Persimmon PLC · LSE:PSN
Persimmon — FY2023 Earnings Presentation
41 slides from Persimmon's earnings presentation, Mar 12, 2024
Slide 1: Navigating the Downturn; Unlocking Future Potential
NAVIGATING THE DOWNTURN; UNLOCKING FUTURE POTENTIAL Full Year Results Presentation 12 March 2024
Slide 2: Successfully navigated a challenging market
Successfully navigated a challenging market Robust performance while investing for growth Owned land with Customer satisfaction NHBC Reportable Items Net private sales rate detailed planning per outlet per week +7% 92.9% 0.28 0.58 Completions Operating margin Net cash Current private forward sales 9
Slide 3: Mike Smith, Group Financial Controller
Mike Smith Group Financial Controller
Slide 4: Navigating a challenging market backdrop
Navigating a challenging market backdrop 2023 2022 Change New home legal completions 9,922 14,868 (33%) Average selling price £255,752 £248,616 + 3% New housing revenue £2,537.6m £3,696.4m (31%) Gross profit1 £520.1m £1,142.5m (54%) Gross margin – New housing 2 20.5% 30.9% (10.4%) Operating profit 3
Slide 5: Protecting margins whilst investing in the business
Protecting margins whilst investing in the business Net impact of HPI Impact of sales Sales incentives & 2022 and build cost inflation rate reduction Mix effect PD/HA marketing costs One-offs 2023 Gross margin 30.9% 26.1% 24.0% 23.4% 21.2% 20.5% 20.5% Gross profit Build and direct cost Land cost VOL
Slide 6: Delivering homes that are affordable for our customers
Delivering homes that are affordable for our customers 2023 2022 Change Partnerships completions 23% of total completions Legal completions compared with 18% in 2022 Private 7,681 12,174 (37%) 31% of private completions to first-time buyers down Partnerships 2,241 2,694 (17%) from 42% in 2022 To
Slide 7: Maintained high quality land investment through disciplined approach
Maintained high quality land investment through disciplined approach Assumed Cost to Number of plots average revenue 1 Average plot cost assumed revenue 1 Plots owned with detailed planning 38,443 £268,248 £34,312 12.8% Plots owned proceeding to planning 28,299 £276,979 £27,367 9.9% Total owned 66,7
Slide 8: Good quality land portfolio, with industry-leading embedded margins
Good quality land portfolio, with industry-leading embedded margins High levels of confidence over the quality of Land plots by gross margin (as at 31 December 2023) our land holdings 45,000 Industry-leading embedded gross margins of 37,723 29% in owned land holdings % of owned land holding Im
Slide 9: Continued strong focus on disciplined cash deployment
Continued strong focus on disciplined cash deployment £m Utilisation £398m of net cash spend on land in 3 IAS2 (107) 2023 (including £253m settlement of land creditors and £28m of land (309) 297 Net decrease in land Net land investment creditors receipts), 38% lower YoY 2024 year-end cash expect
Slide 10: Maintaining our balance sheet strength
Maintaining our balance sheet strength 2023 2022 Change Net asset value per share 1,070p Land £2,104m £2,092m +£12m Average month end cash position of c.£300m Work in progress £1,431m £1,264m +£167m during 2023 Land creditors £372m £473m (£101m) 4,170 EUs of build at the end of 2023, up 2% Net
Slide 11: Clear priorities for capital allocation support both growth and returns
Clear priorities for capital allocation support both growth and returns Strong balance sheet and low leverage Maintain a strong balance sheet through the cycle Organic growth Investment in existing sites and new sites to grow the number of outlets Sustainable ordinary dividend Well covered by profit
Slide 12: 2024 financial outlook
2024 financial outlook 2023 2024 H1/H2 completion weighting in line with 2023 Volume (homes) 9,922 10,000-10,500 Net finance income/(expense) £5m (£15m)-(£20m) H1 2024 margin will be impacted by Tax rate 27.4% 29.0% - Lower ASPs Net land spend 1 £398m £300m-£500m - Mix Net cash £420m £0-£200m -
Slide 13: Dean Finch, Group Chief Executive
Dean Finch Group Chief Executive
Slide 14: Five clear priorities that continue to build a stronger business
Five clear priorities that continue to build a stronger business in a changing market 01 02 03 04 05 Build quality Reinforcing Disciplined Industry- Supporting trust growth leading sustainable financial communities performance Positioning the business for a return to growth 14 Full Year Results 2023
Slide 15: Build quality
Build quality A need for change has produced the highest quality ever Significant improvement in quality over the past few years driven by ‘The Persimmon Way’ delivering results: - 58% improvement in RIs since 2019; moved from bottom to 6th vs. peers NHBC RIs1 Investment in and training of peopl
Slide 16: Reinforcing trust
Reinforcing trust A need to change has delivered five-star homes consistently 8-week HBF customer satisfaction Substantial investment in customer service Moved from being a 3-star builder to a strong 5-star builder Marketing function created from scratch Sales – investment in people and digi
Slide 17: Disciplined growth: high quality land investment
Disciplined growth: high quality land investment A need to change has transformed our planning approach Significant self-help - new approach to planning delivering excellent results: - New standards cost effectively raise design bar - Improved efficiency and density while delivering more attractiv
Slide 18: Industry-leading financial performance
Industry-leading financial performance Core competitive advantages position the business for a disciplined return to growth Land: Return to growth in average outlets - Reversed decline with 20-30 net new outlets planned for 2024 - Aim to get back to over 300 outlets in the medium-term - Industry-l
Slide 19: Industry-leading financial performance (2)
Industry-leading financial performance (2) A need to change has driven innovation for tomorrow’s homes Brickworks 54% of Group brick use at a saving of up to £1,800 per plot 81% - Gen4 bricks, improved aesthetics and brick strength 54% Tileworks 81% of Group roof tile use at a saving of up to £6
Slide 20: Supporting sustainable communities
Supporting sustainable communities A need to change has driven sustainability improvements Appealing to customers: Zero carbon home at Backbridge Farm - ‘Zero Bills’ trial with Octopus Energy - Follows our first zero carbon home at Germany Beck in 2022 Significant running cost savings for custom
Slide 21: Good progress on building safety
Good progress on building safety Resident safety is our key priority As of As of Identified developments 31 Dec 2023 1 Mar 2023 Signed during the period Recently made aware and under investigation 2 - - UK Government’s Self Remediation Pre-tender preparation on-going 8 21 Contract (and member of t
Slide 22: Current trading
Current trading Good progress in 2024, in line with expectations Affordability remains key issue 1 Jan Private Forward Sales Units ASP Revenue Strong product proposition 2024 1,877 £266,092 £499m - Private ASP over 20% below market average 2023 1,696 £282,113 £478m - Strengthening brand reputati
Slide 23: Fundamental long-term strengths
Fundamental long-term strengths Positioning for a return to growth; unlocking future potential Successfully navigated a challenging 2023; industry-leading margins, strong balance sheet, positioned for growth Underlying sales rate +6% at 0.53 in first ten weeks; private forward order book +4% 1
Slide 24: Persimmon: Together, we make your home
(@ Persimmon Together, we make your home
Slide 25: Appendices
Appendices (@ Persimmon Together, we make your home
Slide 26: Appendices contents
APPENDICIES 1. Quarterly trading performance 2. Underlying trading performance 3. Underlying trading per plot 4. Underlying operating profit bridge 5. Underlying P&L split by half 6. Trading performance - Brand 7. Trading performance - Divisional 8. Analysis of new home sales 9. Land holdings as at
Slide 27: Quarterly trading performance
APPENDIX 1 Quarterly trading performance 2023 Q1 Q2 H1 2023 Q3 Q4 FY 2023 Completions 1,136 3,113 4,249 1,439 4,234 9,922 Net private sales rate 0.62 0.58 0.59 0.48 0.69 0.58 First time buyers (% private completions) 38% 33% 34% 32% 26% 31% Average sales outlets 266 268 267 271 257 266 2022 Q1 Q2 H1
Slide 28: Underlying trading performance
APPENDIX 2 Underlying trading performance 2023 2022 New housing Total % of revenue Total % of revenue Revenue £2,537.6m £3,696.4m Cost of sales: land cost (£296.9m) (11.7%) (£442.3m) (12.0%) build and other direct costs (£1,720.6m) (67.8%) (£2,111.6m) (57.1%) Total cost of sales (£2,017.5m) (79.5%)
Slide 29: Underlying trading per plot
APPENDIX 3 Underlying trading per plot New housing per plot 2023 2022 Change 2023 2022 Change Revenue £255,752 £248,616 +2.9% 100.0% 100.0% Land costs (£29,920) (£29,753) +0.6% (11.7%) (12.0%) +0.3% Build and other direct costs (£173,414) (£142,024) +22.1% (67.8%) (57.1%) (10.7%) Gross profit / marg
Slide 30: Underlying operating profit bridge
APPENDIX 4 Underlying operating profit bridge £m 2022 2023 Volume ASP Gross margin Net operating decrease increase decrease expense increase Stated before legacy buildings provision charge (2023: £nil, 2022: £275.0m) and goodwill impairment (2023: £7.6m, 2022: £6.6m) 30 Full Year Results 2023
Slide 31: Underlying P&L split by half
APPENDIX 5 Underlying P&L split by half Underlying performance: H2 2023 H1 2023 H2 2022 H1 2022 New housing Unit completions 5,673 4,249 8,216 6,652 Revenue £1,448.0m £1,089.6m £2,062.7m £1,633.7m Operating profit 1 £202.3m £152.2m £565.8m £440.7m Operating margin 1 14.0% 14.0% 27.4% 27.0% Net finan
Slide 32: Trading performance - Brand
APPENDIX 6 Trading performance - Brand New housing 2023 2022 Change New housing 2023 2022 Change No. No. £m £m Units Persimmon 6,958 11,282 (38%) Gross Profit 1 Persimmon 384.3 966.8 (60%) Charles Church 723 892 (19%) Charles Church 75.6 106.3 (29%) Partnerships 2,241 2,694 (17%) Partnerships 60.2 6
Slide 33: Trading performance - Divisional
APPENDIX 7 Trading performance - Divisional 31 December 2023 31 December 2023 Annual Plots owned Annual Plots owned Average average and under Average average and under New housing Units No. Sale Price (£) price change control New housing Units No. Sale Price (£) price change control Yorkshire 645 23
Slide 34: Analysis of new home sales
APPENDIX 8 Analysis of new home sales By Price Band (Private) By House Type (All) 37% 28% Over £300,000 Detached 37% 36% 25% 30% £150,000 to £299,999 Semi-detached 25% 29% 21% 17% £200,000 to £249,999 Townhouse 22% 26% 13% 24% £150,000 to £199,999 Apartment 13% 8% Persimmon 2022 1% Persimmon 1 4% Bu
Slide 35: Land holdings at December 2023
APPENDIX 9 Land holdings at 31 December 2023 Number Number Number Anticipated Cost to ant. Cost to ant. of plots of plots of plots average Average Revenue Revenue Dec 2022 Dec 2023 change revenue plot cost Dec 2023 Dec 2022 Plots owned with detailed planning 35,860 38,443 + 2,583 £268,248 £34,312 12
Slide 36: Balance sheet – key items
APPENDIX 10 Balance sheet – key items 2023 2022 Change Work in progress £1,431.3m £1,263.9m + £167.4m Land £2,103.5m £2,091.7m + £11.8m Land creditors £372.0m £472.8m (£100.8m) Part exchange stock £114.6m £61.0m + £53.6m Shared equity loans £32.1m £36.0m (£3.9m) Net cash £420.1m £861.6m (£441.5m) Sh
Slide 37: Cash flow
APPENDIX 11 Cash flow £m H1 2023 H2 2023 FY 2023 FY 2022 Operating cash generated (before working capital movements) 155.3 204.8 360.1 1,025.5 Movement in working capital: Decrease/(increase) in gross land 2.7 (11.5) (8.8) (283.9) (Decrease)/increase in land creditors (119.9) 13.1 (106.8) 63.4 Net l
Slide 38: Cash flow generated from operations
APPENDIX 12 Cash flow generated from operations £m 1,200 118.7 900 600 1,053.8 985.8 1,025.5 874.6 300 360.1 0 (13.0) Cash generated from operating activities (275.6) (459.2) (425.7) Movement in working capital -300 Underlying operating profit -600 2019 2020 2021 2022 2023 38 Full Year Results 2023
Slide 39: Monthly mortgage approvals
APPENDIX 13 Monthly mortgage approvals Remain at low levels ‘0 0 0 s 120 Dec 2020: 101,200 100 Dec 2013: Dec 2015: 80 71,000 Dec 2016: Dec 2018: 72,800 68,400 64,800 60 Dec 2021: Dec 2019: 71,200 Dec 2014: Dec 2017: 60,100 Average monthly 62,000 65,900 approvals since 40 beginning of 2013: Dec 2023:
Slide 40: Net zero pathway
APPENDIX 14 Net zero pathway 31% reduction on new eco homes range 40 Full Year Results 2023
Slide 41: Disclaimer
Disclaimer Important Notice Some of the information in this document may contain projections or other forward-looking statements regarding future events or the future financial performance of Persimmon Plc and its subsidiaries (the Group). You can identify forward-looking statements by the terms suc