Persimmon Plc · LSE:PSN
Persimmon — H1 2014 Earnings Presentation
45 slides from Persimmon's earnings presentation, Aug 19, 2014
Slide 1: Results Presentation 19 August 2014
Results Presentation 19 August 2014 44
Slide 2: Agenda
Agenda Results Presentation 19 August 2014 Page Presented by • Chairman’s overview 1 Nicholas Wrigley • Review of operations 3 Jeff Fairburn • Outlook 14 Jeff Fairburn • Financial review 16 Mike Killoran • Summary 26 Nicholas Wrigley Appendices 1 to 9 27 - 42 Results Presentation 19 August 2014
Slide 3: Chairman's overview - Performance highlights
Chairman’s overview - Performance highlights • Strong results − 260 bps increase in underlying operating margin to 17.7% − 57% increase in underlying profit before tax − 54% increase in ROACE to 21.7% H1 2014 H1 2013 Change Underlying performance: Turnover * £1,198.1m £899.9m + 33% Operating profits
Slide 4: Chairman's overview
Chairman’s overview • Delivering growth − 33% increase in Group revenues in the period − forward sales revenue 22% ahead of prior year • Excellent cash delivery - £122m of free cash generated • Strong investment in attractive land opportunities • Second Capital Return Plan payment of 70p per share p
Slide 5: Review of operations
Review of operations Page • Key objectives 4 • Group overview 5 • Strategic land 9 • Consented land 10 • Current trading 11 • Outlook 14 Results Presentation 19 August 2014 3
Slide 6: Review of operations - Key objectives
Review of operations - Key objectives • Optimise sales to suit market conditions • Provide range of choice and quality to our customers • Maximise value from each new home sold • Capture cost efficiencies and control costs to maximise profitability • Secure high quality land replacement including co
Slide 7: Review of operations - Group overview
Review of operations - Group overview • Strong outlet network continually refreshed - 265 new outlets opened in last 18 months • Focus remains on affordable family housing − 64% of sales priced below £200,000 − traditional house types contribute 87% of sales mix • Improvement in market conditions −
Slide 8: Review of operations - Group overview
Review of operations - Group overview • Strong growth in volume - up 28% • Average selling price increased 4% to £187,178 • 56% increase in underlying operating profits with further good expansion in margins to 17.7% • Operating cash flows accelerating H1 2014 H1 2013 Change Underlying performance:
Slide 9: Review of operations - Group overview
Review of operations - Group overview Product Profile - 6 months ended 30 June 2014: Unit Completions Average selling Average price Plots owned and Plot count completions change price * change under control change 2,370 + 43% £164,616 + 4% 28,839 + 14% Persimmon North 37% 35% 1,678 + 27% £215,146 +
Slide 10: Review of operations - Group overview: Half Year Sales Profile
Review of operations - Group overview Half Year Sales Profile 3,000 2,500 Completions (No.) 2,000 1,500 1,000 500 - H1 12 H2 12 H1 13 H2 13 H1 14 H1 12 H2 12 H1 13 H2 13 H1 14 H1 12 H2 12 H1 13 H2 13 H1 14 North Division South Division Partnerships • H1 2014 building on success of H2 2013 • Traditio
Slide 11: Review of operations - Strategic land
Review of operations - Strategic land • Conversion of strategic land remains a priority Strategic • Over 16,850 acres held at 30 June 2014 sites pulled through during 2014 • c. 1,750 acres of new strategic land interests Strategic acquired in the first half interests acquired during 2014 • Over 3,70
Slide 12: Review of operations - Consented land
Review of operations - Consented land • Land market conditions have remained attractive − c. £290m of land payments (including land creditors) made in the period − 14,251 new plots added to the consented land bank • Total plots owned and under control increased to 82,250 (Dec 2013: 74,407) • 16% inc
Slide 13: Review of operations - Current trading
Review of operations - Current trading • Market confidence supportive: − visitor numbers continue to run ahead of prior year levels − cancellation rates remain at historically low levels − opportunity to improve private sales rates • Site activity: − build rates targeted to fulfil customer demand pr
Slide 14: Review of operations - Current trading
Review of operations - Current trading • Strong forward orders building on growth in legal completions Half Year Forward Sales Units ASP Revenue June 2014 7,487 £157,873 £1,182.0m June 2013 6,236 £148,050 £923.2m Movement +20% +7% +28% Current Forward Sales (inc. 7 w eeks post half year) Units ASP R
Slide 15: Review of operations - Accelerated returns
Review of operations - Accelerated returns • Strong operational performance allows us to accelerate returns to shareholders - 70p paid in July 2014 Paid Paid 2013 2014 2015 2016 2017 2018 2019 2020 2021 Original Plan 75p 95p 110p 110p 115p 115p April 2013 Announcement 75p 10p 85p 110p 110p 115p 115p
Slide 16: Outlook - Overall market
Outlook - Overall market • Further improvement in UK economic performance supporting sentiment • Market continues to benefit from Government measures • Continued discipline in the mortgage market supports sustainability − June mortgage approvals 14% ahead of prior year − lenders actively managing ma
Slide 17: Outlook - Operational priorities
Outlook - Operational priorities • New site starts will support further sales growth • Selling price maximised on each sale - private sales rate improvement opportunity as markets continue to progress • Build activity will increase to capture the market opportunity • Greater Space4 utilisation to as
Slide 18: Financial review
Financial review Page • Trading overview 17 • Operating profit bridge 18 • Cost recoveries 19 • Operating efficiency 20 • Land holdings at 30 June 2014 21 • Balance sheet 22 • Cash generation 23 • Underlying operating profit and cash flow 24 • Cash generation through cycle 25 Mike Killoran, Group Fi
Slide 19: Financial review - Trading overview
Financial review - Trading overview • Targeted improvements in profitability continue to be delivered Adjusted trading (for NRV, shared equity fair value charge and goodw ill im pairm ent) H1 2014 H1 2013 Total % of revenue Adjusted Exceptional Total % of revenue Revenue (adjusted) £1,198.8m- £904.0
Slide 20: Financial review - Operating profit bridge
Financial review - Operating profit bridge • Delivery of strong trading and margin expansion - operating profit increased 56% 250 24.5 212.5 200 9.6 8.0 50.1 150 136.3 £m 100 50 0 H1 13 Operating Volume increase ASP increase Gross Margin Net Operating H1 14 Operating Profit improvement Expense incre
Slide 21: Financial review - Cost recoveries
Financial review - Cost recoveries • Gross margin increased to 21.9%, up 220 bps • 160 bps improvement in land cost recoveries • Focussed on mitigating build cost pressures - contributed 60 bps to margin gain • 15.5% increase in gross profit per unit sold to £40,866 Underlying performance per plot:
Slide 22: Financial review - Operating efficiency
Financial review - Operating efficiency • Underlying operating margin of 17.7%, 260 bps improvement on H1 2013 • Utilisation of operational gearing improving overhead efficiency 2014 2013 2013 2013 H1 FY H2 H1 Gross margin 21.9% 20.2% 20.5% 19.7% Operating expenses (4.4%) (4.7%) (4.0%) (5.5%) Other
Slide 23: Financial review - Land holdings at 30 June 2014
Financial review - Land holdings at 30 June 2014 • Cost to revenue percentage of owned & controlled plots of 16.9% (Jun 13: 18.3%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2013 Jun 2014 Change Jun 2014 Dec 2013 Plo
Slide 24: Financial review - Balance sheet
Financial review - Balance sheet • Focus on cash generation and capital discipline through the housing cycle − 64% increase in total capital value generated per share of 53.4 pence (H1 2013: 32.6 pence) in the first half − £214m capital return accrued, and paid in July, via B/C share scheme (70 penc
Slide 25: 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) FY H2 H1 + 250 2014 + 124.8 + 200 2013 + 235.5 + 156.1 + 79.4 2012 + 178.0 + 66.3 + 111.7 + 150 2011 + 119.4 + 66.0 + 53.4 £m + 100 2010
Slide 26: Financial review - Underlying operating profit and cash flow
Financial review - Underlying operating profit and cash flow • Fully utilise operational gearing to deliver improved profitability and cash generation • Enhanced capital returns enabled by strong cash generation 240 210 180 221.5 150 202.5 120 32.1 143.0 £m 90 127.4 60 104.0 30 - (23.1) (59.5) (4.1)
Slide 27: Financial review - Cash generation through cycle
Financial review - Cash generation through cycle 500 450 HALF YEARLY AVERAGE CASH GENERATION PRE LAND EXPENDITURE: £302M 400 350 300 • H1 2014 cash generation £m 250 200 £419m £412m reflects healthy growth in 150 £248m £308m £327m revenues 100 £207m £195m £146m £163m 50 £91m £100m £60m £74m £43m - H
Slide 28: Summary
Summary • The Group is taking advantage of the current market opportunities − customers remain confident and our sales conversion is healthy − we are focussed on providing good stock availability − maximising profitability continues to be a priority − our land replacement activities are delivering h
Slide 29: Appendices
Appendices − Appendix 1 - Financial record: Income Statement Balance Sheet − Appendix 2 - Half yearly profit & loss − Appendix 3 - Trading performance - Business split − Appendix 4 - Trading performance - Divisional split − Appendix 5 - Analysis of unit sales − Appendix 6 - Balance Sheet − Appendix
Slide 30: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement Underlying performance: Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Unit completions 4,712 9,903 5,022 11,528 6,408 Turnover * £806.7m £1,721.4m £899.9m £2,085.9m £1,198.1m Average Selling Price ** £173,343 £175,640 £180,465 £181,861 £187,178 Operating profit *
Slide 31: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Shareholders' funds £1,893.9m £1,993.7m £1,873.6m £2,045.5m £2,006.5m Cash £135.2m £201.5m £48.1m £204.3m £326.3m Gearing * 0% 0% 0% 0% 0% Net asset value per share 625.7p 658.2p 616.6p 671.4p 656.0p Work in progress £46
Slide 32: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss Underlying performance: 2014 2013 2013 H1 H1 Change FY Unit completions 6,408 5,022 + 1,386 11,528 Turnover * £1,198.1m £899.9m + £298.2m £2,085.9m Operating profit * £212.5m £136.3m + £76.2m £333.1m Operating margin * 17.7% 15.1% + 2.6% 16.0% Net interest & fin
Slide 33: Appendix 3: Trading performance - Business split
Appendix 3: Trading performance - Business split Underlying performance: 2014 2013 H1 H1 Change No. No. Units Persimmon Core 4,048 2,982 + 36% Charles Church 1,372 1,140 + 20% Partnerships 988 900 + 10% Total 6,408 5,022 + 28% £ £ Average Selling Price * Persimmon Core 185,562 179,803 + 3% Charles C
Slide 34: Appendix 3: Trading performance - Business split
Appendix 3: Trading performance - Business split Underlying performance: 2014 2013 H1 H1 Change £m £m Gross Profit ** Persimmon Core 167.1 102.8 + 63% Charles Church 78.5 57.2 + 37% Partnerships 16.3 17.7 (8%) Total 261.9 177.7 + 47% Gross Margin ** Persimmon Core 22.3% 19.4% + 2.9% Charles Church 2
Slide 35: Appendix 4: Trading performance - Divisional split
Appendix 4: Trading performance - Divisional split 30 June 2014 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 355 151,899 + 15% 5,492 Scotland 682 165,183 + 4% 5,436 North West 365 164,707 + 11% 6,726 North East 504 145,010 (5%) 6,445 Midlands
Slide 36: Appendix 4: Trading performance - Divisional split
Appendix 4: Trading performance - Divisional split 30 June 2014 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Shires 855 211,473 + 8% 10,278 Western 610 171,510 + 8% 13,971 Southern 408 200,078 (2%) 6,144 Wales 307 158,274 (2%) 4,601 South Division 2,180
Slide 37: Appendix 4: Trading performance - Divisional split
Appendix 4: Trading performance - Divisional split 30 June 2014 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 1,590 233,974 13,275 30 June 2013 1,256 231,648 11,015 Change + 27% + 1% + 21% * Calculated from nominal value of turnover (before fair value charge on share
Slide 38: Appendix 5: Analysis of unit sales
Appendix 5: Analysis of unit sales By Price Band (Private) By House Type (All) 17% 24% Detached Over £250,000 33% 17% 21% Sem i-detached 22% 25% £200,000 to £249,999 19% 18% Tow nhouse ' 29% 31% £150,000 to £199,999 26% 35% Apartm ent 13% 30% Le ss than 2% £150,000 Bungalow 38% 0% 0% 10% 20% 30% 40%
Slide 39: Appendix 5: Analysis of unit sales - Product mix
Appendix 5: Analysis of unit sales - Product mix 1% 1% 1% 1% 0% 1% 0% 1% 0% 2% 100% 11% 13% 16% 14% 14% 90% 21% 18% 22% 22% 80% 35% 32% 29% 70% 30% 29% 31% 30% 32% 35% 60% 37% 18% 50% 25% 25% 24% 24% 24% 40% 23% 20% 21% 20% 17% 30% 20% 31% 32% 32% 33% 28% 29% 23% 25% 23% 24% 10% 0% 6mths to 6mths to
Slide 40: Appendix 5: Analysis of unit sales - Price range
Appendix 5: Analysis of unit sales - Price range 100% 13% 13% 13% 13% 14% 16% 17% 17% 90% 20% 80% 19% 20% 19% 22% 20% 21% 19% 22% 70% 25% 60% 30% 32% 26% 50% 37% 35% 34% 34% 31% 29% 40% 30% 20% 38% 38% 36% 31% 30% 31% 29% 30% 26% 10% 0% 6mths to June 6mths to 6mths to June 6mths to 6mths to June 6mt
Slide 41: Appendix 6: Balance Sheet
Appendix 6: Balance Sheet 2014 2013 2013 H1 H1 Change FY Work in progress £477.6m £460.9m + £16.7m £463.5m Land £1,707.3m £1,538.4m + £168.9m £1,636.6m Land creditors £334.2m £229.7m + £104.5m £306.1m Part exchange stock £45.5m £50.4m (£4.9m) £45.5m Shared equity debt £210.9m £211.5m (£0.6m) £215.4m
Slide 42: Appendix 7: Cash flows
Appendix 7: Cash flows H1 14 H1 13 £m £m Operating cash (before working capital movements) 221.5 143.0 Investment in working capital: Increase in gross land (70.7) (41.9) Increase / (Decrease) in land creditors 28.1 (10.2) Net land investment (42.6) (52.1) Increase in WIP, part exchange and showhous
Slide 43: Appendix 8: Mortgage approvals for house purchase
Appendix 8: Mortgage approvals for house purchase 150 Average monthly approvals: 83,990 Approvals - Volume ('000) 100 Dec 2013: 71,000 Jun 2014: Dec 2009: Dec 2011: 67,000 59,000 52,000 50 Dec 2012: Dec 2010: 55,000 43,000 Average monthly approvals since Nov 2008: beginning of 2008: 27,000 51,680 0
Slide 44: Appendix 9: New housing starts
New Housing Starts ('000) 0 25 50 75 100 125 150 175 200 2003 2004 2005 2006 2007 2008 Source: NHBC Housing Market Report (July 2014) 2009 Results Presentation 19 August 2014 Annual Housing Starts (2003-2013) 2010 2011 2012 2013 Appendix 9: New housing starts 42 New Housing Starts ('000) 0 2 4 6 8 1
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