Persimmon Plc · LSE:PSN
Persimmon — H1 2011 Earnings Presentation
43 slides from Persimmon's earnings presentation, Aug 23, 2011
Slide 1: Results Presentation 23 August 2011
Results Presentation 23 August 2011 42
Slide 2: Agenda
Agenda Results Presentation 23 August 2011 Page Presented by • Chairman’s overview 1 Nicholas Wrigley • Review of operations 3 Mike Farley • Strategy 11 Mike Farley • Outlook 12 Mike Farley • Financial review 14 Mike Killoran • Summary 23 Nicholas Wrigley Appendices 1 to 10 24-40 Results Presentatio
Slide 3: Chairman's overview – Performance highlights
Chairman’s overview – Performance highlights • Strong progress in a challenging market – Focus on operating margin continues – Robust cash generation, £72.5m cash generated from operations • Results: H1 2011 H1 2010 Reported Adjustments Underlying Reported Adjustments Underlying Turnover * £712.8m £
Slide 4: Chairman's overview
Chairman’s overview • Land holdings strengthened − 62,364 plots owned and under control (31 December 2010: 58,862) − Long history of strategic land success • 10% increase in forward sales to over £1bn • Strong liquidity will support improvements in returns • Interim dividend of 4.0p – 33% increase o
Slide 5: Review of operations
Review of operations Page • Group overview 4 • Land holdings & replacement 8 • Current trading 9 • Strategy 11 • Outlook 12 Mike Farley, Group Chief Executive Results Presentation 23 August 2011 3
Slide 6: Review of operations – Group overview
Review of operations – Group overview • Lean overhead structure maintained – 25 dual branded local offices • c.70 new sites opened in the first half – maintaining strong outlet network • Greater proportion of smaller houses sold in the period – average house size of 1,100sqft, c.3% lower • Continued
Slide 7: Review of operations – Group overview
Review of operations – Group overview Further margin improvement and excellent cash generation H1 2011 H1 2010 Change Underlying performance: Unit completions 4,439 4,657 (5%) Average selling price * £162,647 £168,936 (4%) Operating profits ** £64.2m £62.1m + 3% Operating margin ** 9.0% 8.0% + 1.0%
Slide 8: Review of operations – Group overview
Review of operations – Group overview Product Profile - 6 months ended 30 June 2011: Unit Completions Average selling Average price Plots owned and Plot count completions change price * change under control change 891 (10%) £161,561 + 0% 17,569 1% Persimmon North 20% 28% 1,035 (5%) £166,765 (5%) 11,
Slide 9: Half Year Sales Profile
Review of operations – Group overview Half Year Sales Profile 1,500 Completions (No.) 1,250 1,000 750 500 250 - H109 H209 H110 H210 H1 11 H109 H209 H110 H210 H1 11 H109 H209 H110 H210 H1 11 H109 H209 H110 H210 H1 11 H109 H209 H110 H210 H1 11 North Division Central Division South Division Charles Chu
Slide 10: Review of operations – Land holdings & replacement
Review of operations – Land holdings & replacement • Continued improvement in quality of land bank – further NRV provision release • 7,493 plots added in the first half – c.60% in South Division • 37% of acquired plots pulled through from strategic land portfolio (2,753 plots) • c.65% of plots conve
Slide 11: Review of operations – Current trading
Review of operations – Current trading • Traditional seasonality: − Solid Spring season − Visitors to site remain ahead of prior year − Cancellation rates low at c.17% − Private sales reservation rates up 4% on same period last year • Site activity: − Overall work in progress investment tightly cont
Slide 12: Review of operations – Current trading
Review of operations – Current trading • Healthy sales through Spring season resulting in strong forward sales position • Weekly sales rate c.4% ahead of the prior year from 30 June 2011 Half Year Forward Sales Units ASP Revenue June 2011 5,066 £143,168 £725.3m June 2010 4,886 £144,945 £708.2m Movem
Slide 13: Strategy
Strategy Strategy reflects current market opportunities: 1. Maintain strong national network: − Strengthen regional market presence − Deliver strong supply of new site openings 2. Dual branding: − Enhance capital turn − Providing customer choice 3. Strategic land conversion: − New planning policy pr
Slide 14: Outlook – Overall market
Outlook – Overall market • Challenging market backdrop to continue – fragile consumer confidence • Mortgage availability constraints remain – some improvement emerging • Government’s Growth Agenda supportive – economic gearing effect of a healthy housing market: c.£21m grant funding allocated under
Slide 15: Outlook – Strong platform for future success
Outlook – Strong platform for future success • High quality land bank - strong national outlet network continues to be refreshed – c.70 new sites to open H2 2011 • Continued discipline over build activity; adding value working with suppliers and Space4 • Strategic land pull through delivering additi
Slide 16: Financial review
Financial review Page • Trading overview 15 • Net realisable value review 18 • Land holdings at 30 June 2011 19 • Balance sheet 20 • Cash generation 21 • Debt management 22 Mike Killoran, Group Finance Director Results Presentation 23 August 2011 14
Slide 17: Financial review – Trading overview
Financial review – Trading overview • Significant increase in underlying pre-tax profits Adjusted trading (for NRV, shared equity fair value charge and goodw ill im pairm ent) H1 2011 H1 2010 Revenue (adjusted) £722.0m- £786.8m Cost of sales: land cost (£168.2m) (23.3%) (£200.0m) (25.4%) exceptional
Slide 18: Financial review – Trading overview
Financial review – Trading overview • Underlying operating margin of 9.0% - statutory operating margin of 10.5% • Underlying performance: 2011 2010 2010 2010 H1 FY H2 H1 Gross margin 13.7% 12.4% 12.5% 12.3% Operating expenses (5.2%) (4.9%) (5.0%) (4.8%) Other operating income 0.5% 0.7% 0.9% 0.5% Ope
Slide 19: Reported Operating Profit (£m)
Financial review – Trading overview • Operating profit history: improvements in underlying profit delivery set to continue 140.0 131.2 130.0 120.0 110.0 100.0 91.5 70.7 Reported Operating Profit (£m) 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 20.0 10.0 0.
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: − 30 June 2011: c.15% plus further c.6% = c.21% • Excluding provision for price weakness net realisable value review affects c.13% of plots own
Slide 21: Financial review – Land holdings at June 2011
Financial review – Land holdings at 30 June 2011 • Cost to revenue percentage of owned & controlled plots of 19.4% (Jun-10: 20.7%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2010 Jun 2011 Change Jun 2011 Dec 2010 Plo
Slide 22: Financial review – Balance sheet
Financial review – Balance sheet • Net assets c.£110m higher than June 2010 at £1.8bn • Land expenditure profile: H1 H2 FY 2008 £243m £114m £357m 2009 £127m £49m £176m 2010 £94m £108m £202m 2011 £139m est. £150m est. £289m • Work in progress of £420.9m (Jun-10: £471.1m) − asset turn of c.4x to be ma
Slide 23: Financial review – Cash generation
Financial review – Cash generation Pre dividend free cash generation (£m) Pre dividend free cash generation (after working capital) + 600 FY H2 H1 + 500 2011 + 108.4(est.) + 55.0(est.) + 53.4 + 400 2010 + 225.6 + 80.8 + 144.8 + 300 2009 + 356.8 + 227.8 + 129.0 £m + 200 2008 + 239.2 + 325.1 (85.9) +
Slide 24: Financial review – Debt management
Financial review – Debt management Net Debt Profile Cash Interest Paid (6-mth) JUN-11 JUN-11 DEC-10 DEC-10 JUN-10 JUN-10 DEC-09 DEC-09 JUN-09 JUN-09 (600) (500) (400) (300) (200) (100) - 100 200 0 5 10 15 20 25 PP Revolver Overdraft Cash Net Debt (£m) Interest Paid on Revolver, Bank & Private Placem
Slide 25: Summary
Summary • Ongoing improvement in underlying margins • Healthy liquidity • Excellent strategic land successes supporting future growth • Maintained discipline over overheads • Significant balance sheet capacity • Increasing returns to shareholders “Our teams across the country remain focussed on the
Slide 26: Appendices
Appendices − Appendix 1 - Financial record: Income Statement Balance Sheet − Appendix 2 - Half yearly profit & loss − Appendix 3 - Income Statement – Cost recoveries − Appendix 4 - Trading performance - Business split − Appendix 5 - Trading performance - Divisional split − Appendix 6 - Analysis of u
Slide 27: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement Underlying performance: Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 6mth 12mth 6mth 12mth 6mth Unit completions 4,006 8,976 4,657 9,384 4,439 Turnover * £611.8m £1,420.6m £776.6m £1,569.5m £712.8m Average Selling Price ** £155,524 £160,513 £168,936 £169,339 £16
Slide 28: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Shareholders' funds £1,547.5m £1,623.2m £1,702.2m £1,744.0m £1,810.5m Borrowings * £494.2m £267.5m £122.1m £51.0m £15.2m Gearing * 32% 16% 7% 3% 1% Net asset value per share 515.1p 540.2p 565.1p 579.1p 601.1p Work in pro
Slide 29: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss Underlying performance: 2011 2010 2010 H1 H1 Change FY Unit completions 4,439 4,657 (218) 9,384 Turnover * £712.8m £776.6m (£63.8m) £1,569.5m Operating profit * £64.2m £62.1m £2.1m £128.7m Operating margin * 9.0% 8.0% 1.0% 8.2% Net interest & finance costs £6.1m
Slide 30: Appendix 3: Income Statement – Cost recoveries
Appendix 3: Income Statement – Cost recoveries Performance reconciliation - H1 2011: Reported Underlying Adjusted (pre-exceptional) Add back: Add back: Include: Goodwill Shared Exceptional impairment equity items fair value Revenue £712.8m £712.8m £9.2m £722.0m Land costs (£168.2m) (23.6%) (£168.2m)
Slide 31: Appendix 3a: Income Statement – Cost recoveries
Appendix 3a: Income Statement – Cost recoveries Underlying performance per plot: 2011 2010 2011 2010 H1 H1 Change H1 H1 Change Revenue * £160,583 £166,755 (3.7%) 100.0% 100.0% Land costs (£37,895) (£42,963) (11.8%) (23.6%) (25.8%) + 2.2% Build and other direct costs (£100,747) (£103,264) (2.4%) (62.
Slide 32: Appendix 4: Trading performance - Business split
Appendix 4: 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 33: Appendix 4: Trading performance - Business split
Appendix 4: 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 34: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2011 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 210 163,867 + 7% 4,726 Scotland 281 156,840 + 3% 4,206 North West 230 153,683 (1%) 4,542 North East 192 165,818 - 6,118 North Division
Slide 35: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2011 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Birmingham 525 136,895 (8%) 5,669 Shires 247 194,538 + 5% 3,191 Eastern 526 148,770 (2%) 6,431 Central Division 1,298 152,676 (3%) 15,291 30 Jun
Slide 36: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2011 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Southern 379 159,285 (8%) 10,265 Western 487 149,497 (15%) 4,646 Wales 186 144,511 + 5% 4,069 Westbury Partnerships 97 81,588 + 4% 1,348 South D
Slide 37: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2011 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 1,079 194,790 7,153 30 June 2010 942 215,054 6,524 Change + 15% (9%) + 10% * Calculat ed f rom nominal value of t urnover (bef ore f air value charge on shar
Slide 38: Appendix 6: Analysis of unit sales
Appendix 6: Analysis of unit sales By Price Band (Private) By House Type (All) 28% 18% De tache d Ove r £250,000 23% 13% 17% Se m i-de tache d 16% 20% £200,000 to £249,999 20% 21% Tow nhous e 35% 27% £150,000 to £199,999 37% 42% Apartm e nt 21% 29% Le s s than 2% £150,000 Bungalow 30% 1% 0% 10% 20%
Slide 39: Appendix 7: Balance Sheet
Appendix 7: Balance Sheet 2011 2010 2010 H1 H1 Change FY Work in progress £420.9m £471.1m (£50.2m) £413.5m Land £1,516.2m £1,610.6m (£94.4m) £1,575.8m Land creditors £166.4m £203.3m (£36.9m) £195.8m Part exchange stock £36.4m £17.9m + £18.5m £32.8m Shared equity debt £137.2m £91.8m + £45.4m £115.2m
Slide 40: Appendix 8: Cash flows
Appendix 8: Cash flows H1 11 H1 10 £m £m Operating cash (before working capital movements) 68.9 65.8 Investment in working capital: Decrease in gross land 71.6 94.0 (Decrease) / increase in land creditors (29.4) 19.4 Net land divestment 42.2 113.4 (Increase) / decrease in WIP, part exchange and show
Slide 41: Appendix 9: Mortgage approvals for house purchase
Appendix 9: Mortgage approvals for house purchase 150 Average monthly approvals: 88,000 Approvals- Volume('000) 100 Dec 2009: 59,000 Jun 2011: 48,000 50 Dec 2010: Average monthly 42,000 approvals since beginning of Nov 2008: 2008: 27,000 47,000 0 A A A A A A A A A A A A A A A A A A A pr pr pr pr pr
Slide 42: Appendix 10: New housing starts
New Housing Starts ('000) 0 25 50 75 100 125 150 175 200 2001 2002 2003 2004 2005 2006 2007 Annual Housing Starts (2001-2010) 2008 Results Presentation 23 August 2011 2009 2010 Ne w H o u s in g Sta rts ('0 0 0 ) 0 2 4 6 8 10 12 14 16 40 J an-09 Appendix 10: New housing starts F eb-09 M ar-09 Apr-09
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