Persimmon Plc · LSE:PSN
Persimmon — H1 2018 Earnings Presentation
46 slides from Persimmon's earnings presentation, Aug 21, 2018
Slide 1: Results Presentation 21 August 2018
Results Presentation 21 August 2018 45
Slide 2: Agenda
Agenda Results Presentation 21 August 2018 Page • Highlights 1 • Strategy 2 • Review of operations 3 • Outlook 12 • Financial review 14 • Summary 26 Appendices 1 to 10 27 - 43 Results Presentation 21 August 2018
Slide 3: Highlights
Highlights • Focused on meeting customer demand in each of our 30 regional markets – sales increased by 278 new homes to 8,072 – new housing revenue increased by 5% to £1.74bn – forward sales revenue of £2.12bn - 6% increase year on year • Disciplined high quality growth – profit before tax increase
Slide 4: 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 21 August 2018 2
Slide 5: Review of operations
Review of operations Page • Group overview 4 • Consented land 7 • Strategic land 8 • Current trading 9 • Return of surplus capital 11 • Outlook 12 Results Presentation 21 August 2018 3
Slide 6: Review of operations - Group overview
Review of operations - Group overview • Continued growth in output - 278 additional legal completions • 13% increase in underlying operating profits to £518.2m • Pre working capital cash inflows increased 12% to £529.3m • Return on average capital employed of 53.8% - 14% improvement year on year H1
Slide 7: Review of operations - Group overview
Review of operations - Group overview • Strong UK wide sales network maintained • Group’s regional structure strengthened – Suffolk opened in January 2018 • Affordable family housing − 39% of private sales priced below £200,000 − c. 92% of sales are traditional house types • Competitive mortgage mar
Slide 8: Review of operations - Group overview
Review of operations - Group overview Product Profile - 6 months ended 30 June 2018: Unit Completions Average selling Average price Plots owned and Plot count completions change price change under control change 3,218 (0%) £195,224 + 5% 38,899 (1%) Persimmon North 40% 38% 2,590 + 8% £258,202 + 3% 32
Slide 9: Review of operations - Consented land
Review of operations - Consented land • Disciplined land market continues to offer good quality opportunities − owned plot cost to revenue ratio of 13.5% − ex-strategic land content within consented land bank at c. 50% • Total plots owned and under control at 101,445 (Dec 2017: 98,445) − represents
Slide 10: Review of operations - Strategic land
Review of operations - Strategic land • Long term returns supported by conversion of Strategic interests acquired during strategic land 2018 • H1 2018 conversion represents 40% of total plot Strategic sites pulled through during 2018 consumption • 3,212 plots successfully converted in the year over
Slide 11: Review of operations - Current trading
Review of operations - Current trading • Markets continue to be supportive: − year to date private sales rate of 0.76 in line with our expectations − cancellation rates remain at historically low levels • Site activity: − pressures on cost and availability in the supply chain remain − greater use of
Slide 12: Review of operations - Current trading
Review of operations - Current trading • Strong forward order book moving into the second half of the year Half Year Forward Sales Units ASP Revenue June 2018 9,340 £179,879 £1,680.1m June 2017 8,946 £179,179 £1,602.9m Movement +4% 0% +5% Current Forward Sales (inc. 7 w eeks post half year) Units AS
Slide 13: Review of operations - Return of surplus capital
Review of operations - Return of surplus capital • 125p per share, £388.5m, paid 29 March 2018 • 110p per share, £343.8m, paid 2 July 2018 Paid 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
Slide 14: Outlook - Overall market
Outlook - Overall market • Confidence in UK economy remains cautious but resilient - uncertainties surround post Brexit trading arrangements • Lenders continue to support the market with disciplined lending and attractive mortgage offers • Continued strong employment trend • Sentiment may change in
Slide 15: Outlook - Operational priorities
Outlook - Operational priorities • Continue to invest in our sales network and teams across the UK • Bring new land into production as promptly as possible • Increased utilisation of standard house types • Expand off-site manufacturing capabilities • Continued selective investment in new high qualit
Slide 16: Financial review
Financial review Page • Trading overview 15 • Operating profit bridge 16 • Cost recoveries 17 • Operating efficiency 18 • Land holdings at 30 June 2018 19 • Balance sheet 20 • Cash generation 21 • Underlying operating profit and cash flow 22 • Cash generation through cycle 23 • Capital return consid
Slide 17: Financial review - Trading overview
Financial review - Trading overview • Strong trading performance supporting further growth in profits Underlying trading (adjusted for goodw ill im pairm ent) H1 2018 H1 2017 Total % of revenue Total % of revenue New housing revenue £1,742.0m- £1,662.2m Cost of sales: - land cost (£262.1m) (15.0%) (
Slide 18: Financial review - Operating profit bridge
Financial review - Operating profit bridge • Disciplined growth and land replacement, together with good cost control are key drivers Results Presentation 21 August 2018 16
Slide 19: Financial review - Cost recoveries
Financial review - Cost recoveries • Gross margin of 32.4% - increased 190bps over H1 2017 • Land recovery savings from opening new outlets - 120bps margin gain • Build and direct cost control contributing to 70bps improvement in margin • Gross profit per unit sold increased 7.6% to £70,013 Per plot
Slide 20: Financial review - Operating efficiency
Financial review - Operating efficiency • Underlying operating margin increased 210bps to 29.7% • Operating profit per unit increased 8.9% to £64,193 2018 2017 2017 2017 H1 FY H2 H1 Gross margin 32.4% 31.3% 32.1% 30.5% Operating expenses * (2.9%) (3.4%) (3.5%) (3.3%) Other operating income 0.2% 0.3%
Slide 21: Financial review - Land holdings at 30 June 2018
Financial review - Land holdings at 30 June 2018 • Cost to revenue percentage of owned & controlled plots of 13.9% (Dec 17: 13.7%) Number Number Number Anticipated Average Cost to Cost to of plots of plots of plots ave. revenue plot cost revenue revenue Dec 2017 Jun 2018 Change Jun 2018 Dec 2017 Plo
Slide 22: Financial review - Balance sheet
Financial review - Balance sheet • Future growth supported by further investment in good quality land opportunities − £343m land payments (including land creditors) in year - total land investment of £2.13bn (Dec 2017: £2.01bn) − beneficial deferred terms secured - land creditors of £611m (Dec 2017:
Slide 23: 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 2018 + 296.3 + 700 + 650 2017 + 806.3 + 519.3 + 287.0 + 600 + 550 2016 + 684.3 + 450.2 + 234.1 + 500 + 450 20
Slide 24: Financial review - Underlying operating profit and cash flow
Financial review - Underlying operating profit and cash flow • Maximising cash efficiency and strong capital discipline through the housing cycle remains a strategic priority 600 550 60.4 500 112.3 450 400 529.3 350 523.8 300 250 473.0 £m 438.5 200 150 362.0 100 50 - (50) (67.1) (79.8) (132.9) (100)
Slide 25: Financial review - Cash generation through cycle
Financial review - Cash generation through cycle 800 HALF YEARLY AVERAGE CASH GENERATION PRE LAND EXPENDITURE: £507M 700 600 • Optimal capital structure to be 500 400 maintained through disciplined £m £752m £656m 300 £549m £494m £623m £539m £628m £639m land and WIP investment 200 £419m £412m £418m £
Slide 26: Financial review - Capital return considerations
Financial review - Capital return considerations • Annual working capital cycle and reinvestment cash requirements are primary considerations • Aim to operate at optimal scale across all regional markets • Capital returns include two elements − scheduled return of surplus capital i.e. 110p per share
Slide 27: Financial review - 2012 LTIP
Financial review - 2012 LTIP • 40% of options vested on 31 December 2017 (9.2m options) • Net settlement of these vested options on exercise - 4.0m shares issued to date with £54m payment made to HMRC during the first half of the year and a further £31m paid in July • 1.8m options remain to be exerc
Slide 28: Summary
Summary • Strong performance through the first half of 2018 • Financial position provides excellent platform for investment to meet demand • Remain focused on creating sustainable communities across the UK • Ability to react quickly to changes in market conditions • Strong capital disciplines creati
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 - Trading performance - Business split − Appendix 5 - Trading performance - Divisional split − Appendix 6 - Analysis of unit sales
Slide 30: Appendix 1: Financial record - Income Statement
Appendix 1: Financial record - Income Statement 2016 2016 2017 2017 2018 H1 FY H1 FY H1 Unit completions 7,238 15,171 7,794 16,043 8,072 New housing revenue £1,489.3m £3,136.8m £1,662.2m £3,422.3m £1,742.0m Average Selling Price £205,762 £206,765 £213,262 £213,321 £215,813 Operating profit * £354.5m
Slide 31: Appendix 1: Financial record - Balance Sheet
Appendix 1: Financial record - Balance Sheet 2016 2016 2017 2017 2018 H1 FY H1 FY H1 Shareholders' funds £2,343.8m £2,737.4m £2,711.0m £3,201.6m £2,836.3m Cash £462.0m £913.0m £1,120.4m £1,302.7m £1,154.6m Net asset value per share 760.3p 887.3p 878.4p 1036.6p 906.3p Work in progress £587.4m £617.2m
Slide 32: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss 2018 2017 2017 H1 H1 Change FY Unit completions 8,072 7,794 + 278 16,043 New housing revenue £1,742.0m £1,662.2m + £79.8m £3,422.3m Operating profit * £518.2m £459.4m + £58.8m £966.1m Operating margin - New housing * 29.7% 27.6% + 2.1% 28.2% Net finance income (
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 16 H2 16 H1 17 H2 17 H1 18 H1 16 H2 16 H1 17 H2 17 H1 18 H1 16 H2 16 H1 17 H2 17 H1 18 North Division South Division Partnerships Appendix 3 Results Presentation 21 Augu
Slide 34: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split 2018 2017 New housing H1 H1 Change No. No. Units Persimmon Core 5,808 5,630 + 3% Charles Church 769 900 (15%) Partnerships 1,495 1,264 + 18% Total 8,072 7,794 + 4% £ £ Average Selling Price Persimmon Core 223,308 213,982 + 4% Charles Church 355,574 34
Slide 35: Appendix 4: Trading performance - Business split
Appendix 4: Trading performance - Business split 2018 2017 New housing H1 H1 Change £m £m Gross Profit Persimmon Core 434.8 383.8 + 13% Charles Church 96.6 95.4 + 1% Partnerships 33.7 28.1 + 20% Total 565.1 507.3 + 11% Gross Margin Persimmon Core 33.5% 31.9% + 1.6% Charles Church 35.3% 30.5% + 4.8%
Slide 36: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2018 New housing Units Average Sale Annual average Plots owned and No. Price (£) price change under control Yorkshire 546 172,465 + 5% 6,572 Scotland 816 179,580 (2%) 7,733 North West 495 176,720 + 4% 5,986 North East 626 176,835 + 4% 10,819
Slide 37: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2018 New housing Units Average Sale Annual average Plots owned and No. Price (£) price change under control Shires 1,136 249,508 + 1% 14,644 Western 1,029 214,681 + 2% 14,211 Southern 644 265,142 + 7% 7,932 Wales 491 166,424 + 1% 6,090 Persi
Slide 38: Appendix 5: Trading performance - Divisional split
Appendix 5: Trading performance - Divisional split 30 June 2018 New housing Units Average Sale Plots owned and No. Price (£) under control Charles Church 987 307,313 12,168 30 June 2017 1,095 309,102 12,155 Change (10%) (1%) + 0% Appendix 5 - 3 of 3 Results Presentation 21 August 2018 36
Slide 39: Appendix 6: Analysis of unit sales
Appendix 6: Analysis of unit sales By Price Band (Private) By House Type (All) 31% 32% Detached Over £250,000 35% 36% 27% Semi-detached 23% 29% £200,000 to £249,999 25% 15% Townhouse 28% ' 28% £150,000 to £199,999 25% 25% Apartment 8% 17% Less than £150,000 2% Bungalow 14% 0% 0% 10% 20% 30% 40% 50%
Slide 40: Appendix 6: Analysis of unit sales - Product mix
Appendix 6: Analysis of unit sales - Product mix 0% 1% 1% 1% 1% 1% 0% 2% 1% 1% 100% 8% 7% 8% 8% 8% 13% 10% 12% 10% 90% 25% 80% 25% 27% 28% 28% 28% 24% 26% 29% 29% 70% 15% 60% 29% 50% 29% 26% 27% 28% 27% 29% 26% 25% 27% 40% 30% 20% 37% 37% 35% 36% 36% 36% 35% 33% 34% 31% 10% 0% 6mths to June 6mths to
Slide 41: Appendix 6: Analysis of unit sales - Price range
Appendix 6: Analysis of unit sales - Price range 100% 90% 19% 23% 24% 29% 29% 31% 32% 33% 36% 80% 70% 23% 21% 20% 60% 21% 22% 23% 23% 25% 25% 50% 30% 40% 33% 32% 29% 29% 29% 28% 30% 26% 25% 20% 28% 23% 24% 10% 19% 20% 19% 17% 16% 14% 0% 6mths to June 6mths to 6mths to June 6mths to 6mths to June 6mt
Slide 42: Appendix 7: Balance Sheet
Appendix 7: Balance Sheet 2018 2017 2017 H1 H1 Change FY Work in progress £749.6m £676.1m + £73.5m £723.9m Land £2,132.3m £1,970.8m + £161.5m £2,010.6m Land creditors £611.4m £487.3m + £124.1m £567.3m Part exchange stock £45.8m £32.2m + £13.6m £45.2m Shared equity debt £104.0m £132.7m (£28.7m) £117.
Slide 43: Appendix 8: Cash flows
Appendix 8: Cash flows H1 18 H1 17 Change £m £m Operating cash (before working capital movements) 529.3 473.0 +12% Investment in working capital: Increase in gross land (117.8) (22.5) Increase / (Decrease) in land creditors 39.0 (72.4) Net land movement (78.8) (94.9) Increase in WIP, part exchange a
Slide 44: Appendix 9: Mortgage approvals for house purchase
Appendix 9: Mortgage approvals for house purchase 150 Average monthly approvals since beginning of 1993: 81,120 Approvals - Volume ('000) 100 Dec 2013: 72,800 Dec 2015: Dec 2017: 71,000 61,200 Dec 2009: 59,000 Dec 2011: 52,300 Dec 2016: Jun 2018: Dec 2014: 50 68,000 65,600 60,100 Dec 2012: Dec 2010:
Slide 45: Appendix 10: New housing starts
New Housing Starts ('000) 25 50 75 0 100 125 150 175 200 Source: NHBC Housing Market Report (July 2018) Results Presentation 21 August 2018 Annual Housing Starts (2005-2017) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 New Housing Starts ('000) 43 10 12 14 16 18 0 2 4 6 8 Appendi
Slide 46: 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