Persimmon Plc · LSE:PSN
Persimmon — FY2013 Earnings Presentation
51 slides from Persimmon's earnings presentation, Feb 25, 2014
Slide 1: Results Presentation 25 February 2014
Results Presentation 25 February 2014 50
Slide 2: Agenda
Agenda Results Presentation 25 February 2014 Page Presented by • Chairman’s overview 1 Nicholas Wrigley • Review of operations 3 Jeff Fairburn • Outlook 13 Jeff Fairburn • Financial review 15 Mike Killoran • Summary 26 Nicholas Wrigley Appendices 1 to 11 27 - 48 Results Presentation 25 February 2014
Slide 3: Chairman's overview - Performance highlights
Chairman’s overview - Performance highlights • Very strong performance − 50% increase in underlying operating profits − underlying pre tax profits increased by 49% − basic earnings per share up 47% 2013 2012 Change Underlying performance: (restated †) Turnover * £2,085.9m £1,721.4m + 21% Operating p
Slide 4: Chairman's overview
Chairman’s overview • Strong response to increasing customer demand − 16% growth in volume • Strong forward order book indicating further improvement in profitability • Maximising cash efficiency to deliver superior cash generation • Continued investment in future growth of the business − land repla
Slide 5: Review of operations
Review of operations Page • Group overview 4 • Strategic land 8 • Consented land 9 • Current trading 10 • Accelerated returns 12 • Outlook 13 Results Presentation 25 February 2014 3
Slide 6: Review of operations - Group overview
Review of operations - Group overview • Strong network of 390 sites across all regions of the UK mainland • Family housing focused − c. 60% of private sales priced below £200,000 − over 85% of sales are traditional house types • Strengthening trading conditions experienced − increase in lending acti
Slide 7: Review of operations - Group overview
Review of operations - Group overview • Strong growth in output - 30% increase in volume in H2 over H1 • 310bps increase in operating margin • 49% increase in cash flows pre working capital 2013 2012 Change Underlying performance: (restated †) Unit completions 11,528 9,903 + 16% Average selling pric
Slide 8: Review of operations - Group overview
Review of operations - Group overview Product Profile - 12 months ended 31 December 2013: Unit Completions Average selling Average price Plots owned and Plot count completions change price * change under control change 3,884 + 18% £161,188 - 26,740 + 13% Persimmon North 34% 36% 2,946 + 14% £211,523
Slide 9: Review of operations - Group overview: Half Year Sales Profile
Review of operations - Group overview Half Year Sales Profile 3,000 2,500 Completions (No.) 2,000 1,500 1,000 500 - H1 12 H2 12 H1 13 H2 13 H1 12 H2 12 H1 13 H2 13 H1 12 H2 12 H1 13 H2 13 North Division South Divis ion Partners hips • Traditional seasonality of the market maintained in 2013 • Moment
Slide 10: Review of operations - Strategic land
Review of operations - Strategic land Strategic sites pulled • Strategic land investment and promotion through during 2013 remains key to our operational model Strategic • c. 16,300 acres held at 31 December 2013 interests acquired during 2013 • c. 1,800 acres of new strategic land interests acquire
Slide 11: Review of operations - Consented land
Review of operations - Consented land • Excellent opportunities for high quality land replacement across the country • 17,735 new plots added at good margins over 130 locations nationally • 74,407 plots owned and under control at 31 December 2013 - 9% up on prior year • c. 6.5 years forward supply -
Slide 12: Review of operations - Current trading
Review of operations - Current trading • Encouraging start to 2014: − private sales rate 22% ahead of last year for the first eight weeks − visitor numbers 16% stronger than prior year − cancellation rates remain at historically low levels of c. 15% • Site activity: − further growth in build rates b
Slide 13: Review of operations - Current trading: forward sales
Review of operations - Current trading 1 January Forward Sales Units ASP Revenue 2014 6,038 £150,383 £908.0m 2013 4,733 £136,277 £645.0m Movement +28% +10% +41% Current Forward Sales (inc. first 8 w eek sales) Units ASP Revenue 2014 9,105 £156,419 £1,424.2m 2013 7,015 £144,014 £1,010.3m Movement +30
Slide 14: Review of operations - Accelerated returns
Review of operations - Accelerated returns • Strong operational performance allows us to accelerate returns to shareholders - 70p to be paid in 2014 Paid 2013 2014 2015 2016 2017 2018 2019 2020 2021 Original Plan 75p 95p 110p 110p 115p 115p April 2013 Announcement 75p 10p 85p 110p 110p 115p 115p New
Slide 15: Outlook - Overall market
Outlook - Overall market • Improvement in the UK economic outlook • Increase in consumer confidence despite continued austerity measures • Housing market to continue to benefit from Government measures • Improving mortgage lending trends set to continue − improvement in availability with increased c
Slide 16: Outlook - Achieving operational priorities
Outlook - Achieving operational priorities • Construction activity driven forward to capture market improvement − efficiency benefits being secured through build programming skills − Space4 capacity utilisation shortening lead times − greater use of Group core house types provides cost and efficienc
Slide 17: Financial review
Financial review Page • Trading overview 16 • Operating profit bridge 17 • Cost recoveries 18 • Operating efficiency 19 • Land holdings at 31 December 2013 20 • Balance sheet 21 • 2013 cash generation 22 • Underlying operating profit and cash flow 23 • Cash generation through cycle 24 • Capital retu
Slide 18: Financial review - Trading overview
Financial review - Trading overview • Swift response to improvement in sales rates has resulted in significant growth in underlying profits Adjusted trading (for NRV, shared equity fair value charge and goodw ill im pairm ent) 2013 2012 (restated †) Adjusted Exceptional Total % of revenue Adjusted E
Slide 19: Financial review - Operating profit bridge
Financial review - Operating profit bridge • Growth in volumes of 16% delivered improved productivity and efficiency • Underlying operating profit of £333.1m increased 50% 350 31.7 333.1 18.9 8.8 300 68.8 250 222.5 200 £m 150 100 50 0 FY 12 Operating Volume increase ASP increase Gross Profit Net Ope
Slide 20: Financial review - Cost recoveries
Financial review - Cost recoveries • Gross margin increased 270bps to 20.2% • Land cost recoveries reduced by £1,945 per plot - 5% decrease on prior year • 70 bps contribution to margin gain due to build and direct cost control • Gross profit per unit sold increased by £6,056 - 20% increase on 2012
Slide 21: Financial review - Operating efficiency
Financial review - Operating efficiency • 310 bps increase in underlying operating margin 2013 2013 2013 2012 2012 2012 FY H2 H1 FY H2 H1 (restated †) (restated †) (restated †) Gross margin 20.2% 20.5% 19.7% 17.5% 18.3% 16.7% Operating expenses (4.7%) (4.0%) (5.5%) (5.2%) (4.9%) (5.6%) Other operati
Slide 22: Financial review - Land holdings at 31 Dec 2013
Financial review - Land holdings at 31 Dec 2013 • Cost to revenue percentage of owned & controlled plots of 17.5% (Dec 12: 18.6%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2012 Dec 2013 Change Dec 2013 Dec 2012 Plot
Slide 23: Financial review - Balance sheet
Financial review - Balance sheet • Discipline over the level of capital employed through the cycle − shareholders equity just c. £52m higher with the first Capital Return Plan payment of £228m • Land values remain stable across regional markets offering excellent returns − land balances increased by
Slide 24: Financial review - 2013 cash generation
Financial review - 2013 cash generation Pre dividend/capital return free cash generation (£m) * Pre dividend/capital return free cash generation (after working capital) FY H2 H1 + 400 2013 + 235.5 + 156.1 + 79.4 + 350 + 300 2012 + 178.0 + 66.3 + 111.7 + 250 2011 + 119.4 + 66.0 + 53.4 2010 + 225.6 +
Slide 25: Financial review - Underlying operating profit and cash flow
Financial review - Underlying operating profit and cash flow • Strong cash generation from our trading and build activities • Capital Return Plan depends on business performance to deliver the cash 400 350 300 250 9.0 345.5 320.1 179.0 200 £m 150 100 231.4 50 163.4 70.8 137.7 - (0.5) (63.6) (50) (10
Slide 26: Financial review - Cash generation through cycle
Financial review - Cash generation through cycle • Strong gross cash generation delivered through the cycle 1,000 900 800 AVERAGE CASH GENERATION PRE LAND EXPENDITURE: £617M 700 600 £m 500 £961m 400 £746m 300 £630m £564m £556m £457m 200 £414m £402m £246m 100 £165m £104m £67m £103m £2m - 2007 2008 20
Slide 27: 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 payment to shareholders • Seasonal and cyclical movements in working capital to be accommodated • Longer term expectation of
Slide 28: Summary
Summary • Successful achievement of short term operational priorities secures the delivery of our long term strategic objectives • Improving gross margins remain a critical driver • Building a high quality landbank whilst minimising financial risk • Cash generation will remain strong and will suppor
Slide 29: 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 30: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement Underlying performance: 2009 2010 2011 2012 2013 (restated †) (restated †) (restated †) (restated †) Unit completions 8,976 9,384 9,360 9,903 11,528 Turnover * £1,420.6m £1,569.5m £1,535.0m £1,721.4m £2,085.9m Average Selling Price ** £160,513 £169,339
Slide 31: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet 2009 2010 2011 2012 2013 Shareholders' funds £1,623.2m £1,744.0m £1,839.3m £1,993.7m £2,045.5m Borrowings/(Cash) £267.5m £51.0m (£41.0m) (£201.5m) (£204.3m) Gearing * 16% 3% 0% 0% 0% Net asset value per share 540.2p 579.1p 608.6p 658.2p 671.4p Work in pro
Slide 32: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss Underlying performance: 2013 2013 2012 2012 H2 H1 H2 H1 (restated †) (restated †) Unit completions 6,506 5,022 5,191 4,712 Turnover * £1,186.0m £899.9m £914.7m £806.7m Operating profit * £196.8m £136.3m £124.8m £97.7m Operating margin * 16.6% 15.1% 13.6% 12.1% I
Slide 33: Appendix 3: Income Statement - Cost recoveries
Appendix 3: Income Statement - Cost recoveries Performance reconciliation - FY 2013: Reported Underlying Adjusted (pre-exceptional) Add back: Add back: Include: Goodwill Shared Exceptional impairment equity items fair value Revenue £2,085.9m £2,085.9m £6.6m £2,092.5m Land costs (£444.3m) (21.3%) (£4
Slide 34: Appendix 4: Income Statement - 10 year record
Appendix 4: Income Statement - 10 year record Underlying perform ance: 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (restated †) (restated †) (restated †) (restated †) Unit completions 12,360 12,636 16,701 15,905 10,202 8,976 9,384 9,360 9,903 11,528 Turnover * £2,131.3m £2,285.7m £3,141.9m £3,
Slide 35: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2013 2012 FY FY Change No. No. Units Persimmon Core 6,830 5,883 + 16% Charles Church 2,577 2,334 + 10% Partnerships 2,121 1,686 + 26% Total 11,528 9,903 + 16% £ £ Average Selling Price * Persimmon Core 182,899 174,368 + 5% Char
Slide 36: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2013 2012 FY FY Change £m £m Gross Profit ** Persimmon Core 250.8 169.2 + 48% Charles Church 133.2 106.5 + 25% Partnerships 37.3 26.2 + 42% Total 421.3 301.9 + 40% Gross Margin ** Persimmon Core 20.2% 16.7% + 3.5% Charles Churc
Slide 37: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2013 2012 H2 H2 Change No. No. Units Persimmon Core 3,848 3,045 + 26% Charles Church 1,437 1,211 + 19% Partnerships 1,221 935 + 31% Total 6,506 5,191 + 25% £ £ Average Selling Price * Persimmon Core 185,298 176,852 + 5% Charles
Slide 38: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2013 2012 H2 H2 Change £m £m Gross Profit ** Persimmon Core 148.0 91.2 + 62% Charles Church 76.0 60.1 + 26% Partnerships 19.6 16.2 + 21% Total 243.6 167.5 + 45% Gross Margin ** Persimmon Core 20.9% 17.1% + 3.8% Charles Church 2
Slide 39: Appendix 5: Trading performance - Business split
Appendix 5: 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 40: Appendix 5: Trading performance - Business split
Appendix 5: 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 41: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2013 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 671 144,058 + 2% 4,941 Scotland 911 160,482 (3%) 5,143 North West 665 153,269 + 4% 5,646 North East 771 152,196 - 6,130 Midlands 1
Slide 42: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2013 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Shires 1,417 199,629 + 11% 7,966 Western 1,461 160,870 - 13,004 Southern 752 201,926 + 22% 5,140 Wales 465 162,755 + 8% 5,030 South Division
Slide 43: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2013 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 2,933 229,513 11,674 31 December 2012 2,695 217,830 10,624 Change + 9% + 5% + 10% * Calculated from nominal value of turnover (bef ore fair value charge
Slide 44: Appendix 7: Analysis of unit sales
Appendix 7: Analysis of unit sales By Price Band (Private) By House Type (All) 16% 23% Detache d Over £250,000 32% 19% 20% Sem i-detache d 20% 24% £200,000 to £249,999 24% 20% Tow nhous e 30% 34% £150,000 to £199,999 30% 35% Apartm ent 13% 30% Les s than 2% £150,000 Bungalow 27% 1% 0% 10% 20% 30% 40
Slide 45: Appendix 7: Analysis of unit sales - Product mix
Appendix 7: Analysis of unit sales - Product mix 1% 1% 1% 1% 1% 1% 0% 1% 0% 1% 2% 100% 11% 16% 14% 14% 90% 21% 18% 22% 22% 28% 35% 32% 80% 32% 70% 30% 29% 31% 30% 32% 35% 60% 37% 32% 21% 50% 32% 25% 24% 24% 24% 40% 23% 20% 21% 20% 17% 30% 17% 13% 20% 31% 32% 32% 28% 29% 23% 25% 23% 24% 22% 10% 19% 0
Slide 46: Appendix 7: Analysis of unit sales - Price range
Appendix 7: Analysis of unit sales - Price range 100% 10% 12% 13% 13% 13% 13% 14% 16% 17% 90% 20% 16% 80% 16% 19% 20% 19% 22% 20% 21% 22% 70% 25% 60% 29% 32% 32% 30% 50% 34% 37% 35% 34% 31% 29% 40% 30% 45% 20% 40% 36% 38% 31% 30% 31% 29% 30% 26% 10% 0% 6mths to June 6mths to 6mths to June 6mths to 6
Slide 47: Appendix 8: Balance Sheet
Appendix 8: Balance Sheet 2013 2012 Change Work in progress £463.5m £443.1m + £20.4m Land £1,636.6m £1,495.7m + £140.9m Land creditors £306.1m £239.9m + £66.2m Part exchange stock £45.5m £58.6m (£13.1m) Shared equity debt £215.4m £202.9m + £12.5m Cash £204.3m £201.5m + £2.8m Shareholders' funds £2,0
Slide 48: Appendix 9: Cash flows
Appendix 9: Cash flows H1 13 H2 13 FY 13 FY 12 £m £m £m £m Operating cash (before working capital movements) 143.0 202.5 345.5 231.4 Investment in working capital: Increase in gross land (41.9) (84.9) (126.8) (4.8) (Decrease) / Increase in land creditors (10.2) 76.4 66.2 40.2 Net land (divestment) /
Slide 49: Appendix 10: Mortgage approvals for house purchase
Appendix 10: Mortgage approvals for house purchase 150 Average monthly approvals: 84,400 Approvals - Volume ('000) 100 Dec 2013: 72,000 Dec 2009: 59,000 Dec 2011: 52,000 50 Dec 2010: Dec 2012: 43,000 56,000 Average monthly approvals since Nov 2008: beginning of 2008: 27,000 50,380 0 D D D D D D D D
Slide 50: Appendix 11: New housing starts
New Housing Starts ('000) 0 25 50 75 100 125 150 175 200 2003 2004 2005 2006 2007 2008 Source: NHBC Housing Market Report (January 2014) 2009 Annual Housing Starts (2003-2013) Results Presentation 25 February 2014 2010 2011 2012 2013 New Ho u sin g Starts ('000) 48 0 2 4 6 8 10 12 14 Appendix 11: Ne
Slide 51: 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