Persimmon Plc · LSE:PSN
Persimmon — H1 2016 Earnings Presentation
46 slides from Persimmon's earnings presentation, Aug 23, 2016
Slide 1: Results Presentation 23 August 2016
Results Presentation 23 August 2016 45
Slide 2: Agenda
Agenda Results Presentation 23 August 2016 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 10 27 - 43 Results Presentation 23 August 2016
Slide 3: Chairman’s overview
Chairman’s overview • Performance highlights H1 2016 H1 2015 Change Turnover £1,489.3m £1,332.5m + 12% Operating profits * £354.5m £273.3m + 30% Operating margin * 23.8% 20.5% + 3.3% Pre-tax profits * £356.3m £276.6m + 29% Earnings per share * 93.3p 78.6p + 19% Cash £462.0m £278.0m n/a Return on Ave
Slide 4: Chairman’s overview
Chairman’s overview • Delivering growth by meeting market demand − 6% growth in volume − 330bps increase in underlying operating margin − forward sales revenue 2% ahead of prior year • Excellent free cash generation - £230m of free cash generated (pre Capital Return Plan payment) • Further disciplin
Slide 5: Review of operations
Review of operations Page • Strategy 4 • Group overview 5 • Consented land 8 • Strategic land 9 • Current trading 10 • Accelerated returns 12 • Outlook 13 Results Presentation 23 August 2016 3
Slide 6: Strategy to maximise long term shareholder value
Strategy to maximise long term shareholder value Growth to Optimise Long term optimal Disciplined Surplus cash capital scale in land capital efficiency of returns to regional investment generated operations shareholders markets Results Presentation 23 August 2016 4
Slide 7: Review of operations - Group overview
Review of operations - Group overview • Strong outlet network maintained - 108 new outlets opened in H1 2016 • Two new businesses in North Scotland and Cornwall regions - strengthening operational delivery in local markets • Affordable family housing products − 49% of private sales priced below £200
Slide 8: Review of operations - Group overview
Review of operations - Group overview • Average selling price increased 6% to £205,762 • 30% growth in underlying operating profits • Pre working capital cash inflows increase 29% to £362.0m • 29% year on year improvement in return on average capital employed to 35.6% H1 2016 H1 2015 Change Unit com
Slide 9: Review of operations - Group overview
Review of operations - Group overview Product Profile - 6 months ended 30 June 2016: Unit Completions Average selling Average price Plots owned and Plot count completions change price change under control change 2,886 + 10% £175,401 + 3% 34,120 + 4% Persimmon North 40% 37% 2,257 + 16% £245,887 + 7%
Slide 10: Review of operations - Consented land
Review of operations - Consented land • Controlled profit growth supported by well judged investment in high quality land − reduction in plot cost to revenue ratio to 15.7% for owned plots supports further margin growth (Dec 2015: 16.3%) − strategic land content within land bank at c. 45% • Total pl
Slide 11: Review of operations - Strategic land
Review of operations - Strategic land Strategic interests acquired during • Remain focussed on conversion of strategic land 2016 Strategic sites • 2,856 plots successfully converted in the period pulled through during 2016 over 15 locations including: − Morley, West Yorkshire (200 plots) − Birmingha
Slide 12: Review of operations - Current trading
Review of operations - Current trading • Confidence within the housing market: − visitor numbers 20% stronger than prior year since 1 July − cancellation rates remain at low levels − weekly private sales rate per site at 0.67, 17% higher than prior year since 1 July • Site activity: − focus on build
Slide 13: Review of operations - Current trading
Review of operations - Current trading • Strong forward orders reflecting firm customer demand Half Year Forward Sales Units ASP Revenue June 2016 8,110 £168,068 £1,363.0m June 2015 8,188 £166,005 £1,359.2m Movement (1%) +1% +0% Current Forward Sales (inc. 7 w eeks post half year) Units ASP Revenue
Slide 14: Review of operations - Accelerated returns
Review of operations - Accelerated returns • Capital Return commitment increased by 45% to £9.00 per share • Fourth payment of 110p per share, £338m, paid 1 April 2016 Paid Paid Paid Paid 2013 2014 2015 2016 2017 2018 2019 2020 2021 TOTAL Original Plan 75p 95p 110p 110p 115p 115p 620p February 2014
Slide 15: Outlook - Overall market
Outlook - Overall market • EU referendum − increased uncertainty within the economy likely to remain for some time − early action taken by Government to reduce political uncertainty helpful • Bank of England adjusted monetary policy settings - cost of mortgage lending remains compelling • Customer d
Slide 16: Outlook - Operational priorities
Outlook - Operational priorities • Maintain and enhance strong outlet network • Grow in-house construction skill base through training initiatives • Increase build activity and productivity to support improved stock availability • Disciplined investment in high quality open market land opportunities
Slide 17: Financial review
Financial review Page • Trading overview 16 • Operating profit bridge 17 • Cost recoveries 18 • Operating efficiency 19 • Land holdings at 30 June 2016 20 • Balance sheet 21 • Cash generation 22 • Underlying operating profit and cash flow 23 • Cash generation through cycle 24 • Capital return consid
Slide 18: Financial review - Trading overview
Financial review - Trading overview • Increased profitability from combination of strong trading and capital discipline Adjusted trading (for shared equity fair value charge and goodw ill im pairm ent) H1 2016 H1 2015 Total % of revenue Total % of revenue Revenue (adjusted) £1,489.5m- £1,332.8m Cost
Slide 19: Financial review - Operating profit bridge
Financial review - Operating profit bridge • Positive market conditions and new outlet openings deliver increased profits Results Presentation 23 August 2016 17
Slide 20: Financial review - Cost recoveries
Financial review - Cost recoveries • 290bps improvement in gross margin to 26.9% • 170bps margin gain due to 4% reduction in unit land recoveries • Build efficiencies and cost control deliver 120bps margin contribution • Increase in gross profit per unit sold of 18.6% to £55,377 Per plot: 2016 2015
Slide 21: Financial review - Operating efficiency
Financial review - Operating efficiency • Underlying operating margin of 23.8%, increased 330bps on prior year • 22.9% increase in operating profit per unit sold to £48,978 2016 2015 2015 2015 H1 FY H2 H1 Gross margin 26.9% 25.4% 26.6% 24.0% Operating expenses (3.5%) (3.9%) (3.8%) (4.1%) Other opera
Slide 22: Financial review - Land holdings at 30 June 2016
Financial review - Land holdings at 30 June 2016 • Cost to revenue percentage of owned & controlled plots of 16.0% (Dec 15: 16.3%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2015 Jun 2016 Change Jun 2016 Dec 2015 Plo
Slide 23: Financial review - Balance sheet
Financial review - Balance sheet • Total shareholder equity value per share (pre capital return) of 69.6 pence generated in the period • Selective investment in high quality land opportunities − £305m land payments (including land creditors) in period - total land investment of £2.09bn − beneficial
Slide 24: Financial review - Cash generation
Financial review - Cash generation Pre dividend/capital return free cash generation (£m) * Pre dividend/capital return free cash generation (after working capital) + 500 FY H2 H1 + 450 2016 + 234.1 + 400 2015 + 484.6 + 291.5 + 193.1 + 350 2014 + 388.7 + 263.9 + 124.8 + 300 2013 + 235.5 + 156.1 + 79.
Slide 25: Financial review - Underlying operating profit and cash flow
Financial review - Underlying operating profit and cash flow • Continue to pursue the key drivers of sustained value creation and cash generation through the housing cycle 390 4.8 360 330 300 38.9 362.0 270 372.0 240 210 281.6 180 271.6 £m 150 120 226.9 90 60 30 - (40.7) (32.5) (30) (67.1) (60) (90)
Slide 26: Financial review - Cash generation through cycle
Financial review - Cash generation through cycle 700 HALF YEARLY AVERAGE CASH GENERATION PRE LAND EXPENDITURE: £435M 600 • Strategy emphasises the 500 400 requirement for strong cash £m 300 £549m £623m £539m generation £494m 200 £419m £412m 100 £248m £308m £327m £163m £209m £237m £285m £283m • Share
Slide 27: Financial review - Capital return considerations
Financial review - Capital return considerations • Retain flexibility to adapt to changes in market conditions • Maintain focus on return on average capital employed and capital efficiency • Disciplined investment in land and work in progress • Longer term expectation of a c. 5 year consented land b
Slide 28: Summary
Summary • Strong results based on consistent application of our strategic principles • Flexibility to take advantage of opportunities as they arise • Continue to target disciplined land investment in support of delivery of superior shareholder returns • Working hard to open new sites as soon as prac
Slide 29: Appendices
Appendices − Appendix 1 - Financial record: Income Statement Balance Sheet − Appendix 2 - Half yearly profit & loss − Appendix 3 - Half yearly sales profile − Appendix 4 - Trading performance - Business split − Appendix 5 - Trading performance - Divisional split − Appendix 6 - Analysis of unit sales
Slide 30: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement 2014 2014 2015 2015 2016 H1 FY H1 FY H1 Unit completions 6,408 13,509 6,855 14,572 7,238 Turnover £1,198.1m £2,573.9m £1,332.5m £2,901.7m £1,489.3m Average Selling Price £186,970 £190,533 £194,378 £199,127 £205,762 Operating profit * £212.5m £473.3m £2
Slide 31: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet 2014 2014 2015 2015 2016 H1 FY H1 FY H1 Shareholders' funds £2,006.5m £2,192.6m £2,161.8m £2,455.8m £2,343.8m Cash £326.3m £378.4m £278.0m £570.4m £462.0m Net asset value per share 656.0p 715.4p 705.2p 800.7p 760.3p Work in progress £477.6m £464.7m £508.5
Slide 32: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss 2016 2015 2015 H1 H1 Change FY Unit completions 7,238 6,855 + 383 14,572 Turnover £1,489.3m £1,332.5m + £156.8m £2,901.7m Operating profit * £354.5m £273.3m + £81.2m £634.5m Operating margin * 23.8% 20.5% + 3.3% 21.9% Net finance cost / (income) £0.4m (£3.0m) +
Slide 33: Appendix 3: Half yearly sales profile
Appendix 3: Half yearly sales profile Half Year Sales Profile 4,000 3,500 3,000 Completions (No.) 2,500 2,000 1,500 1,000 500 - H1 14 H2 14 H1 15 H2 15 H1 16 H1 14 H2 14 H1 15 H2 15 H1 16 H1 14 H2 14 H1 15 H2 15 H1 16 North Division South Division Partnerships Appendix 3 Results Presentation 23 Augu
Slide 34: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split 2016 2015 H1 H1 Change No. No. Units Persimmon Core 5,143 4,558 + 13% Charles Church 973 1,197 (19%) Partnerships 1,122 1,100 + 2% Total 7,238 6,855 + 6% £ £ Average Selling Price Persimmon Core 206,334 195,409 + 6% Charles Church 317,827 274,049 + 16
Slide 35: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split 2016 2015 H1 H1 Change £m £m Gross Profit Persimmon Core 305.1 223.0 + 37% Charles Church 73.9 76.4 (3%) Partnerships 21.8 20.7 + 5% Total 400.8 320.1 + 25% Gross Margin Persimmon Core 28.8% 25.0% + 3.8% Charles Church 23.9% 23.3% + 0.6% Partnerships
Slide 36: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2016 Units Average Sale Annual average Plots owned and No. Price (£) price change under control Yorkshire 462 161,665 + 10% 7,620 Scotland 819 170,810 + 1% 6,096 North West 414 158,630 + 11% 6,975 North East 548 162,170 + 3% 6,001 Midlands 7
Slide 37: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2016 Units Average Sale Annual average Plots owned and No. Price (£) price change under control Shires 1,018 240,778 + 5% 13,589 Western 812 202,251 + 3% 11,780 Southern 594 238,753 + 7% 7,223 Wales 442 162,652 + 2% 6,456 Persimmon South 2,8
Slide 38: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2016 Units Average Sale Plots owned and No. Price (£) under control Charles Church 1,171 285,440 13,276 30 June 2015 1,414 250,281 12,837 Change (17%) + 14% + 3% Appendix 5 - 3 of 3 Results Presentation 23 August 2016 36
Slide 39: Appendix 6: Analysis of unit sales
Appendix 6: Analysis of unit sales By Price Band (Private) By House Type (All) 30% 24% Detached Over £250,000 36% 29% 24% Semi-detached 20% 27% £200,000 to £249,999 22% 16% Townhouse 26% ' 32% £150,000 to £199,999 29% 28% Apartment 10% 24% Less than £150,000 2% Bungalow 20% 1% 0% 10% 20% 30% 40% 50%
Slide 40: Appendix 6: Analysis of unit sales - Product mix
Appendix 6: Analysis of unit sales - Product mix 0% 1% 0% 1% 0% 1% 1% 1% 2% 1% 100% 11% 10% 8% 10% 13% 12% 16% 14% 14% 90% 28% 80% 27% 24% 26% 29% 32% 29% 70% 31% 30% 29% 16% 60% 50% 29% 26% 27% 26% 25% 25% 24% 24% 24% 24% 40% 30% 20% 37% 35% 36% 32% 32% 33% 34% 29% 31% 30% 10% 0% 6mths to June 6mth
Slide 41: Appendix 6: Analysis of unit sales - Price range
Appendix 6: Analysis of unit sales - Price range 100% 14% 16% 17% 90% 20% 19% 23% 24% 29% 31% 80% 20% 21% 22% 70% 23% 25% 21% 20% 60% 21% 22% 50% 35% 34% 31% 30% 40% 29% 33% 32% 29% 29% 30% 20% 31% 30% 29% 28% 26% 23% 24% 10% 19% 20% 0% 6mths to June 6mths to 6mths to June 6mths to 6mths to June 6mt
Slide 42: Appendix 7: Balance Sheet
Appendix 7: Balance Sheet 2016 2015 2015 H1 H1 Change FY Work in progress £587.4m £508.5m + £78.9m £517.9m Land £2,085.5m £2,030.1m + £55.4m £2,046.7m Land creditors £573.7m £607.4m (£33.7m) £573.3m Part exchange stock £27.4m £66.1m (£38.7m) £38.3m Shared equity debt £163.2m £192.9m (£29.7m) £177.9m
Slide 43: Appendix 8: Cash flows
Appendix 8: Cash flows H1 16 H1 15 Change £m £m Operating cash (before working capital movements) 362.0 281.6 +29% Investment in working capital: Increase in gross land (34.3) (185.6) (Decrease) / Increase in land creditors (5.6) 140.7 Net land investment (39.9) (44.9) Increase in WIP, part exchange
Slide 44: Appendix 9: Mortgage approvals for house purchase
Appendix 9: Mortgage approvals for house purchase 150 Average monthly approvals: 82,450 Approvals - Volume ('000) 100 Dec 2013: Dec 2015: 72,800 70,600 Dec 2009: 59,000 Dec 2011: 52,300 Jun 2016: 64,800 50 Dec 2014: 60,100 Dec 2012: 55,000 Dec 2010: 42,600 Average monthly approvals since beginning o
Slide 45: Appendix 10: New housing starts
New Housing Starts ('000) 25 50 75 0 100 125 150 175 200 2005 2006 2007 2008 2009 2010 Source: NHBC Housing Market Report (July 2016) 2011 Results Presentation 23 August 2016 Annual Housing Starts (2005-2015) 2012 2013 2014 2015 New Housing Starts ('000) 43 10 12 14 16 18 0 2 4 6 8 Appendix 10: New
Slide 46: 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