Persimmon Plc · LSE:PSN
Persimmon — FY2010 Earnings Presentation
50 slides from Persimmon's earnings presentation, Mar 1, 2011
Slide 1: Results Presentation 31 December 2010
Results ResultsPresentation Presentation3131December December2010 2010
Slide 2: Agenda
Agenda Results Presentation 1 March 2011 Page Presented by ● Chairman’s overview 1 John White ● Review of operations 4 Mike Farley ● Strategy 12 Mike Farley ● Outlook 13 Mike Farley ● Financial review 15 Mike Killoran ● Summary 25 John White Appendices 1 to 11 26-47 Results Presentation 1 March 2011
Slide 3: Chairman's overview – Performance highlights
Chairman’s overview – Performance highlights Underlying performance: 2010 2009 Change Turnover * £1,569.5m £1,420.6m + 10% Operating profits * £128.7m £57.2m + 125% Pre-tax profits * £95.5m £7.0m n/a Earnings per share * 24.8p 2.1p n/a Borrowings ** £51.0m £267.5m (81%) Dividend per share 7.50p Nil
Slide 4: Chairman's overview
Chairman’s overview • Excellent performance in a tough market – Revenues ahead by 10%: • Average prices up c.6% • Private sales volumes up 3.3%, Partnership affordable volume up 10.1% • Underlying selling price gains of c.3% – Operating margins moving forward: • Further improvement in second half to
Slide 5: Chairman's overview
Chairman’s overview • Positioned to deliver improving returns – Asset quality improving – National outlet network maintained – Strong support from excellent land holdings • Consented landbank in good quality locations • Continued strategic land success adding additional value – Good forward sales –
Slide 6: Review of operations
Review of operations Page ● Group overview 5 ● Land holdings & replacement 9 ● Current trading 10 ● Strategy 12 ● Outlook 13 Mike Farley, Group Chief Executive Results Presentation 1 March 2011 4
Slide 7: Review of operations – Group overview
Review of operations – Group overview • National coverage with 25 dual branded local offices – lean overhead structure • c.165 new sites opened 2010 • Divisional standard product range delivering build cost savings • Affordability key – c.34% of private sales under £150,000 (national average: 28%) •
Slide 8: Review of operations – Group overview
Review of operations – Group overview Delivery of improvement in underlying profitability and cash generation 2010 2009 Change Underlying performance: Unit completions 9,384 8,976 + 5% Average selling price * £169,339 £160,513 + 6% Operating margin ** 8.2% 4.0% + 4.2% Net cash inflow from operations
Slide 9: Review of operations – Group overview
Review of operations – Group overview Product Profile - 12 months ended 31 December 2010: Unit Annual completions Average selling Annual average Plots owned and Annual plot completions change price * price change under control count change 1,967 + 0% £160,870 + 6% 17,780 6% Persimmon North 21% 30% 2
Slide 10: 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 - H109 H209 H110 H210 H109 H209 H110 H210 H109 H209 H110 H210 H109 H209 H110 H210 H109 H209 H110 H210 North Divis ion Central Divis ion South Divis ion Charles Church Partners hips ● Autumn s
Slide 11: Review of operations – Land holdings & replacement
Review of operations – Land holdings & replacement • Benefits of replanning existing sites coming through • Significant NRV provision release due to improvement in asset quality • c.10,200 plots acquired in 2010 – c.50% in southern markets • 6.3 years consented supply – 58,862 plots • c.32% of 2010
Slide 12: Review of operations – Current trading
Review of operations – Current trading • Encouraging start to the year: − Visitors up c.10% year on year − Cancellation rates in line with prior year at c.16% − Net private reservations c.2% ahead of same period last year • Site activity: − c.70 sites to open in first half 2011 − Work in progress ti
Slide 13: Review of operations – Current trading
Review of operations – Current trading ● Order book provides strong support for 2011 expectations 01 January Forward Sales Units ASP Revenue 2011 4,206 £134,365 £565.1m 2010 4,280 £149,028 £637.8m Movement (2%) (10%) (11%) Current Forward Sales (inc. first 8 w eeks sales) Units ASP Revenue 2011 5,75
Slide 14: Strategy
Strategy Strategy reflects continued focus on key drivers of value creation: 1. Improving margins: − Pricing gains captured on new site starts − Working hard on historic sites − Selective high quality land replacement − Forward land consents predominantly delivering traditional housing 2. Unrelentin
Slide 15: Outlook – Overall market
Outlook – Overall market ● Macroeconomic conditions remain uncertain ● Mortgage availability and loan to value is key constraint − current cost of mortgage loans at lower levels − regulatory risk ● Pricing remains resilient – supported by shortage of availability ● Job creation and unemployment leve
Slide 16: Outlook – Well positioned on all fronts
Outlook – Well positioned on all fronts ● Extensive outlet network across the UK – c.70 sites to open H1 2011 ● Dual branding supporting efficient overhead structure ● Traditional product mix to support sales ● Build costs savings to enhance margins ● Long high quality landbank with good strategic l
Slide 17: Financial review
Financial review Page ● Trading overview 16 ● Net realisable value review 18 ● Land holdings at 31 December 2010 20 ● Balance sheet 21 ● Cash generation 22 ● Debt management 23 ● Capital structure 24 Mike Killoran, Group Finance Director Results Presentation 1 March 2011 15
Slide 18: Financial review – Trading overview
Financial review – Trading overview • Reported pre-tax profits strongly ahead Adjusted trading (for NRV, shared equity fair value charge and goodw ill im pairm ent) 2010 2009 Revenue (adjusted) £1,589.1m- £1,440.7m Cost of sales: land cost (£401.8m) (25.3%) (£348.1m) (24.2%) exceptional NRV release
Slide 19: Financial review – Trading overview
Financial review – Trading overview Underlying performance: 2010 2010 2010 2009 2009 2009 FY H2 H1 FY H2 H1 Gross margin 12.4% 12.5% 12.3% 8.7% 10.3% 6.6% Operating expenses (4.9%) (5.0%) (4.8%) (5.3%) (4.9%) (5.8%) Other operating income 0.7% 0.9% 0.5% 0.6% 0.4% 0.8% Operating margin 8.2% 8.4% 8.0%
Slide 20: Financial review – Net realisable value review
Financial review – Net realisable value review • Detailed site-by-site review performed at balance sheet date • Underlying selling price weakness from peak: • 31 December 2008: c.17% plus further c.10% = c.27% • 31 December 2009: c.18% plus further c.7% = c.25% • 31 December 2010: c.15% plus further
Slide 21: Financial review – Net realisable value review
Financial review – Net realisable value review • Provision movement re land with planning: H110 H210 FY10 H109 H209 FY09 £m Opening balance 385.6 288.4 385.6 545.8 481.9 545.8 Utilised (in underlying gross margin) (26.5) (28.8) (55.3) (36.0) (49.4) (85.4) Exceptional release: Period plots (10.8) (9.
Slide 22: Financial review – Land holdings at Dec 2010
Financial review – Land holdings at 31 Dec 2010 • Cost to revenue percentage of owned & controlled plots of 20.4% (Dec-09: 20.7%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2009 Dec 2010 Change Dec 2010 Dec 2009 Plot
Slide 23: Financial review – Balance sheet
Financial review – Balance sheet ● Net assets c.£120m higher than December 2009 at £1.7bn ● Land expenditure profile: H1 H2 FY 2008 £243m £114m £357m 2009 £127m £49m £176m 2010 £94m £108m £202m ● Work in progress of £413.5m (Dec-09: £485.5m) − rebalancing of investment within WIP remains ongoing alt
Slide 24: Financial review – Cash generation
Financial review – Cash generation Pre dividend free cash generation (after working capital) Pre dividend free cash generation (£m) + 600 FY H2 H1 + 500 2010 + 225.6 + 80.8 + 144.8 + 400 2009 + 356.8 + 227.8 + 129.0 2008 + 239.2 + 325.1 (85.9) + 300 2007 + 67.0 + 5.8 + 61.2 £m + 200 2006 + 583.1 + 2
Slide 25: Financial review – Debt management
Financial review – Debt management Net Debt Profile Cash Interest Paid (6-mth) DEC-10 DEC-10 JUN-10 JUN-10 DEC-09 DEC-09 JUN-09 JUN-09 (600) (500) (400) (300) (200) (100) - 100 200 0 5 10 15 20 25 PP Revolver Overdraft Cash Net Debt (£m) Interest Paid on Revolver, Bank & Private Placements (£m) Pres
Slide 26: Financial review – Capital structure
Financial review – Capital structure ● Current funding position (at 1 March 2011): Private Placement Maturity Profile Current Committed Facilities 60.0 50.0 40.0 £m 30.0 20.0 10.0 £136.4m £322.3m - 2011 2012 2013 2016 2021 Private Placement Repayments Revolver Private Placements Private Placement va
Slide 27: Summary
Summary • Improved margins and strong cash generation • Low gross debt and reduced finance costs • Selective land replacement in support of future growth • Continued discipline of overheads • Dividend resumed • Business “can/has/will” succeed at current levels of activity “Persimmon is well position
Slide 28: Appendices
Appendices − Appendix 1 - Financial record: Income Statement Balance Sheet − Appendix 2 - Half yearly profit & loss − Appendix 3 - Income Statement - Percentage of turnover − Appendix 4 - Income Statement - 10 year record − Appendix 5 - Trading performance - Business split − Appendix 6 - Trading per
Slide 29: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement Underlying performance: 2006 2007 2008 2009 2010 Unit completions 16,701 15,905 10,202 8,976 9,384 Turnover * £3,141.9m £3,014.9m £1,755.1m £1,420.6m £1,569.5m Average Selling Price ** £188,129 £189,558 £172,994 £160,513 £169,339 Operating profit * £65
Slide 30: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet 2006 2007 2008 2009 2010 Shareholders' funds £2,031.3m £2,345.4m £1,555.2m £1,623.2m £1,744.0m Borrowings * £661.3m £721.1m £600.7m £267.5m £51.0m Gearing * 33% 31% 39% 16% 3% Net asset value per share 680.2p 781.4p 518.0p 540.2p 579.1p Work in progress £
Slide 31: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss Underlying performance: 2010 2010 2009 2009 H2 H1 H2 H1 Unit completions 4,727 4,657 4,970 4,006 Turnover * £792.9m £776.6m £808.8m £611.8m Operating profit * £66.6m £62.1m £47.2m £10.0m Operating margin * 8.4% 8.0% 5.8% 1.6% Interest & finance costs £12.4m £21.
Slide 32: Appendix 3: Income Statement - Percentage of turnover
Appendix 3: Income Statement - Percentage of turnover Performance reconciliation - FY 2010: Reported Underlying Adjusted (pre-exceptional) Add back: Add back: Include: Goodwill Shared Exceptional impairment equity items fair value Revenue £1,569.5m £1,569.5m £19.6m £1,589.1m Land costs (£401.8m) (25
Slide 33: Appendix 3a: Income Statement - Percentage of turnover
Appendix 3a: Income Statement - Percentage of turnover Underlying performance: 2010 2009 Change Revenue 100.0% 100.0% Land costs (25.6%) (24.5%) (1.1%) Build and other direct costs (62.0%) (66.8%) + 4.8% Gross margin * 12.4% 8.7% + 3.7% Operating expenses (4.9%) (5.3%) + 0.4% Other operating income
Slide 34: Appendix 4: Income Statement - 10 year record
Appendix 4: Income Statement - 10 year record Underlying perform ance: 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Unit completions 12,051 12,352 12,163 12,360 12,636 16,701 15,905 10,202 8,976 9,384 Turnover * £1,477.5m £1,711.1m £1,883.0m £2,131.3m £2,285.7m £3,141.9m £3,014.9m £1,755.1m £1,
Slide 35: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2010 2009 FY FY Change No. No. Units Persimmon Core 5,795 5,637 +3% Charles Church 1,803 1,717 +5% Partnerships 1,786 1,622 +10% Total 9,384 8,976 +5% £ £ Average Selling Price * Persimmon Core 172,475 165,401 +4% Charles Churc
Slide 36: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2010 2009 FY FY Change £m £m Gross Profit ** Persimmon Core 114.2 80.2 +42% Charles Church 53.7 20.5 +162% Partnerships 26.9 22.9 +17% Total 194.8 123.6 +58% Gross Margin ** Persimmon Core 11.6% 8.8% +2.8% Charles Church 13.1%
Slide 37: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2010 2009 H2 H2 Change No. No. Units Persimmon Core 2,850 3,085 -8% Charles Church 938 1,018 -8% Partnerships 939 867 +8% Total 4,727 4,970 -5% £ £ Average Selling Price * Persimmon Core 173,426 169,914 +2% Charles Church 232,8
Slide 38: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2010 2009 H2 H2 Change £m £m Gross Profit ** Persimmon Core 56.6 56.0 +1% Charles Church 30.1 15.3 +97% Partnerships 12.5 12.1 +3% Total 99.2 83.4 +19% Gross Margin ** Persimmon Core 11.6% 10.8% +0.8% Charles Church 13.9% 7.4%
Slide 39: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2010 2009 H1 H1 Change No. No. Units Persimmon Core 2,945 2,552 + 15% Charles Church 865 699 + 24% Partnerships 847 755 + 12% Total 4,657 4,006 + 16% £ £ Average Selling Price * Persimmon Core 171,556 159,945 + 7% Charles Churc
Slide 40: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2010 2009 H1 H1 Change £m £m Gross Profit ** Persimmon Core 57.6 24.2 + 138% Charles Church 23.6 5.2 + 354% Partnerships 14.4 10.8 + 33% Total 95.6 40.2 + 138% Gross Margin ** Persimmon Core 11.6% 6.1% + 5.5% Charles Church 12.
Slide 41: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2010 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 504 162,321 + 8% 4,454 Scotland 678 153,006 + 5% 4,477 North West 536 139,897 + 1% 4,586 North East 427 163,984 + 8% 6,099 North D
Slide 42: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2010 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Birmingham 1,089 148,615 + 9% 5,709 Shires 620 190,574 + 4% 3,080 Eastern 1,160 154,669 + 3% 5,889 Central Division 2,869 160,130 + 6% 14,67
Slide 43: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2010 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Southern 756 167,541 + 1% 4,793 Western 898 168,339 (1%) 7,453 Wales 447 147,262 - 4,004 Westbury Partnerships 156 75,314 (7%) 1,445 South D
Slide 44: Appendix 6: Trading performance - Divisional split
Appendix 6: Trading performance - Divisional split 31 December 2010 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 2,113 209,989 6,873 31 December 2009 1,903 194,585 6,285 Change + 11% + 8% + 9% * Calculat ed f rom nominal value of t urnover (bef ore f air value charg
Slide 45: Appendix 7: Analysis of unit sales
Appendix 7: Analysis of unit sales By Price Band (Private) By House Type (All) 26% 17% Detache d Over £250,000 23% 13% 19% Se m i-detache d 18% 19% £200,000 to £249,999 20% 24% Tow nhous e 35% 28% £150,000 to £199,999 33% 38% Apartm ent 22% 28% Le s s than 2% £150,000 Bungalow 34% 1% 0% 10% 20% 30%
Slide 46: Appendix 8: Balance Sheet
Appendix 8: Balance Sheet 2010 2009 Change Work in progress £413.5m £485.5m (£72.0m) Land £1,575.8m £1,633.9m (£58.1m) Land creditors £195.8m £183.9m + £11.9m Part exchange stock £32.8m £9.3m + £23.5m Shared equity debt £115.2m £68.0m + £47.2m Borrowings * £51.0m £267.5m (£216.5m) Gearing * 3% 16% (
Slide 47: Appendix 9: Cash flows
Appendix 9: Cash flows H110 H210 FY10 FY09 £m £m £m £m Operating cash (before working capital movements) 65.8 71.9 137.7 70.8 Investment in working capital: Decrease in gross land 94.0 44.3 138.3 288.4 Increase / (decrease) in land creditors 19.4 (7.5) 11.9 (129.8) Net land divestment 113.4 36.8 150
Slide 48: Appendix 10: Mortgage approvals for house purchase
Appendix 10: Mortgage approvals for house purchase 150 Average monthly approvals: 90,000 Approvals- Volume('000) 100 Dec 2009: 59,000 50 Dec 2010: Average monthly 42,000 approvals since beginning of Nov 2008: 2008: 27,000 47,000 0 A A A A A A A A A A A A A A A A A A A pr pr pr pr pr pr pr pr pr pr p
Slide 49: Appendix 11: New housing starts
New Hou sin g S tarts (@ 000) 0 25 50 75 100 125 150 175 200 2000 2001 2002 2003 2004 2005 2006 Annual Housing Starts (2000-2010) 2007 Results Presentation 1 March 2011 2008 2009 2010 N e w H o u s in g S ta rts ('0 0 0 ) 0 2 4 6 8 10 12 14 47 J an-08 Appendix 11: New housing starts F eb-08 M ar-08
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