Persimmon Plc · LSE:PSN
Persimmon — FY2014 Earnings Presentation
53 slides from Persimmon's earnings presentation, Feb 24, 2015
Slide 1: Results Presentation 24 February 2015
Results Presentation 24 February 2015 52
Slide 2: Agenda
Agenda Results Presentation 24 February 2015 Page Presented by • Chairman’s overview 1 Nicholas Wrigley • Review of strategy and operations 3 Jeff Fairburn • Outlook 15 Jeff Fairburn • Financial review 17 Mike Killoran • Summary 28 Nicholas Wrigley Appendices 1 to 11 29 – 50 Results Presentation 24
Slide 3: Chairman's overview
Chairman’s overview • Performance highlights 2014 2013 Change Underlying performance: Turnover * £2,573.9m £2,085.9m + 23% Operating profits * £473.3m £333.1m + 42% Operating margin * 18.4% 16.0% + 2.4% Pre-tax profits * £475.0m £329.6m + 44% Earnings per share 124.5p 83.3p + 49% Cash £378.4m £204.3
Slide 4: Chairman's overview
Chairman’s overview • Delivering profitable growth − 17% growth in volume − 240 bps increase in underlying operating margin − increased forward sales revenues by 5% to £1.5bn • Significant cash generation − over £950m of cash generation of which £572m spent on land and £214m surplus capital returned
Slide 5: Review of strategy and operations
Review of strategy and operations Page • Strategy 4 • Key objectives 5 • Group overview 6 • Consented land 10 • Strategic land 11 • Current trading 12 • Accelerated returns 14 • Outlook 15 Results Presentation 24 February 2015 3
Slide 6: Strategy to maximise long term shareholder value
Strategy to maximise long term shareholder value Growth to Optimise Long term optimal cash Disciplined Surplus capital scale in efficiency land capital returns to regional of investment generated shareholders markets operations Results Presentation 24 February 2015 4
Slide 7: Review of operations - Key objectives
Review of operations - Key objectives • Optimise sales to suit market conditions • Provide a range of quality homes to our customers • Maximise value from each new home sold • Capture cost efficiencies and control costs to maximise profitability • Grow site based skills to support expansion in const
Slide 8: Review of operations - Group overview
Review of operations - Group overview • Strong network of sites across all regions of the UK - currently 385 active outlets • Remain committed to providing choice at affordable prices − c. 57% of private sales priced below £200,000 − c. 90% of sales are traditional house types • Return to more balan
Slide 9: Review of operations - Group overview
Review of operations - Group overview • Substantial increase in legal completions - 17% up on prior year • 42% growth in operating profits • 41% increase in pre working capital cash flows 2014 2013 Change Underlying performance: Unit completions 13,509 11,528 + 17% Average selling price * £190,667 £
Slide 10: Review of operations - Group overview
Review of operations - Group overview Product Profile - 12 months ended 31 December 2014: Unit Completions Average selling Average price Plots owned and Plot count completions change price * change under control change 4,950 + 27% £169,514 + 5% 30,713 + 15% Persimmon North 37% 35% 3,553 + 21% £221,0
Slide 11: Review of operations - Group overview
Review of operations - Group overview Half Year Sales Profile 3,500 3,000 Completions (No.) 2,500 2,000 1,500 1,000 500 - H1 13 H2 13 H1 14 H2 14 H1 13 H2 13 H1 14 H2 14 H1 13 H2 13 H1 14 H2 14 North Divis ion South Divis ion Partners hips • Traditional seasonal trading pattern re-emerging • Improve
Slide 12: Review of operations - Consented land
Review of operations - Consented land • Excellent liquidity has supported strong investment in new land − £572m of land payments (including land creditors) in the year (2013: £510m) − 26,822 new plots added to the consented land bank across 156 locations • Land replacement focus remains on securing
Slide 13: Review of operations - Strategic land
Review of operations - Strategic land • Continued investment in strategic land Strategic sites pulled remains a key element of our business model through during 2014 • c. 17,000 acres held at 31 December 2014 Strategic • Over 2,650 acres of new strategic land interests acquired during 2014 interests
Slide 14: Review of operations - Current trading
Review of operations - Current trading • Encouraging opening to 2015: − visitor numbers in line with the prior year − weekly private sales rate per site 5% stronger − historically low cancellation rates at 16% (2014: 15%) • Site activity: − 50% of the planned new outlets for H1 2015 already open − S
Slide 15: Review of operations - Current trading
Review of operations - Current trading • Strong forward orders despite substantial growth in 2014 legal completions 1 January Forward Sales Units ASP Revenue 2015 6,320 £153,964 £973.1m 2014 6,038 £150,383 £908.0m Movement +5% +2% +7% Current Forward Sales (inc. first 8 w eek sales) Units ASP Revenu
Slide 16: Review of operations - Accelerated returns
Review of operations - Accelerated returns • Second payment of 70p paid in early July 2014 • Proposed further acceleration based upon 2014 outperformance • 95p payment due July 2015 to be paid in April 2015 Paid Paid 2013 2014 2015 2016 2017 2018 2019 2020 2021 Original Plan 75p 95p 110p 110p 115p 1
Slide 17: Outlook - Overall market
Outlook - Overall market • UK economic performance forecast to improve, however uncertainty remains due to the General Election in May • Consumer confidence continues to gradually improve • Market oversight measures introduced by BoE will help underwrite sustainable lending practices • Expectation t
Slide 18: Outlook - Operational priorities
Outlook - Operational priorities • Focus on achieving sustainable market share and scale in each of our regional markets • Continue to maximise selling prices whilst capturing further improvement in sales rates as markets allow • Increase the number of skilled trades people in the business to improv
Slide 19: Financial review
Financial review Page • Trading overview 18 • Operating profit bridge 19 • Cost recoveries 20 • Operating efficiency 21 • Land holdings at 31 December 2014 22 • Balance sheet 23 • 2014 cash generation 24 • Underlying operating profit and cash flow 25 • Cash generation through cycle 26 • Capital retu
Slide 20: Financial review - Trading overview
Financial review - Trading overview • Increased profits resulting from operational improvements Adjusted trading (for NRV, shared equity fair value charge and goodw ill im pairm ent) 2014 2013 Total % of revenue Adjusted Exceptional Total % of revenue Revenue (adjusted) £2,575.0m- £2,092.5m £2,092.5
Slide 21: Financial review - Operating profit bridge
Financial review - Operating profit bridge • Volume growth, development cost control and operational efficiencies delivered improved profits 500 51.0 473.3 26.3 10.3 73.2 400 333.1 300 £m 200 100 - FY 13 Operating Volume increase ASP increase Gross Margin Net Operating FY 14 Operating Profit improve
Slide 22: Financial review - Cost recoveries
Financial review - Cost recoveries • 200 bps improvement in gross margin to 22.2% • Reduced land recoveries contributed 130 bps to margin gain • Build and direct cost control contributed 70 bps • 16% increase in gross profit per unit sold to £42,330 Underlying performance per plot: 2014 2013 2014 20
Slide 23: Financial review - Operating efficiency
Financial review - Operating efficiency • Underlying operating margin of 18.4% up 240 bps on prior year 2014 2014 2014 2013 2013 2013 FY H2 H1 FY H2 H1 Gross margin 22.2% 22.5% 21.9% 20.2% 20.5% 19.7% Operating expenses (4.1%) (3.9%) (4.4%) (4.7%) (4.0%) (5.5%) Other operating income 0.3% 0.4% 0.2%
Slide 24: Financial review - Land holdings at Dec 2014
Financial review - Land holdings at 31 Dec 2014 • Cost to revenue percentage of owned & controlled plots of 17.1% (Dec 13: 17.5%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2013 Dec 2014 Change Dec 2014 Dec 2013 Plot
Slide 25: Financial review - Balance sheet
Financial review - Balance sheet • Shareholder equity value per share (pre capital return) generated in the year of 118 pence (2013: 92 pence per share) • High quality land investments secured − £206m increase in land balances to £1.84bn; 26,822 plots added − beneficial deferred terms negotiated - £
Slide 26: Financial review - 2014 cash generation
Financial review - 2014 cash generation Pre dividend/capital return free cash generation (£m) * Pre dividend/capital return free cash generation (after working capital) FY H2 H1 + 400 2014 + 388.7 + 263.9 + 124.8 + 350 2013 + 235.5 + 156.1 + 79.4 + 300 2012 + 178.0 + 66.3 + 111.7 + 250 2011 + 119.4
Slide 27: Financial review - Underlying operating profit and cash flow
Financial review - Underlying operating profit and cash flow • Growth of the business financed through generation of cash inflows from operations • Delivery of the Capital Return Plan depends upon the cash efficiency of our business processes 8.8 500 450 400 350 300 487.9 9.0 250 179.0 345.5 £m 200
Slide 28: Financial review - Cash generation through cycle
Financial review - Cash generation through cycle 600 HALF YEARLY AVERAGE CASH GENERATION PRE LAND EXPENDITURE: £333M 500 400 • Excellent cash generation delivered from revenue and profit £m 300 200 £419m £412m £549m growth £308m £327m £248m 100 £207m £195m £209m £146m £163m £91m £100m £43m £60m £74m
Slide 29: Financial review - Capital return considerations
Financial review - Capital return considerations • Operational requirement for cash remains the priority • Surplus cash generation in excess of operational needs available for return to shareholders • Seasonal and cyclical movements in working capital to be accommodated • Longer term expectation of
Slide 30: Summary
Summary • Further successful execution of the Group’s operational objectives • Building value with strong land investment and swift asset turn • Scale of operations increasing - further improvement in returns and cash generation to come • Continued investment in strategic land, promotion and convers
Slide 31: 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 32: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement Underlying performance: 2010 2011 2012 2013 2014 Unit completions 9,384 9,360 9,903 11,528 13,509 Turnover * £1,569.5m £1,535.0m £1,721.4m £2,085.9m £2,573.9m Average Selling Price ** £169,339 £166,142 £175,640 £181,861 £190,667 Operating profit * £130
Slide 33: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet 2010 2011 2012 2013 2014 Shareholders' funds £1,744.0m £1,839.3m £1,993.7m £2,045.5m £2,192.6m Borrowings/(Cash) £51.0m (£41.0m) (£201.5m) (£204.3m) (£378.4m) Gearing * 3% 0% 0% 0% 0% Net asset value per share 579.1p 608.6p 658.2p 671.4p 715.4p Work in pr
Slide 34: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss Underlying performance: 2014 2014 2013 2013 H2 H1 H2 H1 Unit completions 7,101 6,408 6,506 5,022 Turnover * £1,375.8m £1,198.1m £1,186.0m £899.9m Operating profit * £260.8m £212.5m £196.8m £136.3m Operating margin * 19.0% 17.7% 16.6% 15.1% Interest & finance cos
Slide 35: Appendix 3: Income Statement - Cost recoveries
Appendix 3: Income Statement - Cost recoveries Performance reconciliation - FY 2014: Reported Underlying Adjusted Add back: Add back: Goodwill Shared impairment equity fair value Revenue £2,573.9m £2,573.9m £1.1m £2,575.0m Land costs (£516.0m) (20.0%) (£516.0m) (20.0%) (£516.0m) (20.0%) Exceptional
Slide 36: Appendix 4: Income Statement - 10 year record
Appendix 4: Income Statement - 10 year record Underlying perform ance: 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Unit completions 12,636 16,701 15,905 10,202 8,976 9,384 9,360 9,903 11,528 13,509 Turnover * £2,285.7m £3,141.9m £3,014.9m £1,755.1m £1,420.6m £1,569.5m £1,535.0m £1,721.4m £2,08
Slide 37: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2014 2013 FY FY Change No. No. Units Persimmon Core 8,503 6,830 + 24% Charles Church 2,750 2,577 + 7% Partnerships 2,256 2,121 + 6% Total 13,509 11,528 + 17% £ £ Average Selling Price * Persimmon Core 191,028 182,899 + 4% Charl
Slide 38: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2014 2013 FY FY Change £m £m Gross Profit ** Persimmon Core 365.6 250.8 + 46% Charles Church 168.2 133.2 + 26% Partnerships 38.0 37.3 + 2% Total 571.8 421.3 + 36% Gross Margin ** Persimmon Core 22.5% 20.2% + 2.3% Charles Church
Slide 39: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2014 2013 H2 H2 Change No. No. Units Persimmon Core 4,455 3,848 + 16% Charles Church 1,378 1,437 (4%) Partnerships 1,268 1,221 + 4% Total 7,101 6,506 + 9% £ £ Average Selling Price * Persimmon Core 195,996 185,298 + 6% Charles
Slide 40: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2014 2013 H2 H2 Change £m £m Gross Profit ** Persimmon Core 198.5 148.0 + 34% Charles Church 89.7 76.0 + 18% Partnerships 21.7 19.6 + 11% Total 309.9 243.6 + 27% Gross Margin ** Persimmon Core 22.7% 20.9% + 1.8% Charles Church
Slide 41: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2014 2013 H1 H1 Change No. No. Units Persimmon Core 4,048 2,982 + 36% Charles Church 1,372 1,140 + 20% Partnerships 988 900 + 10% Total 6,408 5,022 + 28% £ £ Average Selling Price * Persimmon Core 185,562 179,803 + 3% Charles C
Slide 42: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2014 2013 H1 H1 Change £m £m Gross Profit ** Persimmon Core 167.1 102.8 + 63% Charles Church 78.5 57.2 + 37% Partnerships 16.3 17.7 (8%) Total 261.9 177.7 + 47% Gross Margin ** Persimmon Core 22.3% 19.4% + 2.9% Charles Church 2
Slide 43: Appendix 6: Trading performance - Regional split
Appendix 6: Trading performance - Regional split 31 December 2014 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 815 151,848 + 5% 6,273 Scotland 1,285 174,511 + 9% 6,170 North West 804 161,600 + 5% 6,572 North East 1,050 152,911 - 6,528 Midlands
Slide 44: Appendix 6: Trading performance - Regional split
Appendix 6: Trading performance - Regional split 31 December 2014 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Shires 1,844 213,574 + 7% 10,736 Western 1,422 175,599 + 9% 14,473 Southern 808 199,316 (1%) 6,478 Wales 681 159,485 (2%) 6,064 South 4,755 19
Slide 45: Appendix 6: Trading performance - Regional split
Appendix 6: Trading performance - Regional split 31 December 2014 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 3,226 240,418 13,381 31 December 2013 2,933 229,513 11,674 Change + 10% + 5% + 15% * Calculated from nominal value of turnover (before fair value charge on
Slide 46: Appendix 7: Analysis of unit sales
Appendix 7: Analysis of unit sales By Price Band (Private) By House Type (All) 19% 26% Detached Ove r £250,000 33% 21% 21% Sem i-detached 24% 26% £200,000 to £249,999 22% 18% Tow nhouse ' 29% 30% £150,000 to £199,999 32% 33% Apartm ent 11% 27% Les s than 2% £150,000 Bungalow 25% 1% 0% 10% 20% 30% 40
Slide 47: Appendix 7: Analysis of unit sales - Product mix
Appendix 7: Analysis of unit sales - Product mix 1% 1% 1% 1% 0% 1% 0% 1% 0% 1% 2% 100% 11% 13% 10% 16% 14% 14% 90% 21% 18% 22% 22% 32% 80% 29% 32% 29% 70% 30% 29% 31% 30% 32% 35% 60% 37% 17% 50% 26% 25% 25% 24% 24% 24% 40% 23% 22% 20% 20% 17% 30% 20% 32% 32% 33% 34% 29% 31% 28% 27% 23% 25% 23% 10% 0
Slide 48: Appendix 7: Analysis of unit sales - Price range
Appendix 7: Analysis of unit sales - Price range 100% 13% 13% 13% 13% 14% 16% 17% 90% 20% 19% 23% 80% 19% 20% 19% 22% 20% 21% 22% 70% 23% 25% 21% 60% 32% 30% 50% 34% 37% 35% 34% 31% 30% 29% 40% 33% 30% 20% 36% 38% 31% 30% 31% 29% 30% 26% 28% 23% 10% 0% 6mths to June 6mths to 6mths to June 6mths to 6
Slide 49: Appendix 8: Balance Sheet
Appendix 8: Balance Sheet 2014 2013 Change Work in progress £464.7m £463.5m + £1.2m Land £1,842.4m £1,636.6m + £205.8m Land creditors £459.5m £306.1m + £153.4m Part exchange stock £52.4m £45.5m + £6.9m Shared equity debt £201.3m £215.4m (£14.1m) Cash £378.4m £204.3m + £174.1m Shareholders' funds £2,
Slide 50: Appendix 9: Cash flows
Appendix 9: Cash flows H1 14 H2 14 FY 14 FY 13 £m £m £m £m Operating cash (before working capital movements) 221.5 266.4 487.9 345.5 Investment in working capital: Increase in gross land (70.7) (135.1) (205.8) (126.8) Increase in land creditors 28.1 125.3 153.4 66.2 Net land investment (42.6) (9.8)
Slide 51: Appendix 10: Mortgage approvals for house purchase
Appendix 10: Mortgage approvals for house purchase 150 Average monthly approvals: Approvals - Volume ('000) 83,470 100 Dec 2013: 72,000 Dec 2014: Dec 2009: Dec 2011: 60,000 59,000 52,000 50 Dec 2012: Dec 2010: 55,000 43,000 Average monthly approvals since Nov 2008: beginning of 2008: 27,000 52,380 0
Slide 52: Appendix 11: New housing starts
New Housing Starts ('000) 0 25 50 75 100 125 150 175 200 2004 2005 2006 2007 2008 2009 2010 Source: NHBC Housing Market Report (January 2015) Annual Housing Starts (2004-2014) 2011 Results Presentation 24 February 2015 2012 2013 2014 New Housing Starts ('000) 50 0 2 4 6 8 10 12 14 16 Appendix 11: Ne
Slide 53: 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