Persimmon Plc · LSE:PSN
Persimmon — H1 2015 Earnings Presentation
47 slides from Persimmon's earnings presentation, Aug 18, 2015
Slide 1: Results Presentation 18 August 2015
Results Presentation 18 August 2015 46
Slide 2: Agenda
Agenda Results Presentation 18 August 2015 Page Presented by • Chairman’s overview 1 Nicholas Wrigley • Review of operations 3 Jeff Fairburn • Outlook 15 Jeff Fairburn • Financial review 17 Mike Killoran • Summary 28 Nicholas Wrigley Appendices 1 to 9 29 - 44 Results Presentation 18 August 2015
Slide 3: Chairman's overview
Chairman’s overview • Performance highlights H1 2015 H1 2014 Change Underlying performance: Turnover * £1,332.5m £1,198.1m + 11% Operating profits * £273.3m £212.5m + 29% Operating margin * 20.5% 17.7% + 2.8% Pre-tax profits * £276.6m £212.9m + 30% Earnings per share 78.6p 54.8p + 43% Cash £278.0m £
Slide 4: Chairman's overview
Chairman’s overview • Delivering sustainable growth − 7% growth in volume − 280 bps increase in underlying operating margin − forward sales revenue 12% ahead of prior year • Financial position of the business further strengthened - £191m of free cash generated (pre Capital Return Plan payment) • Str
Slide 5: Review of operations
Review of operations Page • Strategy 4 • Key objectives 5 • Group overview 6 • Consented land 10 • Strategic land 11 • Current trading 12 • Accelerated returns 14 • Outlook 15 Results Presentation 18 August 2015 3
Slide 6: Strategy to maximise long term shareholder value
Strategy to maximise long term shareholder value Growth to Optimise Long term optimal cash Disciplined Surplus capital scale in efficiency land capital returns to regional of investment generated shareholders markets operations Results Presentation 18 August 2015 4
Slide 7: Review of operations - Key objectives
Review of operations - Key objectives • Current market conditions supporting high quality growth in sales • Sales value from each new home sold maximised • Profit growth being delivered from strong control over costs and cost efficiencies • Increase in build rates and productivity will be secured fr
Slide 8: Review of operations - Group overview
Review of operations - Group overview • Investment strategy delivering strong pipeline of new outlets - 122 new outlets opened in H1 2015 • Two new businesses in Teesside and Central regions - strengthening operational delivery in local markets • Broad mix of well priced homes in good locations − 56
Slide 9: Review of operations - Group overview
Review of operations - Group overview • Volume growth - up 7% on prior year • 4% increase in average selling price to £194,423 • 29% growth in underlying operating profits • Pre working capital cash inflows increase 25% to £276m H1 2015 H1 2014 Change Underlying performance: Unit completions 6,855 6
Slide 10: Review of operations - Group overview
Review of operations - Group overview Product Profile - 6 months ended 30 June 2015: Unit Completions Average selling Average price Plots owned and Plot count completions change price * change under control change 2,618 + 10% £169,997 + 3% 32,900 + 14% Persimmon North 38% 35% 1,940 + 16% £229,864 +
Slide 11: Review of operations - Group overview
Review of operations - Group overview Half Year Sales Profile 3,500 3,000 2,500 Completions (No.) 2,000 1,500 1,000 500 - H1 13 H2 13 H1 14 H2 14 H1 15 H1 13 H2 13 H1 14 H2 14 H1 15 H1 13 H2 13 H1 14 H2 14 H1 15 North Divis ion South Divis ion Partnerships • Growth within the traditional seasonal tr
Slide 12: Review of operations - Consented land
Review of operations - Consented land • Superior shareholder value to be delivered through further strong land investment at the right time in the housing cycle − c. £300m of land payments (including land creditors) made in the period, with c. £590m paid over the last 12 months − 11,539 new plots ad
Slide 13: Review of operations - Strategic land
Review of operations - Strategic land • Conversion of strategic land is providing good Strategic sites pulled through source of newly consented plots at attractive during 2015 values • 2,974 plots successfully converted in the Strategic interests acquired during period over 16 locations including: 2
Slide 14: Review of operations - Current trading
Review of operations - Current trading • Market encouraging: − visitor numbers in line with prior year − cancellation rates continue at low levels − since 1 July private sales rate 5% ahead of the prior year • Site activity: − focus on increasing production to secure customer demand − availability o
Slide 15: Review of operations - Current trading
Review of operations - Current trading • Strong forward orders building on market demand Half Year Forward Sales Units ASP Revenue June 2015 8,188 £166,005 £1,359.2m June 2014 7,487 £157,873 £1,182.0m Movement +9% +5% +15% Current Forward Sales (inc. 7 w eeks post half year) Units ASP Revenue August
Slide 16: Review of operations - Accelerated returns
Review of operations - Accelerated returns • Strong operational performance allows us to accelerate returns to shareholders alongside significant investment for the future • Third payment of 95p made 2 April 2015 Paid Paid Paid 2013 2014 2015 2016 2017 2018 2019 2020 2021 Original Plan 75p 95p 110p
Slide 17: Outlook - Overall market
Outlook - Overall market • UK economic recovery continues to provide positive backdrop − further growth in job creation − improvement in real disposable income − interest rates expected to remain at lower levels • Government drive for further improvements to planning should support expansion in sell
Slide 18: Outlook - Operational priorities
Outlook - Operational priorities • Delivery of new sales outlets in a timely manner to refresh current network and supplement market share - currently selling from 390 active outlets • Maximise the value of each new home sold • Improve private sales rates to optimal level of c. 0.70/0.75 new home sa
Slide 19: Financial review
Financial review Page • Trading overview 18 • Operating profit bridge 19 • Cost recoveries 20 • Operating efficiency 21 • Land holdings at 30 June 2015 22 • Balance sheet 23 • Cash generation 24 • Underlying operating profit and cash flow 25 • Cash generation through cycle 26 • Capital return consid
Slide 20: Financial review - Trading overview
Financial review - Trading overview • Execution of operational objectives is delivering increasing profitability Adjusted trading (for shared equity fair value charge and goodw ill im pairm ent) H1 2015 H1 2014 Total % of revenue Total % of revenue Revenue (adjusted) £1,332.8m- £1,198.8m Cost of sal
Slide 21: Financial review - Operating profit bridge
Financial review - Operating profit bridge • Strong trading, cost control and new outlets deliver increased profits 300 28.1 2.6 273.3 11.9 18.2 212.5 200 £m 100 - H1 14 Operating Volume increase ASP increase Gross Margin Net Operating H1 15 Operating Profit improvement Expense decrease Profit Resul
Slide 22: Financial review - Cost recoveries
Financial review - Cost recoveries • Gross margin increased by 210 bps to 24.0% • 240 bps margin gain due to reduced land recoveries • Investments made in site resourcing will deliver margin support over future periods • Gross profit per unit sold increased 14.3% to £46,690 Underlying performance pe
Slide 23: Financial review - Operating efficiency
Financial review - Operating efficiency • Underlying operating margin of 20.5%, 280 bps improvement on prior year • 20% increase in operating profit per unit sold to £39,861 2015 2014 2014 2014 H1 FY H2 H1 Gross margin 24.0% 22.2% 22.5% 21.9% Operating expenses (4.1%) (4.1%) (3.9%) (4.4%) Other oper
Slide 24: Financial review - Land holdings at 30 June 2015
Financial review - Land holdings at 30 June 2015 • Cost to revenue percentage of owned & controlled plots of 16.5% (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 Jun 2015 Change Jun 2015 Dec 2014 Plo
Slide 25: Financial review - Balance sheet
Financial review - Balance sheet • 55% increase in total shareholder equity value per share (pre capital return) of 84.8 pence (H1 2014: 54.6 pence) over last 12 months • Substantial investment in high quality land opportunities − £300m land payments in period - total land investment of £2.03bn − be
Slide 26: 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) + 400 FY H2 H1 + 350 2015 + 193.1 + 300 2014 + 388.7 + 263.9 + 124.8 + 250 2013 + 235.5 + 156.1 + 79.4 2012 + 178.0 + 66.3 + 111.7 £m +
Slide 27: Financial review - Underlying operating profit and cash flow
Financial review - Underlying operating profit and cash flow • Continue to focus on managing the key drivers of sustained value creation and cash generation through the housing cycle 330 300 44.1 270 240 275.9 266.4 210 180 221.5 202.5 150 £m 120 143.0 90 60 30 - (4.1) (35.3) (26.8) (30) (59.5) (60)
Slide 28: Financial review - Cash generation through cycle
Financial review - Cash generation through cycle 600 HALF YEARLY AVERAGE CASH GENERATION PRE LAND EXPENDITURE: £351M • Very strong cash generation 500 delivered from revenue and 400 profit growth £m 300 200 £419m £412m £549m £494m • High quality land replacement a £207m £248m £308m £327m £209m £237m
Slide 29: Financial review - Capital return considerations
Financial review - Capital return considerations • Investment in land and work in progress continues to be prioritised • Seasonal and cyclical movements in working capital to be accommodated • Longer term expectation of a c. 5 year consented land bank • Financial risk will be minimised through the c
Slide 30: Summary
Summary • The Group is delivering sustainable growth across the UK • Customer confidence is improving as the economy recovers • The quality of our land pipeline continues to improve • We are working very hard to open new sites as soon as practicably possible and to increase build in response to the
Slide 31: 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 32: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement Underlying performance: 2013 2013 2014 2014 2015 H1 FY H1 FY H1 Unit completions 5,022 11,528 6,408 13,509 6,855 Turnover * £899.9m £2,085.9m £1,198.1m £2,573.9m £1,332.5m Average Selling Price ** £180,465 £181,861 £187,178 £190,667 £194,423 Operating
Slide 33: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet 2013 2013 2014 2014 2015 H1 FY H1 FY H1 Shareholders' funds £1,873.6m £2,045.5m £2,006.5m £2,192.6m £2,161.8m Cash £48.1m £204.3m £326.3m £378.4m £278.0m Gearing * 0% 0% 0% 0% 0% Net asset value per share 616.6p 671.4p 656.0p 715.4p 705.2p Work in progres
Slide 34: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss Underlying performance: 2015 2014 2014 H1 H1 Change FY Unit completions 6,855 6,408 + 447 13,509 Turnover * £1,332.5m £1,198.1m + £134.4m £2,573.9m Operating profit * £273.3m £212.5m + £60.8m £473.3m Operating margin * 20.5% 17.7% + 2.8% 18.4% Net interest & fin
Slide 35: Appendix 3: Trading performance - Business split
Appendix 3: 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 36: Appendix 3: Trading performance - Business split
Appendix 3: 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 37: Appendix 4: Trading performance - Divisional split
Appendix 4: Trading performance - Divisional split 30 June 2015 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Yorkshire 446 146,856 (3%) 6,962 Scotland 740 168,709 + 2% 6,462 North West 439 143,235 (13%) 7,345 North East 546 157,564 + 9% 6,577 Midlands 6
Slide 38: Appendix 4: Trading performance - Divisional split
Appendix 4: Trading performance - Divisional split 30 June 2015 Units Average Sale Annual average Plots owned and No. Price (£)* price change under control Shires 904 230,182 + 9% 12,739 Western 760 196,553 + 15% 13,393 Southern 318 222,898 + 11% 7,294 Wales 431 159,044 - 6,518 South 2,413 205,924 +
Slide 39: Appendix 4: Trading performance - Divisional split
Appendix 4: Trading performance - Divisional split 30 June 2015 Units Average Sale Plots owned and No. Price (£)* under control Charles Church 1,414 250,281 12,837 30 June 2014 1,590 233,974 13,275 Change (11%) + 7% (3%) * Calculated from nominal value of turnover (before fair value charge on shared
Slide 40: Appendix 5: Analysis of unit sales
Appendix 5: Analysis of unit sales By Price Band (Private) By House Type (All) 27% 19% Detached Over £250,000 35% 24% 22% Semi-detached 23% 29% £200,000 to £249,999 20% 18% Tow nhouse 27% ' 30% £150,000 to £199,999 32% 31% Apartment 8% 28% Less than £150,000 2% Bungalow 24% 1% 0% 10% 20% 30% 40% 50%
Slide 41: Appendix 5: Analysis of unit sales - Product mix
Appendix 5: Analysis of unit sales - Product mix 1% 1% 0% 1% 0% 1% 0% 1% 1% 2% 100% 11% 10% 8% 13% 16% 14% 14% 90% 21% 18% 31% 80% 27% 29% 32% 29% 70% 30% 29% 31% 30% 60% 35% 18% 50% 29% 26% 25% 25% 24% 24% 24% 40% 23% 22% 20% 30% 20% 33% 34% 35% 31% 32% 32% 28% 29% 27% 23% 10% 0% 6mths to 6mths to
Slide 42: Appendix 5: Analysis of unit sales - Price range
Appendix 5: Analysis of unit sales - Price range 100% 13% 13% 14% 16% 17% 19% 90% 20% 23% 24% 80% 20% 19% 20% 21% 22% 70% 23% 25% 21% 20% 60% 30% 50% 37% 35% 34% 31% 30% 29% 40% 33% 32% 30% 20% 38% 30% 31% 29% 30% 26% 28% 23% 24% 10% 0% 6mths to June 6mths to 6mths to June 6mths to 6mths to June 6mt
Slide 43: Appendix 6: Balance Sheet
Appendix 6: Balance Sheet 2015 2014 2014 H1 H1 Change FY Work in progress £508.5m £477.6m + £30.9m £464.7m Land £2,030.1m £1,707.3m + £322.8m £1,842.4m Land creditors £607.4m £334.2m + £273.2m £459.5m Part exchange stock £66.1m £45.5m + £20.6m £52.4m Shared equity debt £192.9m £210.9m (£18.0m) £201.
Slide 44: Appendix 7: Cash flows
Appendix 7: Cash flows H1 15 H1 14 Change £m £m Operating cash (before working capital movements) 275.9 221.5 +25% Investment in working capital: Increase in gross land (187.7) (70.7) Increase in land creditors 147.9 28.1 Net land investment (39.8) (42.6) Increase in WIP, part exchange and showhouse
Slide 45: Appendix 8: Mortgage approvals for house purchase
Appendix 8: Mortgage approvals for house purchase 150 Average monthly approvals: 83,030 Approvals - Volume ('000) 100 Dec 2013: Jun 2015: 73,000 66,500 Dec 2009: 59,000 Dec 2011: 52,000 50 Dec 2014: 60,500 Dec 2012: Dec 2010: 55,000 43,000 Average monthly approvals since beginning of 2008: Nov 2008:
Slide 46: Appendix 9: New housing starts
New Housing Starts ('000) 0 25 50 75 100 125 150 175 200 2004 2005 2006 2007 2008 2009 Source: NHBC Housing Market Report (July 2015) 2010 Results Presentation 18 August 2015 Annual Housing Starts (2004-2014) 2011 2012 2013 2014 Appendix 9: New housing starts New Housing Starts ('000) 44 0 2 4 6 8 1
Slide 47: 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