Persimmon Plc · LSE:PSN
Persimmon — Investor Day (November 2016)
27 slides from Persimmon's investor day presentation, Nov 3, 2016
Slide 1: Persimmon Plc Capital Market Day - 3 November 2016
PERSIMMON PLC Capital Market Day - 3 November 2016
Slide 2: Agenda
Agenda 8.15 a.m. Coach leaves Ramada Birmingham Hotel 8.30 a.m. Arrive Space4 factory site, Castle Bromwich 8.45 a.m. Welcome and days events Jeff Fairburn 9.00 a.m. The Cycle Mike Killoran 9.30 a.m. Growth and Return Jeff Fairburn 10.00 a.m. Space4 Richard Oldroyd 10.30 a.m. Brickworks Alan Hopwood
Slide 3: Index
Index Page • The Cycle − Key elements of our strategy 4 − Historical context 5-7 − Features of current market 8 − Future resilience and flexibility 9 -14 • Growth and Return − Optimum scale opportunity 15 − Operating coverage 16 − Recent performance 17 - 19 − Outlets and planning 20 − Build 21 - 24
Slide 4: Notes
Notes Capital Market Day - 3 November 2016 3
Slide 5: Key elements of our strategy
The Cycle - Key elements of our strategy Growth to Optimise Long term optimal Disciplined Surplus cash capital scale in land capital efficiency of returns to regional investment generated operations shareholders markets Capital Market Day - 3 November 2016 4
Slide 6: Historical context: Selling price sensitivity
The Cycle - Historical context Selling price sensitivity 30.0% 210.0 200.0 25.0% 190.0 20.0% 180.0 £'000 15.0% 170.0 10.0% 160.0 5.0% 150.0 0.0% 140.0 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 16 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1
Slide 7: Historical context
The Cycle - Historical context Capital Market Day - 3 November 2016 6
Slide 8: Historical context: Strong cash generation through the cycle
The Cycle - Historical context 1,200 Strong cash generation through the cycle 1,000 800 AVERAGE CASH GENERATION PRE LAND EXPENDITURE: £710M 600 £1,117m £961m £961m 400 £746m £630m £564m £556m £522m £414m £457m 200 £402m £372m £246m £165m £104m £2m £67m £103m - 2007 2008 2009 2010 2011 2012 2013 2014
Slide 9: Features of the current market
The Cycle - Features of the current market • Housing demand is strong • Interest rates forecast to remain “lower for longer”, affordability is good • New build mortgage cost advantage over second hand and renting • Active outlet numbers constrained, further land release required • Consumer confidenc
Slide 10: Future resilience and flexibility: high quality land bank
The Cycle - Future resilience and flexibility • What is our starting position? – High quality land bank - margin resilience and asset value protection – 67,300 plots owned at a cost to revenue ratio of 15.7% – 4.4 years owned forward supply at 15,200 units – Tight stock levels - WIP turn > 5x – Stro
Slide 11: Future resilience and flexibility: gross margins reflect land quality
The Cycle - Future resilience and flexibility • Future margin resilience – Gross margins reflect high quality land bank 2016 2015 2014 H1 H2 H1 H2 H1 Revenue 100.0% 100.0% 100.0% 100.0% 100.0% Land cost (16.6)% (17.8)% (18.3)% (19.4)% (20.7)% Build and other direct cost (56.5)% (55.6)% (57.7)% (58.1
Slide 12: Future resilience and flexibility: margin sensitivity to price change
The Cycle - Future resilience and flexibility • Future margin resilience – High quality land bank provides resilience for the future Price change * -20% -10% -5% H1 2016 +5% Gross margin 14.4% 21.3% 23.1% 26.9% 28.8% * excluding mix effects • Sensitivity above assumes the following (on a proforma ba
Slide 13: Future resilience and flexibility: cash resilience stress tests
The Cycle - Future resilience and flexibility • Future cash resilience – Cash generation delivered from trading and working capital management – Trading cash delivery together with stress tests (on a proforma basis): Base Volume falls 34% Volume falls 47% Per unit H1 2016 £ £ £ Revenue receipt 205,7
Slide 14: Future resilience and flexibility: trading delivery and working capital
The Cycle - Future resilience and flexibility • Future cash resilience (cont.) – Combined trading delivery and working capital management (on a proforma basis): Volume falls 34% Volume falls 47% £m Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 Volume 10,000 10,000 10,000 8,000 8,000 8,000 Total trading
Slide 15: Future resilience and flexibility: return on capital employed and right sizing
The Cycle - Future resilience and flexibility • Future return resilience - “right sizing” the balance sheet (on a proforma basis) – Return on capital employed maintained at higher levels through capital returns Volume falls 34% Volume falls 47% £m Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 Capital em
Slide 16: Optimum scale opportunity
Growth and Return - Optimum scale opportunity • Focus on the long term delivery of: – High quality land replacement – Cost effective and efficient build – Higher levels of customer satisfaction – Superior levels of shareholder value creation Capital Market Day - 3 November 2016 15
Slide 17: Operating coverage
Growth and Return - Operating coverage • Nationwide coverage – 28 businesses across mainland UK - further market share opportunities – New Nottingham based business to open 2 January 2017 – Operational capacity to deliver c.16,500 new homes per annum • Land market offering good opportunities – Short
Slide 18: Recent performance: growth and operating margin
Growth and Return - Recent performance • Outperformance of both growth and quality Volume Growth Operating Margin (Units) 25.0% 6,000 22.5% 5,000 20.0% 4,000 17.5% 15.0% 3,000 12.5% 2,000 10.0% 1,000 7.5% - 5.0% y/e Jun 12 y/e Jun 13 y/e Jun 14 y/e Jun 15 y/e Jun 16 y/e Jun 12 y/e Jun 13 y/e Jun 14
Slide 19: Recent performance: cash generation and returns
Growth and Return - Recent performance • Outperformance of both cash generation and returns Cash Generation Return on Capital Employed (£m) 1,600.0 40.0% 1,400.0 35.0% 1,200.0 30.0% 1,000.0 25.0% 800.0 600.0 20.0% 400.0 15.0% 200.0 10.0% - 5.0% -200.0 Jun/Jul 11 Jun/Jul 12 Jun/Jul 13 Jun/Jul 14 Jun/
Slide 20: Recent performance: land investment and investor returns
Growth and Return - Recent performance • Outperformance of both land investment and investor returns Landbank Growth Dividend/Capital Returns (plots) (£ms) 1200 30,000 1000 25,000 800 20,000 15,000 600 10,000 400 5,000 200 - 0 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Per
Slide 21: Outlets and planning
Growth and Return - Outlets and planning • Over 60% growth in new home volumes since 2011 from same number of sites • Government support for smaller housebuilders and new entrants welcome • Currently building and selling from c.390 outlets • 108 new sites opened in H1 2016 • 102 new sites opened in
Slide 22: Build: standard group house types
Growth and Return - Build • Penetration of standard Group house types increasing – Optimised layouts maximise land coverage – Easier to build – Range designed to cover c.85% of houses built nationwide – Efficient shell footprints to maximise square footage but minimise build cost – Designed to accom
Slide 23: Build: block and masterplan principles
Growth and Return - Build • Block/masterplan principles - driving efficiency Capital Market Day - 3 November 2016 22
Slide 24: Build: standard block arrangement
Growth and Return - Build • Standard block arrangement - efficiency/marketability Capital Market Day - 3 November 2016 23
Slide 25: Build: layout flexibility and market responsiveness
Growth and Return - Build • Layout flexibility/market responsiveness Capital Market Day - 3 November 2016 24
Slide 26: Efficiency and control
Growth and Return - Efficiency and control • Secure build capacity • Increased directly employed workforce • Training - apprentices and mature trainees including C2C • Improvements to build programmes and efficiency • Strong supplier relationships • Control over superstructure • Space4 - walls and r
Slide 27: Key points of differentiation
Key points of differentiation • Growth and returns - excellent land bank • National coverage • In-house planning and design • Strong strategic land capabilities • Group house types • Employed workforce • Training programmes • Offsite manufacturing expertise • Affordability • Fast capital turn • Extr