Persimmon PLC · LSE:PSN
Persimmon — H1 2008 Earnings Presentation
45 slides from Persimmon's earnings presentation, Aug 21, 2008
Slide 1: Results Presentation 21 August 2008
Results Presentation 21 August 2008
Slide 2: Agenda
Agenda Results Presentation 21 August 2008 Page Presented by Q Chairman’s introduction 1 John White Q Review of operations 3 Mike Farley Q Outlook 14 Mike Farley Q Financial review 16 Mike Killoran Q Summary 27 John White Appendices 1 to 9 APPENDICES 1 to 9 28-42 Results Presentation 21 August 2008
Slide 3: Chairman's introduction
Chairman’s introduction H1 2008 H1 2007 Change Turnover £998.4m £1,514.4m -34% Operating profits * £139.7m £315.3m -56% Pre-tax profits * £100.9m £281.1m -64% Earnings per share * 24.1p 65.5p -63% Dividend 5.0p 18.5p -73% ROACE ** * 15.0% 22.9% -7.9% The business has performed well in very difficult
Slide 4: Chairman's introduction
Chairman’s introduction • Results reflect significant deterioration in market conditions • Reduction in mortgage lending and customer confidence resulting in lower volumes and increased pricing pressures • Significant actions taken in first half to position the business for current market conditions
Slide 5: Review of operations
Review of operations Page Q Performance Highlights 4 Q Business Restructuring 5 Q Group Overview 7 Q North Division 8 Q Central Division 9 Q South Division 10 Q Charles Church 11 Q Current Trading 12 Q Outlook 14 Mike Farley, Group Chief Executive Results Presentation 21 August 2008 3
Slide 6: Performance Highlights
Performance Highlights The first half of 2008 has been a period of significant change H1 2008 H1 2007 Change Completions 5,501 8,002 -31% Average selling price £181,485 £189,255 -4% Operating margin * 14.0% 20.8% -6.8% Landbank (plots) 76,159 82,145 -7% Strategic land portfolio (acres) 20,891 21,929
Slide 7: Business Restructuring
Business Restructuring • In response to tightening of market in Autumn 2007 three offices closed in February 2008 – reduction of c.600 in employee numbers • Significant further deterioration in market from April 2008 resulted in: – network reorganised with satellite offices maintaining market presen
Slide 8: Business Restructuring
Business Restructuring • Further tightening of capital control measures: • Land replacement curtailed • Tightening of build progress on active sites • Selective opening of new sites • Clearance of stock property • Continual renegotiation of supplier and subcontractor terms • Replanning of existing s
Slide 9: Review of operations - Overview
Review of operations - Overview Group Profile - 6 months ended 30 June 2008 Annual Annual Plots owned completions Average average price and under Annual plot Completions change selling price change control count change 1,206 -36% £165,006 -6% 18,383 -14% J North 22% 24% 1,827 -39% £173,544 - 28,196
Slide 10: Review of operations - North Division
Review of operations - North Division 30 June 2008 Units Average Sale Annual average Plots owned and No. Price (£) price change under control J Yorkshire 373 160,973 -11% 5,566 J North East 248 160,552 -1% 7,006 J Scotland 585 169,465 -5% 5,811 Division 1,206 165,006 -6% 18,383 30 June 2007 1,896 17
Slide 11: Review of operations - Central Division
Review of operations - Central Division 30 June 2008 Units Average Sale Annual average Plots owned and No. Price (£) price change under control J North West 440 160,245 -14% 5,170 J Birmingham 545 172,536 +13% 8,468 J Shires 539 191,549 +1% 9,641 J Eastern 303 162,640 -2% 4,917 Division 1,827 173,54
Slide 12: Review of operations - South Division
Review of operations - South Division 30 June 2008 Units Average Sale Annual average Plots owned and No. Price (£) price change under control J Southern 395 189,876 -15% 5,638 J Western 675 180,381 -3% 9,409 J Wales 245 168,371 - 4,151 J Westbury Partnerships 179 100,285 +16% 1,568 Division 1,494 17
Slide 13: Review of operations - Charles Church
Review of operations - Charles Church 30 June 2008 Units Average Sale Plots owned and No. Price (£) under control Charles Church 974 232,371 8,814 30 June 2007 1,343 252,576 10,730 Change -27% -8% -18% • Private sales volumes proving more resilient – customers of higher credit quality securing great
Slide 14: Review of operations - Current trading
Review of operations - Current trading • Sales rates from 30 June in line with Q2 2008 • c.470 outlets currently active (June 2007: c.490) – reviewing new site openings • Visitor levels remain in line with Q2 2008 – c.22% down year on year • Cancellation rates continue at higher levels – currently c
Slide 15: Review of operations - Current trading
Review of operations - Current trading Q Forward sales continue to include a greater proportion of partnership units as anticipated Units ASP Revenue Forward sales at 21 August 2008 5,531 £151,101 £835.7m Forward sales at 21 August 2007 7,283 £184,828 £1,346.1m Change 2008 on 2007 -24.1% -18.2% -37.
Slide 16: Outlook – Overall market
Outlook – Overall market Q Mortgage activity likely to remain weak for the next 12 months – constrains any significant recovery in private sales volumes in the short term Q Near term conditions creating selling price weakness likely to continue – speculation regarding Government initiatives leading
Slide 17: Outlook – Persimmon positioning
Outlook – Persimmon positioning Q Reduction in cost base to retain operational efficiency Q Working with suppliers and subcontractors to reduce costs Q Maintaining market presence to optimise trading performance and retain operational gearing Q Landbank actively managed to match current trading Q Ex
Slide 18: Financial Review
Financial Review Page Q Land and land write-down 17 Q Balance sheet 20 Q Debt structure 21 Q Cash generation 22 Q Trading overview 23 Mike Killoran, Group Finance Director Results Presentation 21 August 2008 16
Slide 19: Financial review – Land and land write-down
Financial review – Land and land write-down Q Owned and controlled plots of 76,159 (December 2007: 78,863) Q 27% of owned and controlled landbank sourced from ex-strategic pull through – 20,891 strategic acres held Q Owned and controlled land ageing profile – land purchased: Plots 2007/08 c.23% 2005
Slide 20: Financial review – Land and land write-down
Financial review – Land and land write-down Q £40m land write-down review includes: − poorer performing sites where margins produce negative contribution − requirement assessed against a calculated break-even level of contribution − underlying pricing weakness experienced in the first half of c.5% −
Slide 21: Financial review – Land and land write-down
Financial review – Land and land write-down Q Near term net land spend commitment (including land creditor payments) tightly controlled and significantly reduced: H1 2007 (Act) H2 2007 (Act) H1 2008 (Act) H2 2008 (Est) H1 2009 (Est) H2 2009 (Est) FY 2010 (Est) £497.0m £342.0m £243.0m £200.0m £115.0m
Slide 22: Financial review - Balance sheet
Financial review - Balance sheet Q Work in progress of £867.3m set to reduce: − sales focused on built, and part built, stock property − new build limited to sold units − reduced new site openings Q £120m of part exchange stock – down from £146.9m at December 2007 Q £401.8m land creditor to reduce i
Slide 23: Financial review – Debt structure
Financial review – Debt structure Committed Facilities £m USPP Repayment Profile 250 Loan notes, 4.6 200 USPP, 590.1 150 £m 100 Revolver, 800.0 50 0 H2 2008 2009 2010 2011 2012 Beyond USPP Revolver Loan notes Repayments • Good long-term liquidity • Plenty of headroom within £1,395m of total committe
Slide 24: Financial review – Cash generation
Financial review – Cash generation Pre dividend free cash generation 300 Pre dividend free cash generation H1 H2 FY 200 2008 - 85.9 est.+ 200.0* est.+ 114.1* £m 2007 + 61.2 + 5.8 + 67.0 100 2006 + 323.7 + 259.4 + 583.1 0 2005 + 52.8 + 114.5 + 167.3 2004 2005 2006 2007 2008 2004 + 65.0 + 86.3 + 151.3
Slide 25: Financial review – Trading overview
Financial review – Trading overview H1 2008 H1 2007 Change Completions 5,501 8,002 -31% Turnover £998.4m £1,514.4m -34% Operating Profit * £139.7m £315.3m -56% Operating Margin * 14.0% 20.8% -6.8% Interest ** £38.8m £34.2m +13% Pre-tax Profit * £100.9m £281.1m -64% Earnings per share * 24.1p 65.5p -
Slide 26: Financial review – Trading
Financial review – Trading Volumes Unit Completions • Private sales volumes substantially lower than last year Persimmon Core 3,515 – reflecting the change in market conditions 5,810 • Charles Church sales continue to represent c.15% of Charles Church 845 1,293 total completions • Strong growth in p
Slide 27: Financial review – Trading
Financial review – Trading 2008 2007 2007 2007 2006 H1 FY H2 H1 FY Gross Margin 17.8% 24.4% 24.6% 24.2% 23.5% Operating Expenses (5.2%) (3.9%) (3.7%) (4.2%) (3.7%) Other Operating Income 1.4% 1.3% 1.9% 0.8% 1.0% Operating Margin 14.0% 21.8% 22.8% 20.8% 20.8% Gross Margins Q 6.4% reduction in gross m
Slide 28: Financial review – Trading
Financial review – Trading Group Operating Margins 30.0% 23.5% 24.4% 25.0% 17.8% Operating margins* have followed 20.0% 21.8% M argin 20.8% Q 15.0% 14.0% the trend of gross margin reductions 10.0% 5.0% 0.0% FY 2006 FY 2007 H1 2008 Q Operating expenses proportionally Period higher due to reduced effi
Slide 29: Summary
Summary • Business restructuring completed swiftly in line with current market conditions • Working capital being reduced to improve returns • Reduction of landbank spend to support the new level of sales • Further development of the partnership housing business • Balance sheet strength retained • R
Slide 30: Appendices
Appendices Q Appendix 1 - Financial record: Profit & Loss Account Balance Sheet Half year summary Q Appendix 2 - Half yearly Profit & Loss Account Q Appendix 3 - Profit & Loss Account - Percentage of turnover Q Appendix 4 - Trading performance - Business split Q Appendix 5 - Analysis of unit sales Q
Slide 31: Appendix 1: Financial record - Profit & Loss Account
Appendix 1: Financial record - Profit & Loss Account Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 *** *** * **** 6 months 12 months 6 months 12 months 6 months Unit Sales 8,226 16,701 8,002 15,905 5,501 Turnover £1,550.0m £3,141.9m £1,514.4m £3,014.9m £998.4m Average Selling Price £188,427 £188,129 £189,255 £
Slide 32: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Shareholders' funds £1,832.5m £2,031.3m £2,204.5m £2,345.4m £2,274.8m Borrowings £913.9m £661.3m £646.4m £721.1m £905.5m Gearing 50% 33% 29% 31% 40% Net asset value per share 618.7p 680.2p 730.1p 781.4p 758.1p W ork in p
Slide 33: Appendix 1: Half year summary
Appendix 1: Half year summary Underlying performance: 6mth to 6mth to 6mth to 6mth to 6mth to Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 * ** *** Unit Sales 8,226 8,475 8,002 7,903 5,501 Turnover £1,550.0m £1,591.9m £1,514.4m £1,500.5m £998.4m Operating Profit £309.1m £343.6m £315.3m £342.0m £139.7m Profit
Slide 34: Appendix 2: Half yearly Profit & Loss Account
Appendix 2: Half yearly Profit & Loss Account Underlying performance: 2008 2007 2007 H1 H1 Change Full Year Completions 5,501 8,002 -31.3% 15,905 Turnover £998.4m £1,514.4m -34.1% £3,014.9m Operating profit * £139.7m £315.3m -55.7% £657.3m Operating margin * 14.0% 20.8% 21.8% Interest ** £38.8m £34.
Slide 35: Appendix 3: Profit & Loss Account – Percentage of turnover
Appendix 3: Profit & Loss Account – Percentage of turnover Underlying performance: 2008 2007 2007 H1 H1 Change Full Year Turnover 100.0% 100.0% 100.0% Land costs (24.2%) (22.7%) -1.5% (22.5%) Build and direct costs (58.0%) (53.1%) -4.9% (53.1%) Gross Margin 17.8% 24.2% -6.4% 24.4% Operating expenses
Slide 36: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split Underlying performance: 2008 2007 H1 H1 Change No. No. Units Persimmon Core 4,527 6,659 -32.0% Charles Church 974 1,343 -27.5% Total 5,501 8,002 -31.3% £ £ Average Selling Persimmon Core 170,537 176,485 -3.4% Price Charles Church 232,371 252,576 -8.0%
Slide 37: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split Underlying performance: 2008 2007 H1 H1 £m £m Gross Profit * Persimmon Core 147.0 19.0% 301.6 25.7% Charles Church 30.3 13.4% 65.5 19.3% Total 177.3 17.8% 367.1 24.2% £m £m Net Operating Persimmon Core (30.9) (4.0%) (42.4) (3.6%) Expenses * Charles Ch
Slide 38: Appendix 4a: Trading performance - Business split
Appendix 4a: Trading performance - Business split Underlying performance: 2008 2007 H1 H1 Change No. No. Units Persimmon Core 3,515 5,810 -39.5% Charles Church 845 1,293 -34.6% Partnerships 1,141 899 +26.9% Total 5,501 8,002 -31.3% £ £ Average Selling Persimmon Core 192,625 190,334 +1.2% Price Charl
Slide 39: Appendix 4a: Trading performance - Business split
Appendix 4a: Trading performance - Business split Underlying performance: 2008 2007 H1 H1 Change £m £m Gross Profit * Persimmon Core 129.7 288.3 -55.0% Charles Church 28.1 64.8 -56.6% Partnerships 19.5 14.0 +39.3% Total 177.3 367.1 -51.7% Gross Margin * Persimmon Core 19.2% 26.1% -6.9% Charles Churc
Slide 40: Appendix 5: Analysis of unit sales
Appendix 5: Analysis of unit sales By Price Band (Private) By House Type (All) > £250,000 Detached 28% 16% 22% 21% Semi- detached £200,000 to £249,999 14% 15% 19% Town 19% house 21% £150,000 to £199,999 33% 28% Apartment 30% 47% 29% < £150,000 Bungalow 25% 2% 30% 1% 0% 10% 20% 30% 40% 0% 10% 20% 30%
Slide 41: Appendix 6: Balance Sheet
Appendix 6: Balance Sheet 2008 2007 2007 30 June 30 June 31 December Work in progress £867.3m £683.3m £814.8m Land £2,453.2m £2,335.7m £2,346.1m Land creditors £401.8m £337.6m £319.5m Part exchange stock £120.0m £90.3m £146.9m Borrowings (excl. leases) £905.5m £646.4m £721.1m Gearing 40% 29% 31% Sha
Slide 42: Appendix 7: Analysis of land holdings at June 2008
Appendix 7: Analysis of land holdings at 30 June 2008 Number Number Number Current period Average Cost to Cost to of plots of plots of plots average sales plot costs revenue revenue Dec 2007 Jun 2008 Change revenue 2007 Plots owned 55,149 56,261 +1,112 £182,459 £42,946 23.5% 22.4% Plots under contro
Slide 43: Appendix 8: Cash flows
Appendix 8: Cash flows All figures £'m 6mths ended 30 Jun 2008 Profit from operations 145.3 Investment in working capital Increase in gross land (147.1) Increase in land creditors 82.3 Net inv estment in land (64.8) Increase in W IP * (43.6) Net movement in creditors / debtors (46.6) Cash flow from
Slide 44: Appendix 9: Loan approvals for house purchase
Appendix 9: Loan approvals for house purchase 120 100 80 60 40 20 Jan-07 Jul-07 Jan-08 Jul-08 Volume of loans secured on dwellings ('000) Source: Bank of England Data Appendix 9 Results Presentation 21 August 2008 42
Slide 45: 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