Persimmon Plc · LSE:PSN
Persimmon — FY2017 Earnings Presentation
52 slides from Persimmon's earnings presentation, Feb 27, 2018
Slide 1: Results Presentation 27 February 2018
Results Presentation 27 February 2018 51
Slide 2: Agenda
Agenda Results Presentation 27 February 2018 Page Presented by • Overview 1 Jeff Fairburn • Review of operations 3 Jeff Fairburn • Outlook 13 Jeff Fairburn • Financial review 15 Mike Killoran • Summary 28 Jeff Fairburn Appendices 1 to 10 29 - 49 Results Presentation 27 February 2018
Slide 3: Overview
Overview • Outstanding performance 2017 2016 Change Turnover £3,422.3m £3,136.8m + 9% Operating profits * £966.1m £778.5m + 24% Operating margin * 28.2% 24.8% + 3.4% Pre-tax profits * £977.1m £782.8m + 25% Earnings per share * 258.6p 205.6p + 26% Cash £1,302.7m £913.0m n/a Return on Average Capital
Slide 4: Overview
Overview • Focused on execution of strategic plan – 16,043 new homes delivered to customers across the UK - increase of 872 over prior year – robust operational efficiency - operating margin up 340bps to 28.2% – forward sales revenue increased 7.5% to £2.03bn • Strong free cash generation - £806m of
Slide 5: Review of operations
Review of operations Page • Strategy 4 • Group overview 5 • Consented land 8 • Strategic land 9 • Current trading 10 • Return of surplus capital 12 • Outlook 13 Results Presentation 27 February 2018 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 27 February 2018 4
Slide 7: Review of operations - Group overview
Review of operations - Group overview • Strong UK sales network maintained - 197 new outlets opened in the year • Group’s regional structure strengthened – Nottingham opened in 2017, and Suffolk in January 2018 – Brickworks commissioned and delivering to site • Affordable family housing − 43% of pri
Slide 8: Review of operations - Group overview
Review of operations - Group overview • Expansion in output - 872 additional legal completions • Underlying operating profits up 24% to £966.1m • 25% increase in pre working capital cash inflows, to £996.8m • Return on average capital employed of 51.5% - 31% improvement year on year 2017 2016 Change
Slide 9: Review of operations - Group overview
Review of operations - Group overview Product Profile - 12 months ended 31 December 2017: Unit Completions Average selling Average price Plots owned and Plot count completions change price change under control change 6,660 + 7% £190,037 + 7% 39,139 + 4% Persimmon North 42% 40% 4,829 + 3% £250,228 +
Slide 10: Review of operations - Consented land
Review of operations - Consented land • Disciplined investment in compelling land acquisition opportunities − margin will be supported by reduction in owned plot cost to revenue ratio (Dec 2017: 13.2%; Dec 2016: 14.7%) − ex-strategic land content within consented land bank at c. 51% • Total plots ow
Slide 11: Review of operations - Strategic land
Review of operations - Strategic land • Conversion of strategic land supports long term Strategic interests acquired during superior returns 2017 • 2017 conversion represents 52% of total plot Strategic sites pulled through during 2017 consumption • 8,296 plots successfully converted in the year ove
Slide 12: Review of operations - Current trading
Review of operations - Current trading • Encouraging start to 2018: − private sales rates c. 7% stronger over first eight weeks of 2017 − cancellation rates remain at historically low levels • Site activity: − increased output despite labour and key material constraints − greater use of Space4 produ
Slide 13: Review of operations - Current trading
Review of operations - Current trading • Strong position in all local markets moving forwards 1 January Forward Sales Units ASP Revenue 2018 7,758 £174,799 £1,356.1m 2017 7,327 £168,429 £1,234.1m Movement +6% +4% +10% Current Forward Sales (inc. 8 w eeks post year end) Units ASP Revenue 2018 10,900
Slide 14: Review of operations - Return of surplus capital
Review of operations - Return of surplus capital • 25p per share, £77.1m, paid 31 March 2017 • 110p per share, £339.5m, paid 3 July 2017 Paid Paid Paid Paid Paid 2013 2014 2015 2016 2017 2018 2019 2020 2021 TOTAL Original Plan 75p 95p 110p 110p 115p 115p 620p Current Plan - scheduled 75p 70p 95p 110
Slide 15: Outlook - Overall market
Outlook - Overall market • UK economy remains resilient - employment levels strong • Disciplined lending and compelling mortgage offers supporting the market • Market uncertainties surrounding ongoing negotiations of the UK’s exit from the EU • Concerns over job security, wage growth and interest ra
Slide 16: Outlook - Operational priorities
Outlook - Operational priorities • Continue to invest in our sales network across the UK where planning allows • Increase construction output across all regional markets to meet demand • Traditional site layouts utilising core house types • Further investment in off-site manufacturing capabilities •
Slide 17: Financial review
Financial review Page • Trading overview 16 • Operating profit bridge 17 • Cost recoveries 18 • Operating efficiency 19 • Land holdings at 31 December 2017 20 • Balance sheet 21 • Cash generation 22 • Underlying operating profit and cash flow 23 • Cash generation through cycle 24 • Capital return co
Slide 18: Financial review - Trading overview
Financial review - Trading overview • Excellent trading performance delivering profit growth Underlying trading (adjusted for goodw ill im pairm ent) 2017 2016 Total % of revenue Total % of revenue Revenue £3,422.3m- £3,136.8m Cost of sales: - land cost (£551.7m) (16.1%) (£514.9m) (16.4%) - build an
Slide 19: Financial review - Operating profit bridge
Financial review - Operating profit bridge • Top line growth and operational gains key drivers to profit increase Results Presentation 27 February 2018 17
Slide 20: Financial review - Cost recoveries
Financial review - Cost recoveries • Gross margin increased 350bps over 2016, to 31.3% • New outlet openings securing land recovery savings - 30bps margin contribution • 320bps margin contribution from build and direct costs • Gross profit per unit sold increased 16.3% to £66,801 Per plot: 2017 2016
Slide 21: Financial review - Operating efficiency
Financial review - Operating efficiency • Underlying operating margin increased 340bps to 28.2% • Operating profit per unit increased 17.3% to £60,217 2017 2017 2017 2016 2016 2016 FY H2 H1 FY H2 H1 Gross margin 31.3% 32.1% 30.5% 27.8% 28.6% 26.9% Operating expenses * (3.4%) (3.5%) (3.3%) (3.2%) (2.
Slide 22: Financial review - Land holdings at 31 December 2017
Financial review - Land holdings at 31 December 2017 • Cost to revenue percentage of owned & controlled plots of 13.7% (Dec 16: 14.9%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2016 Dec 2017 Change Dec 2017 Dec 2016
Slide 23: Financial review - Balance sheet
Financial review - Balance sheet • Total shareholder equity value per share (pre capital return) of 285 pence generated during the year, 41% up on 2016 (202 pence per share) • Investment in compelling land opportunities supports future growth − £602m land payments (including land creditors) in year
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) + 850 FY H2 H1 + 800 + 750 2017 + 806.3 + 519.3 + 287.0 + 700 + 650 2016 + 684.3 + 450.2 + 234.1 + 600 + 550 2015 + 484.6 + 291.5 + 193.
Slide 25: Financial review - Underlying operating profit and cash flow
Financial review - Underlying operating profit and cash flow • Strategic priority to maximise cash efficiency and capital discipline through the housing cycle 1,000 900 45.2 800 996.8 700 800.5 600 500 653.6 £m 400 498.5 300 345.5 200 100 - (63.6) (1.8) (27.7) (19.4) (100) 2013 2014 2015 2016 2017 C
Slide 26: Financial review - Cash generation through cycle
Financial review - Cash generation through cycle 800 HALF YEARLY AVERAGE CASH GENERATION PRE LAND EXPENDITURE: £496M • Disciplined approach to land 700 and WIP investment allows an 600 500 optimal capital structure to be 400 £m 300 £623m £628m £656m £752m maintained £549m £539m £494m 200 100 £248m £
Slide 27: Financial review - Capital return considerations
Financial review - Capital return considerations • Annual working capital cycle and reinvestment cash requirements are primary considerations • Capital returns include two elements − scheduled return of surplus capital i.e. 110p per share - long term commitment − additional return of excess capital
Slide 28: Financial review - 2012 LTIP
Financial review - 2012 LTIP • 40% of options vested on 31 December 2017 (9.2m options) to be exercised by participants from 27 February 2018 onwards • Net settlement of these vested options on exercise aligned with capital disciplines of the Group’s strategy (a c. £88m cash payment would be made to
Slide 29: Financial review - 2012 LTIP
Financial review - 2012 LTIP • On exercise the number of shares issued is reduced by a value equivalent to any outstanding option cost due from the participant • Net settlement also reduces the number of shares issued by a value equivalent to the employees income tax and national insurance contribut
Slide 30: Summary
Summary • Excellent performance through 2017 • Strong balance sheet providing platform for future growth • Committed to increasing output to meet market demand - creating sustainable communities in our local markets • Retained flexibility to react to changes in market conditions • Excellent cash gen
Slide 31: 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 32: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement 2013 2014 2015 2016 2017 Unit completions 11,528 13,509 14,572 15,171 16,043 Turnover £2,085.9m £2,573.9m £2,901.7m £3,136.8m £3,422.3m Average Selling Price £180,941 £190,533 £199,127 £206,765 £213,321 Operating profit * £333.1m £473.3m £634.5m £778.5
Slide 33: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet 2013 2014 2015 2016 2017 Shareholders' funds £2,045.5m £2,192.6m £2,455.8m £2,737.4m £3,201.6m Cash £204.3m £378.4m £570.4m £913.0m £1,302.7m Net asset value per share 671.4p 715.4p 800.7p 887.3p 1036.6p Work in progress £463.5m £464.7m £517.9m £617.2m £7
Slide 34: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss Underlying performance: 2017 2017 2016 2016 H2 H1 H2 H1 Unit completions 8,249 7,794 7,933 7,238 Turnover £1,760.1m £1,662.2m £1,647.5m £1,489.3m Operating profit * £506.7m £459.4m £424.0m £354.5m Operating margin * 28.8% 27.6% 25.7% 23.8% Interest & finance cos
Slide 35: 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 16 H2 16 H1 17 H2 17 H1 16 H2 16 H1 17 H2 17 H1 16 H2 16 H1 17 H2 17 North Division South Division Partnerships Appendix 3 Results Presentation 27 February 2018 33
Slide 36: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split 2017 2016 FY FY Change No. No. Units Persimmon Core 11,489 10,906 + 5% Charles Church 1,785 2,047 (13%) Partnerships 2,769 2,218 + 25% Total 16,043 15,171 + 6% £ £ Average Selling Price Persimmon Core 215,336 205,597 + 5% Charles Church 351,218 321,20
Slide 37: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split 2017 2016 FY FY Change £m £m Gross Profit Persimmon Core 804.1 652.3 + 23% Charles Church 205.1 175.8 + 17% Partnerships 62.5 43.3 + 44% Total 1,071.7 871.4 + 23% Gross Margin Persimmon Core 32.5% 29.1% + 3.4% Charles Church 32.7% 26.7% + 6.0% Partner
Slide 38: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split 2017 2016 H2 H2 Change No. No. Units Persimmon Core 5,859 5,763 + 2% Charles Church 885 1,074 (18%) Partnerships 1,505 1,096 + 37% Total 8,249 7,933 + 4% £ £ Average Selling Price Persimmon Core 216,637 204,939 + 6% Charles Church 354,675 324,273 + 9%
Slide 39: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split 2017 2016 H2 H2 Change £m £m Gross Profit Persimmon Core 420.3 347.2 + 21% Charles Church 109.7 101.9 + 8% Partnerships 34.4 21.5 + 60% Total 564.4 470.6 + 20% Gross Margin Persimmon Core 33.1% 29.4% + 3.7% Charles Church 35.0% 29.3% + 5.7% Partnershi
Slide 40: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split 2017 2016 H1 H1 Change No. No. Units Persimmon Core 5,630 5,143 + 9% Charles Church 900 973 (8%) Partnerships 1,264 1,122 + 13% Total 7,794 7,238 + 8% £ £ Average Selling Price Persimmon Core 213,982 206,334 + 4% Charles Church 347,819 317,827 + 9% Pa
Slide 41: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split 2017 2016 H1 H1 Change £m £m Gross Profit Persimmon Core 383.8 305.1 + 26% Charles Church 95.4 73.9 + 29% Partnerships 28.1 21.8 + 29% Total 507.3 400.8 + 27% Gross Margin Persimmon Core 31.9% 28.8% + 3.1% Charles Church 30.5% 23.9% + 6.6% Partnership
Slide 42: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 31 December 2017 Units Average Sale Annual average Plots owned and No. Price (£) price change under control Yorkshire 1,059 167,773 + 3% 6,814 Scotland 1,591 184,621 + 7% 7,054 North West 991 167,641 + 4% 5,699 North East 1,360 171,823 + 7% 11,197 M
Slide 43: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 31 December 2017 Units Average Sale Annual average Plots owned and No. Price (£) price change under control Shires 2,140 244,677 + 1% 13,729 Western 1,590 207,947 + 2% 13,322 Southern 1,406 251,407 + 3% 7,036 Wales 1,104 160,538 - 5,224 Persimmon So
Slide 44: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 31 December 2017 Units Average Sale Plots owned and No. Price (£) under control Charles Church 2,203 310,794 12,239 31 December 2016 2,399 293,437 12,813 Change (8%) + 6% (4%) Appendix 5 - 3 of 3 Results Presentation 27 February 2018 42
Slide 45: Appendix 6: Analysis of unit sales
Appendix 6: Analysis of unit sales By Price Band (Private) By House Type (All) 30% 29% Detached Over £250,000 37% 33% 26% Semi-detached 23% 28% £200,000 to £249,999 24% 16% Townhouse 26% ' 29% £150,000 to £199,999 27% 26% Apartment 8% 19% Less than £150,000 2% Bungalow 16% 1% 0% 10% 20% 30% 40% 50%
Slide 46: Appendix 6: Analysis of unit sales - Product mix
Appendix 6: Analysis of unit sales - Product mix 0% 1% 0% 1% 1% 1% 1% 1% 1% 1% 2% 100% 11% 8% 7% 8% 8% 13% 10% 12% 10% 14% 90% 24% 80% 25% 27% 28% 28% 24% 26% 29% 32% 29% 70% 29% 15% 60% 29% 50% 29% 26% 27% 28% 27% 26% 25% 25% 27% 24% 40% 30% 20% 37% 37% 35% 36% 36% 36% 32% 32% 33% 34% 32% 10% 0% 6m
Slide 47: Appendix 6: Analysis of unit sales - Price range
Appendix 6: Analysis of unit sales - Price range 100% 17% 90% 20% 19% 23% 24% 29% 29% 31% 32% 33% 80% 22% 70% 23% 25% 21% 20% 60% 21% 22% 23% 23% 25% 50% 31% 30% 40% 29% 33% 32% 29% 29% 29% 28% 30% 26% 20% 30% 28% 26% 23% 24% 10% 19% 20% 19% 17% 16% 0% 6mths to June 6mths to 6mths to June 6mths to 6
Slide 48: Appendix 7: Balance Sheet
Appendix 7: Balance Sheet 2017 2016 Change Work in progress £723.9m £617.2m + £106.7m Land £2,010.6m £1,946.4m + £64.2m Land creditors £567.3m £554.9m + £12.4m Part exchange stock £45.2m £37.1m + £8.1m Shared equity debt £117.3m £148.7m (£31.4m) Cash £1,302.7m £913.0m + £389.7m Shareholders' funds £
Slide 49: Appendix 8: Cash flows
Appendix 8: Cash flows H1 17 H2 17 FY 17 FY 16 Change £m £m £m £m Operating cash (before working capital movements) 473.0 523.8 996.8 800.5 +25% Investment in working capital: (Increase) / Decrease in gross land (22.5) (37.4) (59.9) 107.8 (Decrease) / Increase in land creditors (72.4) 74.6 2.2 (30.4
Slide 50: Appendix 9: Mortgage approvals for house purchase
Appendix 9: Mortgage approvals for house purchase 150 Average monthly approvals since beginning of 1993: 81,460 Approvals - Volume ('000) 100 Dec 2013: Dec 2015: 72,800 71,000 Dec 2017: 61,000 Dec 2009: 59,000 Dec 2011: 52,300 Dec 2014: Dec 2016: 50 60,100 68,400 Dec 2012: Dec 2010: 55,000 Average m
Slide 51: Appendix 10: New housing starts
New Housing Starts ('000) 25 50 75 0 100 125 150 175 200 Source: NHBC Housing Market Report (January 2018) Annual Housing Starts (2005-2017) Results Presentation 27 February 2018 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 New Housing Starts ('000) 49 10 12 14 16 18 0 2 4 6 8 Ap
Slide 52: 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