Persimmon Plc · LSE:PSN
Persimmon — FY2015 Earnings Presentation
51 slides from Persimmon's earnings presentation, Feb 23, 2016
Slide 1: Results Presentation 23 February 2016
Results Presentation 23 February 2016 50
Slide 2: Agenda
Agenda Results Presentation 23 February 2016 Page Presented by • Chairman’s overview 1 Nicholas Wrigley • Review of strategy and operations 3 Jeff Fairburn • Outlook 13 Jeff Fairburn • Financial review 15 Mike Killoran • Summary 26 Nicholas Wrigley Appendices 1 to 11 27 - 48 Results Presentation 23
Slide 3: Chairman's overview
Chairman’s overview • A year of substantial growth − 13% increase in turnover − underlying profit before tax increased by 34% • Performance highlights: 2015 2014 Change Underlying performance: Turnover * £2,901.7m £2,573.9m + 13% Operating profits * £634.5m £473.3m + 34% Operating margin * 21.9% 18.
Slide 4: Chairman's overview
Chairman’s overview • Disciplined growth of high quality − 8% growth in volume − 350bps increase in underlying operating margin − forward sales revenue increased 12% to £1.7bn • Strong liquidity − £483m of free cash generated pre capital returns - 24% increase on 2014 • Acceleration of Capital Retur
Slide 5: Review of strategy and operations
Review of strategy and operations Page • Strategy 4 • Group overview 5 • Consented land 8 • Strategic land 9 • Current trading 10 • Accelerated and increased returns 12 • Outlook 13 Results Presentation 23 February 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 February 2016 4
Slide 7: Review of operations - Group overview
Review of operations - Group overview • Strong network of sites across the UK - 252 new outlets opened during the year • Strengthened control of operations − Teesside and Central opened during 2015 − North Scotland and Cornwall opened January 2016 • Scalable growth to match market demand − over half
Slide 8: Review of operations - Group overview
Review of operations - Group overview • Over 1,000 additional new homes delivered year on year • Solid growth in average selling price - 4.5% increase to £199,173 • Earnings quality improving - operating margin of 21.9% increased 350bps • Pre working capital cash inflows increased 31% to £653.6m • E
Slide 9: Review of operations - Group overview
Review of operations - Group overview Product Profile - 12 months ended 31 December 2015: Unit Completions Average selling Average price Plots owned and Plot count completions change price * change under control change 5,681 + 15% £170,464 + 0.6% 33,773 + 10% Persimmon North 39% 36% 4,362 + 23% £237
Slide 10: Review of operations - Consented land
Review of operations - Consented land • Focus on delivering superior return on capital from new land investment − continued margin growth to be supported by reduction in plot cost to revenue ratio (Dec 2015: 16.3%; Dec 2014: 17.1%) − strategic land content within land bank at c. 44% • Total plots ow
Slide 11: Review of operations - Strategic land
Review of operations - Strategic land • New investment and its subsequent Strategic sites pulled through conversion remains a strategic priority during 2015 • c. 2,100 acres of new strategic land interests Strategic interests acquired in the year acquired during 2015 • 6,739 plots successfully conve
Slide 12: Review of operations - Current trading
Review of operations - Current trading • Encouraging start to 2016: − new year visitor numbers over 12% stronger than prior year − cancellation rates continue at historically low levels − weekly private sales rates 13% ahead of last year • Site activity: − availability of site construction skills re
Slide 13: Review of operations - Current trading
Review of operations - Current trading • Customer confidence reflected in strong forward orders 1 January Forward Sales Units ASP Revenue 2016 6,967 £158,336 £1,103.1m 2015 6,320 £153,964 £973.1m Movement +10% +3% +13% Current Forward Sales (inc. first 7 w eek sales) Units ASP Revenue 2016 9,862 £16
Slide 14: Review of operations - Accelerated and increased returns
Review of operations - Accelerated and increased returns • Third payment of 95p paid on 2 April 2015 • Further acceleration - 110p per share payable 1 April 2016 • Increase of £2.80 per share in Capital Return Plan to £9.00 per share - 45% increase on original £6.20 per share Paid Paid Paid 2013 201
Slide 15: Outlook - Overall market
Outlook - Overall market • Strong job creation and increasing household incomes supporting confidence • Improved land release with continuity of NPPF • Extension of Help to Buy to 2021 provides additional visibility • Lenders supporting customers in increasing numbers with compelling deals • Mortgag
Slide 16: Outlook - Operational priorities
Outlook - Operational priorities • Maintain market coverage on all sites across the UK • Commence new sites at earliest opportunity • Increase construction activity to support growth • Improve provision of new skills - Combat to Construction, Upskill to Construction, Apprentices, Graduate trainees •
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 2015 20 • Balance sheet 21 • 2015 cash generation 22 • Underlying operating profit and cash flow 23 • Cash generation through cycle 24 • Capital retu
Slide 18: Financial review - Trading overview
Financial review - Trading overview • Increased profits resulting from strong trading and good capital discipline Adjusted trading (for shared equity fair value charge and goodw ill im pairm ent) 2015 2014 Total % of revenue Total % of revenue Revenue * £2,902.3m- £2,575.0m Cost of sales: - land cos
Slide 19: Financial review - Operating profit bridge
Financial review - Operating profit bridge • Strong sales, productivity gains and new outlets deliver increased profits Results Presentation 23 February 2016 17
Slide 20: Financial review - Cost recoveries
Financial review - Cost recoveries • Gross margin of 25.4% improved 320bps • Land recovery reduction of 6% delivered 200bps margin gain • 120bps margin contribution from good control over build and direct costs • 19.5% increase in gross profit per unit sold to £50,597 Underlying performance per plot
Slide 21: Financial review - Operating efficiency
Financial review - Operating efficiency • Underlying operating margin of 21.9% increased 350bps 2015 2015 2015 2014 2014 2014 FY H2 H1 FY H2 H1 Gross margin 25.4% 26.6% 24.0% 22.2% 22.5% 21.9% Operating expenses (3.9%) (3.8%) (4.1%) (4.1%) (3.9%) (4.4%) Other operating income 0.4% 0.2% 0.6% 0.3% 0.4
Slide 22: Financial review - Land holdings at Dec 2015
Financial review - Land holdings at 31 Dec 2015 • Cost to revenue percentage of owned & controlled plots of 16.3% (Dec 14: 17.1%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2014 Dec 2015 Change Dec 2015 Dec 2014 Plot
Slide 23: Financial review - Balance sheet
Financial review - Balance sheet • Further investment in high quality land opportunities − £204m increase in land balances to £2.05bn; 20,501 plots added − beneficial deferred terms negotiated - £114m increase in land creditors to £573m (Dec 2014: £459m) • Work in progress of £518m (Dec 14: £465m) −
Slide 24: Financial review - 2015 cash generation
Financial review - 2015 cash generation Pre dividend/capital return free cash generation (£m) * Pre dividend/capital return free cash generation (after working capital) FY H2 H1 + 500 2015 + 484.6 + 291.5 + 193.1 + 400 2014 + 388.7 + 263.9 + 124.8 2013 + 235.5 + 156.1 + 79.4 + 300 2012 + 178.0 + 66.
Slide 25: Financial review - Underlying operating profit and cash flow
Financial review - Underlying operating profit and cash flow • Cash generation is supporting growth whilst also delivering surplus capital 700 600 500 653.6 400 £m 300 498.5 9.0 200 345.5 231.4 100 163.4 - (0.5) (63.6) (1.8) (27.7) (100) 2011 2012 2013 2014 2015 Cash from operating activities Moveme
Slide 26: Financial review - Cash generation through cycle
Financial review - Cash generation through cycle 800 700 HALF YEARLY AVERAGE CASH GENERATION PRE LAND EXPENDITURE: £423M • Strong cash generation over the 600 housing cycle is our strategic 500 priority £m 400 300 £623m £549m £494m 200 100 £248m £308m £327m £419m £412m £209m £237m £285m • Capital di
Slide 27: Financial review - Capital return considerations
Financial review - Capital return considerations • Maintain flexibility of funding to support investment in land and work in progress at this point in the cycle • Longer term expectation of a c. 5 year consented land bank • Conversion of strategic land expected to increase • Financial risk to be min
Slide 28: Summary
Summary • 2015 results represent further strong progress for the Group • High quality growth is being delivered as well as substantial surplus capital • The Group’s asset platform continues to strengthen • We will continue to invest in our teams and their skills • Our Capital Return Plan commitment
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 - Income Statement - 10 year record − Appendix 5 - Trading performance - Business split − Appendix 6 - Trading performance - Regio
Slide 30: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement Underlying performance: 2011 2012 2013 2014 2015 Unit completions 9,360 9,903 11,528 13,509 14,572 Turnover * £1,535.0m £1,721.4m £2,085.9m £2,573.9m £2,901.7m Average Selling Price ** £166,142 £175,640 £181,861 £190,667 £199,173 Operating profit * £15
Slide 31: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet 2011 2012 2013 2014 2015 Shareholders' funds £1,839.3m £1,993.7m £2,045.5m £2,192.6m £2,455.8m Cash £41.0m £201.5m £204.3m £378.4m £570.4m Net asset value per share 608.6p 658.2p 671.4p 715.4p 800.7p Work in progress £427.8m £443.1m £463.5m £464.7m £517.9
Slide 32: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss Underlying performance: 2015 2015 2014 2014 H2 H1 H2 H1 Unit completions 7,717 6,855 7,101 6,408 Turnover * £1,569.2m £1,332.5m £1,375.8m £1,198.1m Operating profit * £361.2m £273.3m £260.8m £212.5m Operating margin * 23.0% 20.5% 19.0% 17.7% Interest & finance c
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 14 H2 14 H1 15 H2 15 H1 14 H2 14 H1 15 H2 15 North Division South Division Partnerships • Traditional seasonal trading pattern • Improvement in b
Slide 34: Appendix 4: Income Statement - 10 year record
Appendix 4: Income Statement - 10 year record Underlying perform ance: 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Unit completions 16,701 15,905 10,202 8,976 9,384 9,360 9,903 11,528 13,509 14,572 Turnover * £3,141.9m £3,014.9m £1,755.1m £1,420.6m £1,569.5m £1,535.0m £1,721.4m £2,085.9m £2,57
Slide 35: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2015 2014 FY FY Change No. No. Units Persimmon Core 10,043 8,503 + 18% Charles Church 2,382 2,750 (13%) Partnerships 2,147 2,256 (5%) Total 14,572 13,509 + 8% £ £ Average Selling Price * Persimmon Core 199,727 191,028 + 5% Char
Slide 36: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2015 2014 FY FY Change £m £m Gross Profit ** Persimmon Core 536.8 365.6 + 47% Charles Church 161.0 168.2 (4%) Partnerships 39.5 38.0 + 4% Total 737.3 571.8 + 29% Gross Margin ** Persimmon Core 26.8% 22.5% + 4.3% Charles Church
Slide 37: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2015 2014 H2 H2 Change No. No. Units Persimmon Core 5,485 4,455 + 23% Charles Church 1,185 1,378 (14%) Partnerships 1,047 1,268 (17%) Total 7,717 7,101 + 9% £ £ Average Selling Price * Persimmon Core 203,258 195,996 + 4% Charle
Slide 38: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2015 2014 H2 H2 Change £m £m Gross Profit ** Persimmon Core 313.8 198.5 + 58% Charles Church 84.6 89.7 (6%) Partnerships 18.8 21.7 (13%) Total 417.2 309.9 + 35% Gross Margin ** Persimmon Core 28.2% 22.7% + 5.5% Charles Church 2
Slide 39: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2015 2014 H1 H1 Change No. No. Units Persimmon Core 4,558 4,048 + 13% Charles Church 1,197 1,372 (13%) Partnerships 1,100 988 + 11% Total 6,855 6,408 + 7% £ £ Average Selling Price * Persimmon Core 195,478 185,562 + 5% Charles
Slide 40: Appendix 5: Trading performance - Business split
Appendix 5: Trading performance - Business split Underlying performance: 2015 2014 H1 H1 Change £m £m Gross Profit ** Persimmon Core 223.0 167.1 + 33% Charles Church 76.4 78.5 (3%) Partnerships 20.7 16.3 + 27% Total 320.1 261.9 + 22% Gross Margin ** Persimmon Core 25.0% 22.3% + 2.7% Charles Church 2
Slide 41: Appendix 6: Trading performance - Regional split
Appendix 6: Trading performance - Regional split 31 December 2015 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 912 150,610 (1%) 7,255 Scotland 1,559 167,409 (4%) 6,299 North West 900 150,709 (7%) 7,328 North East 1,220 156,813 + 3% 6,244 Midla
Slide 42: Appendix 6: Trading performance - Regional split
Appendix 6: Trading performance - Regional split 31 December 2015 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Shires 2,051 236,897 + 11% 13,296 Western 1,560 196,535 + 12% 11,874 Southern 914 238,079 + 19% 8,252 Wales 899 157,376 (1%) 6,362 South 5,424
Slide 43: Appendix 6: Trading performance - Regional split
Appendix 6: Trading performance - Regional split 31 December 2015 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 2,759 260,816 13,070 31 December 2014 3,226 240,418 13,381 Change (14%) + 8% (2%) * Calculated from nominal value of turnover (before fair value charge on
Slide 44: Appendix 7: Analysis of unit sales
Appendix 7: Analysis of unit sales By Price Band (Private) By House Type (All) 21% 27% Over Detached £250,000 36% 28% Semi- 22% detached 27% 22% £200,000 to £249,999 21% 17% Townhouse ' 26% 32% £150,000 to £199,999 30% 32% Apartment 10% 25% Less than 2% £150,000 Bungalow 21% 1% 0% 10% 20% 30% 40% 50
Slide 45: Appendix 7: Analysis of unit sales - Product mix
Appendix 7: Analysis of unit sales - Product mix 1% 1% 0% 1% 0% 1% 0% 1% 1% 1% 2% 100% 11% 10% 8% 13% 12% 16% 14% 14% 90% 21% 18% 32% 80% 27% 29% 24% 32% 29% 70% 31% 30% 29% 30% 60% 35% 16% 50% 29% 26% 26% 25% 25% 24% 24% 24% 40% 23% 23% 20% 30% 20% 37% 33% 34% 35% 31% 32% 32% 28% 29% 27% 23% 10% 0%
Slide 46: Appendix 7: Analysis of unit sales - Price range
Appendix 7: Analysis of unit sales - Price range 100% 13% 13% 14% 16% 17% 90% 20% 19% 23% 24% 31% 80% 20% 19% 20% 21% 22% 70% 23% 25% 21% 20% 60% 21% 30% 50% 37% 35% 34% 31% 30% 40% 29% 33% 32% 29% 30% 20% 38% 30% 31% 30% 29% 28% 26% 24% 23% 10% 19% 0% 6mths to June 6mths to 6mths to June 6mths to 6
Slide 47: Appendix 8: Balance Sheet
Appendix 8: Balance Sheet 2015 2014 Change Work in progress £517.9m £464.7m + £53.2m Land £2,046.7m £1,842.4m + £204.3m Land creditors £573.3m £459.5m + £113.8m Part exchange stock £38.3m £52.4m (£14.1m) Shared equity debt £177.9m £201.3m (£23.4m) Cash £570.4m £378.4m + £192.0m Shareholders' funds £
Slide 48: Appendix 9: Cash flows
Appendix 9: Cash flows H1 15 H2 15 FY 15 FY 14 £m £m £m £m Operating cash (before working capital movements) 281.6 372.0 653.6 498.5 Investment in working capital: Increase in gross land (185.6) (13.6) (199.2) (201.6) Increase / (Decrease) in land creditors 147.9 (48.5) 99.4 147.7 Net land investmen
Slide 49: Appendix 10: Mortgage approvals for house purchase
Appendix 10: Mortgage approvals for house purchase 150 Average monthly approvals: 82,750 Approvals - Volume ('000) 100 Dec 2013: Dec 2015: 73,000 71,000 Dec 2009: 59,000 Dec 2011: 52,000 50 Dec 2014: 60,000 Dec 2012: Dec 2010: 55,000 Average monthly 43,000 approvals since beginning of 2008: 54,220 N
Slide 50: Appendix 11: New housing starts
New Housing Starts ('000) 25 50 75 0 100 125 150 175 200 2005 2006 2007 2008 2009 2010 2011 Source: NHBC Housing Market Report (January 2016) Annual Housing Starts (2005-2015) 2012 Results Presentation 23 February 2016 2013 2014 2015 New Housing Starts ('000) 48 0 2 4 6 8 10 12 14 16 Appendix 11: Ne
Slide 51: 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