 (1,000) (800) (600) (400) (200) - 200 0 5 10 15 20 25 30 35 40 PP Revolver Overdraft Cash Net Debt (£m) Interest Paid on Revolver, Bank & Private Plac
Slide 26: Financial review – Capital structure
Financial review – Capital structure ● Current funding position (at 24 August 2010): Private Placement M aturity Profile 60.0 Current Committed Facilities 50.0 40.0 £m 30.0 20.0 10.0 £177.8m £350.0m - 2011 2012 2013 2016 2021 Revolver Private Placements Private Placement Repayments Private Placement
Slide 27: Summary
Summary • Active capital management - reducing finance costs • Strong cash generation, low debt and improved margins • Focus on core values - traditional affordable homes • Lean operation • Carefully considered investment decisions • Dividend resumed • Management optimistic about the future of the b
Slide 28: Appendices
Appendices ● Appendix 1 - Financial record: Income Statement Balance Sheet ● Appendix 2 - Half yearly profit & loss ● Appendix 3 - Income Statement - Percentage of turnover ● Appendix 4 - Trading performance - Business split ● Appendix 5 - Trading performance - Divisional split ● Appendix 6 - Analys
Slide 29: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement Underlying performance: Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 6mth 12mth 6mth 12mth 6mth Unit completions 5,501 10,202 4,006 8,976 4,657 Turnover * £998.4m £1,755.1m £611.8m £1,420.6m £776.6m Average Selling Price ** £181,485 £172,994 £155,524 £160,513 £1
Slide 30: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Shareholders' funds £2,274.8m £1,555.2m £1,547.5m £1,623.2m £1,702.2m Borrowings * £905.5m £600.7m £494.2m £267.5m £122.1m Gearing * 40% 39% 32% 16% 7% Net asset value per share 758.1p 518.0p 515.1p 540.2p 565.1p W ork i
Slide 31: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss Underlying performance: 2010 2009 2009 H1 H1 Change FY Unit completions 4,657 4,006 651 8,976 Turnover * £776.6m £611.8m £164.8m £1,420.6m Operating profit * £62.1m £10.0m £52.1m £57.2m Operating margin * 8.0% 1.6% 6.4% 4.0% Net interest & finance costs £21.8m £
Slide 32: Appendix 3: Income Statement - Percentage of turnover
Appendix 3: Income Statement - Percentage of turnover Performance reconciliation - H1 2010: Reported Underlying Adjusted (pre-exceptional) Add back: Add back: Include: Goodwill Shared Exceptional impairment equity items fair value Revenue £776.6m £776.6m £10.2m £786.8m Land costs (£200.0m) (25.8%) (
Slide 33: Appendix 3a: Income Statement - Percentage of turnover
Appendix 3a: Income Statement - Percentage of turnover Underlying performance: 2010 2009 H1 H1 Change Revenue 100.0% 100.0% Land costs (25.8%) (24.1%) (1.7%) Build and other direct costs (61.9%) (69.3%) + 7.4% Gross margin * 12.3% 6.6% + 5.7% Operating expenses (4.8%) (5.8%) + 1.0% Other operating i
Slide 34: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split U nderlying performance: 2010 2009 H1 H1 Change No. No. Units Persimmon Core 2,945 2,552 + 15% Charles Church 865 699 + 24% Partnerships 847 755 + 12% Total 4,657 4,006 + 16% £ £ Average Selling Price * Persimmon Core 171,556 159,945 + 7% Charles Chur
Slide 35: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split Underlying performance: 2010 2009 H1 H1 Change £m £m Gross Profit ** Persimmon Core 57.6 24.2 + 138% Charles Church 23.6 5.2 + 354% Partnerships 14.4 10.8 + 33% Total 95.6 40.2 + 138% Gross M argin ** Persimmon Core 11.6% 6.1% + 5.5% Charles Church 12
Slide 36: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2010 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 268 152,881 + 4% 4,067 Scotland 355 152,425 + 10% 4,258 North W est 238 154,664 + 18% 4,580 North East 205 165,049 + 13% 6,200 North D
Slide 37: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2010 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Birmingham 544 149,340 + 11% 6,212 Shires 323 184,632 - 3,416 Eastern 634 151,618 + 8% 6,200 Central Division 1,501 157,897 + 9% 15,828 30 June
Slide 38: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2010 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Southern 377 172,448 + 13% 4,812 W estern 423 175,908 + 2% 7,582 W ales 247 137,850 (5%) 3,606 W estbury Partnerships 101 78,752 (2%) 1,500 Sout
Slide 39: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2010 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 942 215,054 6,524 30 June 2009 745 199,487 7,154 Change + 26% + 8% (9%) * Calculat ed f ro m no minal value o f t urno ver (b ef o re f air value charg e o n
Slide 40: Appendix 6: Analysis of unit sales
Appendix 6: Analysis of unit sales By House Type (All) By Price Band (Private) 16% 26% De tache d 23% Ove r £250,000 13% 20% Se m i-de tache d 17% 17% £200,000 to £249,999 19% 25% Tow nhous e 37% 27% £150,000 to £199,999 37% 32% Apar tm e nt 22% 30% 2% Le s s than Bungalow £150,000 36% 1% 0% 10% 20%
Slide 41: Appendix 7: Balance Sheet
Appendix 7: Balance Sheet 2010 2009 2009 H1 H1 Change FY W ork in progress £471.1m £553.1m (£82.0m) £485.5m Land ** £1,610.6m £1,744.3m (£133.7m) £1,633.9m Land creditors £203.3m £195.9m + £7.4m £183.9m Part exchange stock £17.9m £11.4m + £6.5m £9.3m Shared equity debt £91.8m £47.2m + £44.6m £68.0m
Slide 42: Appendix 8: Cash flows
Appendix 8: Cash flows H110 H109 £m £m Operating cash (before working capital movements) 65.8 16.4 Investment in working capital: Decrease in gross land 94.0 131.1 Increase / (decrease) in land creditors 19.4 (117.8) Net land divestment 113.4 13.3 Decrease in W IP, part exchange and showhouses 8.2 1
Slide 43: Appendix 9: Housing market data
Appendix 9: Housing market data Annual Housing Starts & Completions (1998-2009) Loan Approvals: House Purchase 200 150 175 150 Number ('000) 125 Average monthly 100 approvals: Approvals - Volume ('000) 91,000 75 100 50 25 June 2010: 48,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 200
Slide 44: 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