Persimmon Plc · LSE:PSN
Persimmon — FY2012 Earnings Presentation
50 slides from Persimmon's earnings presentation, Feb 25, 2013
Slide 1: Results Presentation 25 February 2013
Results Presentation 25 February 2013 49
Slide 2: Agenda
Agenda Results Presentation 25 February 2013 Page Presented by • Chairman’s overview 1 Nicholas Wrigley • Review of operations 3 Mike Farley • Outlook 12 Jeff Fairburn • Financial review 14 Mike Killoran • Summary 24 Nicholas Wrigley Appendices 1 to 11 25 - 47 Results Presentation 25 February 2013
Slide 3: Chairman's overview - Performance highlights
Chairman’s overview - Performance highlights • Excellent start to delivery of the long term strategic plan − profitability continues to improve - 52% growth in underlying PBT − focus on operational improvement - 300bps increase in profit margin − ROACE improved 47% to 12.2% (2011: 8.3%) − basic earn
Slide 4: Chairman's overview
Chairman’s overview • Growth in revenues and profitability − 12% increase in revenues • Maximising cash efficiency - free cash inflow pre dividends of £179m • Land bank position strengthened further − 68,200 forward plots provides robust platform for future growth • Strong forward order book of over
Slide 5: Review of operations
Review of operations Page • Group overview 4 • Strategic land 8 • Consented land 9 • Current trading 10 • Outlook 12 Results Presentation 25 February 2013 3
Slide 6: Review of operations - Group overview
Review of operations - Group overview • Sales network enhanced during the year through 125 new outlet openings • Continued focus on traditional affordable product − 15% apartments sold (national average: 32%) − average selling price of £175,640 (national average: £193,000) • Consolidation to a two d
Slide 7: Review of operations - Group overview
Review of operations - Group overview 52% increase in underlying pre-tax profits 2012 2011 Change Underlying performance: Unit completions 9,903 9,360 + 6% Average selling price * £175,640 £166,142 + 6% Operating profits ** £223.2m £153.0m + 46% Operating margin ** 13.0% 10.0% + 3.0% Pre-tax profits
Slide 8: Review of operations - Group overview
Review of operations - Group overview Product Profile - 12 months ended 31 December 2012: Unit Completions Average selling Average price Plots owned and Plot count completions change price * change under control change 2,236 + 12% £157,160 (2%) 17,394 3% Persimmon North 23% 25% 1,940 (4%) £186,525 +
Slide 9: Review of operations - Group overview: Half Year Sales Profile
Review of operations - Group overview Half Year Sales Profile 1,500 1,250 Completions (No.) 1,000 750 500 250 - H1 11 H2 11 H1 12 H2 12 H1 11 H2 11 H1 12 H2 12 H1 11 H2 11 H1 12 H2 12 H1 11 H2 11 H1 12 H2 12 North Division Central Division South Division Partnerships • Traditional seasonality throug
Slide 10: Review of operations - Strategic land
Review of operations - Strategic land • Fundamental pillar of the business model Large strategic sites • c. 16,100 acres held at 31 December 2012 pulled through during 2012 • c. 60% of interests in southern markets Strategic interests • In excess of 1,000 acres of new strategic acquired during 2012
Slide 11: Review of operations - Consented land
Review of operations - Consented land • c. 14,800 plots acquired at attractive residual values • Continued successful conversion of strategic land - c. 38% of new plots acquired in the year − Bamber Bridge, Lancashire - 250 plots − Taunton, South West - 1,370 plots • 68,200 plots owned and under con
Slide 12: Review of operations - Current trading
Review of operations - Current trading • Good start to 2013: − visitor traffic c. 4% higher than prior year over early weeks of 2013 − cancellation rates of c. 16% remain at historically low levels − net private sale reservation rate up c. 3% against a strong prior year • Site activity: − c. 90 site
Slide 13: Review of operations - Current trading
Review of operations - Current trading 1 January Forward Sales Units ASP Revenue 2013 4,733 £136,277 £645.0m 2012 4,753 £129,392 £615.0m Movement (0%) +5% +5% Current Forward Sales (inc. first 8 w eeks sales) Units ASP Revenue 2013 7,015 £144,014 £1,010.3m 2012 6,509 £142,482 £927.4m Movement +8% +1
Slide 14: Outlook - Overall market
Outlook - Overall market • Trading conditions in the UK housing market to remain challenging • Resilient employment levels despite government austerity measures • Restricted availability of mortgage credit continues - but gradually improving • Funding for Lending scheme being embraced by lenders • A
Slide 15: Outlook - Execution of strategic objectives
Outlook - Execution of strategic objectives • Scale and quality of land bank increased to support future growth • Focus to remain on cash efficiency − strategic land conversion and growth of cash margins − planning skills to maximise development value over life − core house types reducing developmen
Slide 16: Financial review
Financial review Page • Trading overview 15 • Operating profit bridge 16 • Cost recoveries 17 • Operating efficiency 18 • Profit history 19 • Land holdings at 31 December 2012 20 • Balance sheet 21 • Cash generation 22 • Underlying operating profit and cash flow 23 Mike Killoran, Group Finance Direc
Slide 17: Financial review - Trading overview
Financial review - Trading overview • Continued growth in underlying operating profits Adjusted trading (for NRV, shared equity fair value charge and goodw ill im pairm ent) 2012 2011 Adjusted Exceptional Total % of revenue Adjusted Exceptional Total % of revenue Revenue (adjusted) £1,737.3m- £1,737
Slide 18: Financial review - Operating profit bridge
Financial review - Operating profit bridge • Volume, mix and margin improvement all support growth in operating profit 250 37.6 223.2 8.7 200 22.7 18.6 153.0 150 £m 100 50 0 FY 11 Operating Volume increase ASP increase Gross Profit Net Operating FY 12 Operating Profit improvement Expense increase Pr
Slide 19: Financial review - Cost recoveries
Financial review - Cost recoveries • Gross margin increased 300bps to 17.5% • Land cost recoveries reduced 60bps to 23.3% - further improvement to come • Build and direct cost recoveries down 240bps to 59.2% • Gross profit per unit sold increased 28% to £30,489 Underlying performance per plot: 2012
Slide 20: Financial review - Operating efficiency
Financial review - Operating efficiency • Underlying operating margin of 13.0% for full year - 2012 2012 2012 2011 2011 2011 FY H2 H1 FY H2 H1 Gross margin 17.5% 18.3% 16.7% 14.5% 15.3% 13.7% Operating expenses (5.1%) (4.8%) (5.5%) (5.1%) (5.1%) (5.2%) Other operating income 0.6% 0.2% 1.0% 0.6% 0.6%
Slide 21: Financial review - Profit history
Financial review - Profit history • Strong growth in underlying PBT supported by reduced financial risk 1.1 140 131.2 (1.3) 130 122.2 1 7 1.7 120 1 3 1.3 6 (0.6) 110 0.4 97.7 100 70.7 Reported Operating Profit (£m) 87.3 90 80 74.6 73.1 70 9.5 12.0 60 10.5 4.5 50 22.7 40 30 20 10 0 H1 2010 H2 2010 H1
Slide 22: Financial review - Land holdings at Dec 2012
Financial review - Land holdings at 31 Dec 2012 • Cost to revenue percentage of owned & controlled plots of 18.6% (Dec 11: 18.5%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2011 Dec 2012 Change Dec 2012 Dec 2011 Plot
Slide 23: Financial review - Balance sheet
Financial review - Balance sheet • Net assets c.£155m higher than December 2011 at £2.0bn - net assets per share up 8% year on year • Land expenditure profile: H1 H2 FY 2010 £94m £108m £202m 2011 £139m £134m £273m 2012 £142m £211m £353m • Work in progress of £443.1m (Dec 11: £427.8m) − well position
Slide 24: Financial review - Cash generation
Financial review - Cash generation Pre dividend free cash generation (after working capital) Pre dividend free cash generation (£m) * + 400 FY H2 H1 + 350 + 300 2012 + 178.0 + 66.3 + 111.7 + 250 2011 + 119.4 + 66.0 + 53.4 + 200 2010 + 225.6 + 80.8 + 144.8 £m + 150 2009 + 356.8 + 227.8 + 129.0 + 100
Slide 25: Financial review - Underlying operating profit and cash flow
Financial review - Underlying operating profit and cash flow • Consistent operating profit growth delivers strong cash flow from operating activities • Capital returns supported by strong cash flows from operating activities 390.9 400 350 316.7 300 240.4 250 201.1 200 £m 162.9 150 100 50 - 2008 2009
Slide 26: Summary
Summary • Continue to grow the business to an optimal larger scale • Disciplined land replacement now and in the future • Successful conversion of strategic land will remain a key objective • Margin growth continues towards 15% to 17% target • Strong cash generation will remain a priority • First ca
Slide 27: 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 28: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement Underlying performance: 2008 2009 2010 2011 2012 Unit completions 10,202 8,976 9,384 9,360 9,903 Turnover * £1,755.1m £1,420.6m £1,569.5m £1,535.0m £1,721.4m Average Selling Price ** £172,994 £160,513 £169,339 £166,142 £175,640 Operating profit * £198.
Slide 29: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet 2008 2009 2010 2011 2012 Shareholders' funds £1,555.2m £1,623.2m £1,744.0m £1,839.3m £1,993.7m Borrowings/(Cash) * £600.7m £267.5m £51.0m (£41.0m) (£201.5m) Gearing * 39% 16% 3% 0% 0% Net asset value per share 518.0p 540.2p 579.1p 608.6p 658.2p Work in pr
Slide 30: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss Underlying performance: 2012 2012 2011 2011 H2 H1 H2 H1 Unit completions 5,191 4,712 4,921 4,439 Turnover * £914.7m £806.7m £822.2m £712.8m Operating profit * £125.1m £98.1m £88.8m £64.2m Operating margin * 13.7% 12.2% 10.8% 9.0% Interest & finance costs £1.7m £
Slide 31: Appendix 3: Income Statement - Cost recoveries
Appendix 3: Income Statement - Cost recoveries Performance reconciliation - FY 2012: Reported Underlying Adjusted (pre-exceptional) Add back: Add back: Include: Goodwill Shared Exceptional impairment equity items fair value Revenue £1,721.4m £1,721.4m £15.9m £1,737.3m Land costs (£401.0m) (23.3%) (£
Slide 32: Appendix 4: Income Statement - 10 year record
Appendix 4: Income Statement - 10 year record Underlying perform ance: 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Unit completions 12,163 12,360 12,636 16,701 15,905 10,202 8,976 9,384 9,360 9,903 Turnover * £1,883.0m £2,131.3m £2,285.7m £3,141.9m £3,014.9m £1,755.1m £1,420.6m £1,569.5m £1,53
Slide 33: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2012 2011 FY FY Change No. No. Units Persimmon Core 5,883 5,643 + 4% Charles Church 2,334 1,928 + 21% Partnerships 1,686 1,789 (6%) Total 9,903 9,360 + 6% £ £ Average Selling Price * Persimmon Core 174,368 167,582 + 4% Charles
Slide 34: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2012 2011 FY FY Change £m £m Gross Profit ** Persimmon Core 169.2 134.1 + 26% Charles Church 106.5 63.7 + 67% Partnerships 26.2 25.2 + 4% Total 301.9 223.0 + 35% Gross Margin ** Persimmon Core 16.7% 14.4% + 2.3% Charles Church
Slide 35: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2012 2011 H2 H2 Change No. No. Units Persimmon Core 3,045 2,926 + 4% Charles Church 1,211 1,061 + 14% Partnerships 935 934 + 0% Total 5,191 4,921 + 5% £ £ Average Selling Price * Persimmon Core 176,852 168,551 + 5% Charles Chur
Slide 36: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2012 2011 H2 H2 Change £m £m Gross Profit ** Persimmon Core 91.2 73.8 + 24% Charles Church 60.1 38.5 + 56% Partnerships 16.2 13.3 + 22% Total 167.5 125.6 + 33% Gross Margin ** Persimmon Core 17.1% 15.2% + 1.9% Charles Church 20
Slide 37: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2012 2011 H1 H1 Change No. No. Units Persimmon Core 2,838 2,717 + 4% Charles Church 1,123 867 + 30% Partnerships 751 855 (12%) Total 4,712 4,439 + 6% £ £ Average Selling Price * Persimmon Core 171,703 166,538 + 3% Charles Churc
Slide 38: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2012 2011 H1 H1 Change £m £m Gross Profit ** Persimmon Core 78.0 60.3 + 29% Charles Church 46.4 25.2 + 84% Partnerships 10.0 11.9 (16%) Total 134.4 97.4 + 38% Gross Margin ** Persimmon Core 16.3% 13.6% + 2.7% Charles Church 17.
Slide 39: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2012 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 545 141,160 (10%) 4,274 Scotland 617 164,624 + 2% 4,533 North West 639 147,610 (4%) 5,435 North East 589 151,964 (3%) 5,635 North
Slide 40: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2012 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Birmingham 943 145,005 + 8% 5,016 Shires 571 202,914 + 3% 3,259 Eastern 985 167,902 + 10% 6,239 Central Division 2,499 167,262 + 9% 14,514 3
Slide 41: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2012 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Southern 632 166,027 + 6% 5,224 Western 1,287 160,796 + 8% 12,988 Wales 400 150,278 + 4% 4,973 South Division 2,319 160,408 + 7% 23,185 31 D
Slide 42: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2012 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 2,695 217,830 10,624 31 December 2011 2,375 202,617 8,431 Change + 13% + 8% + 26% * Calculated from nominal value of turnover (before f air value charge
Slide 43: Appendix 7: Analysis of unit sales
Appendix 7: Analysis of unit sales By Price Band (Private) By House Type (All) 13% 22% Detache d Ove r £250,000 30% 16% 21% Sem i-detached 19% 24% £200,000 to £249,999 20% 23% Tow nhouse 31% 33% £150,000 to £199,999 34% 32% Apartm ent 15% 35% Le s s than 2% £150,000 Bungalow 30% 0% 0% 10% 20% 30% 40
Slide 44: Appendix 7: Analysis of unit sales - Product mix
Appendix 7: Analysis of unit sales - Product mix 1% 1% 1% 1% 1% 1% 1% 1% 0% 1% 2% 100% 16% 14% 90% 21% 18% 22% 22% 29% 28% 35% 35% 32% 80% 70% 31% 30% 30% 32% 35% 60% 37% 32% 24% 33% 50% 31% 32% 24% 24% 40% 23% 20% 20% 17% 20% 30% 15% 17% 15% 13% 20% 29% 31% 28% 23% 25% 23% 22% 22% 22% 10% 18% 19% 0
Slide 45: Appendix 7: Analysis of unit sales - Price range
Appendix 7: Analysis of unit sales - Price range 100% 90% 29% 30% 29% 31% 31% 35% 36% 38% 80% 40% 45% 70% 60% 30% 34% 34% 37% 35% 50% 32% 32% 30% 32% 29% 40% 19% 30% 21% 16% 22% 20% 20% 19% 19% 20% 16% 16% 22% 10% 17% 16% 12% 13% 13% 13% 13% 14% 10% 0% 6mths to June 6mths to 6mths to June 6mths to 6
Slide 46: Appendix 8: Balance Sheet
Appendix 8: Balance Sheet 2012 2011 Change Work in progress £443.1m £427.8m + £15.3m Land £1,495.7m £1,484.2m + £11.5m Land creditors £239.9m £199.7m + £40.2m Part exchange stock £58.6m £39.1m + £19.5m Shared equity debt £202.9m £164.0m + £38.9m Cash * £201.5m £41.0m + £160.5m Gearing * 0% 0% - Shar
Slide 47: Appendix 9: Cash flows
Appendix 9: Cash flows H112 H212 FY12 FY11 £m £m £m £m Operating cash (before working capital movements) 104.0 127.4 231.4 163.4 Investment in working capital: Decrease / (Increase) in gross land 81.9 (86.7) (4.8) 104.9 (Decrease) / Increase in land creditors (3.3) 43.5 40.2 3.9 Net land divestment
Slide 48: Appendix 10: Mortgage approvals for house purchase
Appendix 10: Mortgage approvals for house purchase 150 Average monthly approvals: 85,600 Approvals - Volume ('000) 100 Dec 2009: 59,000 Dec 2012: Dec 2011: 56,000 53,000 50 Dec 2010: 42,000 Average monthly approvals since Nov 2008: beginning of 2008: 27,000 48,200 0 D D D D D D D D D D D D D D D D D
Slide 49: Appendix 11: New housing starts
New Housing Starts ('000) 0 25 50 75 100 125 150 175 200 2002 2003 2004 2005 2006 2007 2008 Source: NHBC Housing Market Report (January 2013) Annual Housing Starts (2002-2012) 2009 Results Presentation 25 February 2013 2010 2011 2012 New Ho usin g Starts ('000) 47 0 2 4 6 8 10 12 Appendix 11: New ho
Slide 50: 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