Persimmon Regulatory News (PSN)

21 Aug 2007 07:00

Persimmon PLC21 August 2007 21 August 2007 RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 Highlights • Record pre-tax profits up 9.8% to £281.1m (H1 2006: £256.1m*) • Interim dividend increased by 34% to 18.5p (H1 2006: 13.8p) • Earnings per share up 7.9% to 65.5p (H1 2006: 60.7p*) • Operating profit of £315.3m showing a margin of 20.8% (H1 2006: £293.7m* with a margin of 18.9%*) • Completions 8,002 units (H1 2006: 8,226) • Gearing reduced to 29% from 50% at H1 2006 • Landbank increase to 82,145 plots (December 2006: 80,085) • Current forward sales for H2 2007 c. £1.35bn - c. 85% sold up for 2007 *stated after charging exceptional reorganisation costs of £15.4million John White, Group Chairman said: "Persimmon continues to achieve industry high margins, supported by an excellentlandbank, good forward sales and an experienced management team with a clearfocus on cash management and continued improvement of shareholder returns. " For further information, please contact:John White, Group ChairmanMike Farley, Group Chief ExecutiveMike Killoran, Group Finance Director Persimmon plcOn 21st August 2007: +44 (0) 20 7153 1570After this date: Tel: +44 (0) 1904 642 199 M: CommunicationsEdward Orlebar / Charlotte McMullenTel: +44 (0) 20 7153 1523 / 1549 There will be an analyst briefing at 9am today at the London Stock Exchange anda webcast of today's analyst presentation will be available onwww.persimmonhomes.com by 2pm today. CHAIRMAN'S STATEMENT INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 Once again I am pleased to announce another set of record interim results forPersimmon for the six months ended 30 June 2007. Results Pre-tax profits increased by 9.8% to £281.1 million (H1 2006: £256.1 million).Comparative figures for 2006 are stated after charging exceptionalreorganisation costs of £15.4 million. Basic earnings per share increased by7.9% to 65.5p. During the period we completed 8,002 units (H1 2006: 8,226) at an averageselling price of £189,255 (H1 2006: £188,427). Turnover was £1,514 million (H12006: £1,550 million). Operating profit increased to £315.3 million representing a margin of 20.8% (H12006: £293.7 million: 18.9%). This improvement in operating margin reflects theprogress that has been made in the delivery of the anticipated level of synergysavings and tight control of build costs which more than offset the effects ofthe challenging market conditions. On the basis of this strong performance we are increasing the interim dividendthis year to 18.5p, which represents a 34% increase over the 13.8p per shareinterim dividend paid in 2006. This increase includes a rebalancing of the fullyear dividend payment as well as an expected total dividend increase for 2007which will be not less than 10%. Therefore the total dividend for 2007 will benot less than 51.2p, which would represent an annual compound growth rate individend per share of c. 28% over the last 5 years. The interim dividend will bepayable on 19 October 2007 to shareholders on the Register on 31 August 2007. Total net borrowings at 30 June 2007 were £646 million representing a gearinglevel of 29% (30 June 2006: 50%). We generated a strong pre-dividend freecash inflow of £61 million after investing a further net £181 million in workingcapital. Net assets per share have increased by 18% since June 2006 to 730.1p. Interest cover remained healthy at 9.2 times whilst the net interest cost forthe period was £34.2 million (H1 2006: £37.6 million). Return on averagecapital employed remained strong at 22.9% (H1 2006: 24.4%). Business Overview During the last six months we have continued to apply the necessary basicdisciplines of our business to ensure that we achieve the best possible results.This requires investment in land at sensible prices, maximisation of salesrevenues through careful planning and marketing, and the application of firmcontrol of build costs. All divisions have been impacted by the industrydifficulties encountered in opening new developments due to delays in obtainingdetailed planning consents. Despite this, all our divisions have shownunderlying price growth, and have traded well albeit with some regional andlocal differences. The North Division once again had a mixed experience. Scotland performed verywell while some parts of the North of England experienced a more subdued market.The Division completed 1,896 units (H1 2006: 1,926 units) at an average sellingprice of £175,171 (H1 2006: £169,432). A change of mix was partly responsible for the 6.6% increase in average sellingprices in Scotland, where underlying price per square foot rose by c. 5%. In theNorth of England underlying price growth was more muted at c. 2%. Marginsremained robust. The Central Division performed well completing 2,982 units (H1 2006: 2,910units) at an average selling price of £173,834 (H1 2006: £169,794) withunderlying price per square foot increasing by c. 3%. We achieved furtherimprovement in margins in this Division. Regionally, Thames Valley and Essexperformed well, whilst the market was more challenging in some parts of theMidlands and North West. The South Division completed 1,781 units (H1 2006: 1,924 units) at an averageselling price of £182,322 (H1 2006: £189,674). The reduction in average sellingprice was largely due to a change of mix with a greater proportion of affordablehousing, underlying price per square foot increasing by c. 3%. Our continuedfocus on margin improvement delivered an increase in profitability in thisDivision. The lower level of legal completions achieved against the prior yearcomparatives is largely due to the sale of low margin Westbury stock in thefirst few months of 2006. Our South West business has performed particularlywell over recent years and we have recently opened a further business in thisarea, Persimmon Homes Severn Valley based at Bridgwater. Within the South Division, Westbury Partnerships traded very well during theperiod achieving 106 completions at an average selling price of £86,642. Theprogress that Partnerships has made so far this year will result in asignificant increase in completions in the second half and we expect to completec. 300 units for the full year (2006: 197 units). We are very confident that themodel we have implemented in this business, working closely with Space4, ourmanufacturing plant supplying factory built homes, will benefit from theGovernment's agenda to increase the number of affordable and environmentallyfriendly homes to be built each year. The launch of Persimmon Homes' Living-i collection in Greater Manchester in June2007 further demonstrated the Group's commitment to protecting the environmentwhilst responding to homebuyers' demands. Charles Church completed 1,343 units (H1 2006: 1,466 units) with marginsremaining resilient. As anticipated volumes in the period were lower, the prioryear benefiting from the legal completion of ex Westbury stock houses which weretransferred to Charles Church in January 2006. The top end of the market wasalso more difficult whilst the opening of a number of new developments in theearly months was delayed by planning. To a large extent these planning issueshave now been resolved and volumes for the second half are set to increase. Charles Church average selling price was £252,576 (H1 2006: £248,731), anincrease of 1.5%. This increase reflects the sale of a higher proportion ofsmaller homes in addition to underlying price growth of c. 2%. Land We are pleased that the Government is increasing its efforts to resolve theundersupply of new housing. There are undoubtedly many challenges to meet toachieve the necessary volume increases whilst at the same time addressing themany environmental issues. We believe it is possible to achieve both and with our broad product range and national coverage we expect Persimmon to be a majorparticipant working closely with all parties to achieve this. We have continued to replace and strengthen our landbank to ensure adequatedetailed consents are available for our business. For example we have recentlytaken our first sales on new large developments at Ashford and Gillingham. Inaddition we have recently commenced infrastructure works on several new excitingdevelopments, such as a 630 plot scheme at Salisbury and an 810 plot scheme atBridgwater. Once again we have increased our landbank. At 30 June 2007 we owned orcontrolled 82,145 plots (December 2006: 80,085) with a further 18,361 plots onwhich we had agreed terms and were proceeding to contract. In addition, wecontrol c. 22,000 acres of strategic land. This strategic land portfolio hascontinued to provide plots into our landbank and during the six months c. 5,000plots have been consented with a further c. 30,000 expected over the next 3years. This continues to provide a strong platform for our business. Outlook Sales for the second half of 2007 are ahead of the same date last year at ahealthy level of £1.35 billion (22 August 2006: £1.30 billion). Total salesactivity achieved for 2007, including legal completions to date, represent c.85% of our full year target. During the summer months the housing market is usually quieter. This has beenthe case this year. We believe that as long as current assumptions on interestrates remain intact, and employment data continues to be supportive, purchaserswill feel confident about job security. This, coupled with general confidence inthe housing market, should deliver the normal seasonal upturn in activitythroughout the Autumn selling period. We are confident that the demand for new housing will continue to support thelong term prospects for the business despite short term challenges. Persimmon continues to achieve industry high margins, supported by an excellentlandbank, good forward sales and an experienced management team with a clearfocus on cash management and continued improvement of shareholder returns. Noneof this would be possible without the commitment and efforts of all our staff. Ithank them for their continued efforts and hard work. PERSIMMON PLC Consolidated Income Statement (unaudited) Six months to Six months to Year to 30 June 30 June 31 December Note 2007 2006 2006 (Restated) (Restated) £m £m £m-------------------------------------------------------------------------------------------Revenue 1,514.4 1,550.0 3,141.9 Cost of sales (1,147.3) (1,191.4) (2,404.2)-------------------------------------------------------------------------------------------Gross profit 367.1 358.6 737.7 Other operating income 11.9 10.8 29.6Operating expenses (64.0) (60.6) (115.3)Share of results of jointly 0.3 0.3 0.7controlled entities-------------------------------------------------------------------------------------------Profit from operations before 315.3 309.1 652.7reorganisation costs Reorganisation costs - (15.4) (15.4)-------------------------------------------------------------------------------------------Profit from operations 315.3 293.7 637.3 Finance income 0.3 0.6 0.5Finance costs (34.5) (38.2) (71.1)-------------------------------------------------------------------------------------------Profit before tax 281.1 256.1 566.7 Income tax expense 3 (84.5) (77.0) (170.3)-------------------------------------------------------------------------------------------Profit after tax 196.6 179.1 396.4 (all attributable to equity holders of theparent)------------------------------------------------------------------------------------------- Earnings per share (afterreorganisation costs)Basic 5 65.5p 60.7p 133.8pDiluted 5 65.2p 60.3p 133.1p-------------------------------------------------------------------------------------------Earnings per share (beforereorganisation costs, net of relatedtax credit)Basic 5 65.5p 64.4p 137.5pDiluted 5 65.2p 64.0p 136.7p------------------------------------------------------------------------------------------- PERSIMMON PLCConsolidated Balance Sheet (unaudited) 30 June 30 June 31 December Note 2007 2006 2006 (Restated) (Restated) £m £m £m----------------------------------------------------------------------------ASSETSNon-current assetsIntangible assets 470.3 470.5 470.4Property, plant and equipment 46.5 49.3 48.9Investments 3.0 3.4 2.8Trade and other receivables 13.5 11.2 11.5Deferred tax assets 57.4 63.9 62.8---------------------------------------------------------------------------- 590.7 598.3 596.4----------------------------------------------------------------------------Current assetsInventories 3,188.8 3,016.3 2,959.9Trade and other receivables 181.3 193.9 178.7Cash and cash equivalents 7 14.1 39.3 18.9---------------------------------------------------------------------------- 3,384.2 3,249.5 3,157.5----------------------------------------------------------------------------Total assets 3,974.9 3,847.8 3,753.9----------------------------------------------------------------------------LIABILITIESNon-current liabilitiesInterest bearing loans and 7 (508.6) (816.0) (511.0)borrowingsForward currency swaps 7 (85.2) (86.6) (94.8)Deferred tax liabilities (36.6) (28.5) (25.9)Retirement benefit obligation (64.6) (91.6) (103.7)Other liabilities (110.3) (108.7) (96.8)---------------------------------------------------------------------------- (805.3) (1,131.4) (832.2)----------------------------------------------------------------------------Current liabilitiesInterest bearing loans and 7 (62.9) (50.2) (70.6)borrowingsForward currency swaps 7 (7.0) (2.8) (6.7)Trade and other payables (753.4) (726.3) (706.4)Current tax liabilities (141.8) (104.6) (106.7)---------------------------------------------------------------------------- (965.1) (883.9) (890.4)----------------------------------------------------------------------------Total liabilities (1,770.4) (2,015.3) (1,722.6)----------------------------------------------------------------------------Net assets 2,204.5 1,832.5 2,031.3----------------------------------------------------------------------------SHAREHOLDERS' EQUITYOrdinary share capital issued 30.2 29.7 29.9Share premium 233.5 230.7 233.4Own shares (5.8) (5.2) (5.1)Hedge reserve 1.0 (12.5) (4.3)Consolidation reserve 281.4 281.4 281.4Retained earnings 1,664.2 1,308.4 1,496.0----------------------------------------------------------------------------Total shareholders' equity 2,204.5 1,832.5 2,031.3---------------------------------------------------------------------------- PERSIMMON PLCConsolidated Cash Flow Statement (unaudited) Six months to Six months to Year to 30 June 30 June 31 December Note 2007 2006 2006 (Restated) (Restated) £m £m £m-------------------------------------------------------------------------------------------Cash flows from operating activities:Profit for the period 196.6 179.1 396.4 Adjustment for:Income tax expense 84.5 77.0 170.3Finance income (0.3) (0.6) (0.5)Finance costs 34.5 38.2 71.1Depreciation charge 5.0 5.0 9.6Amortisation of intangible assets 0.1 0.1 0.3Share of results of jointly controlled (0.3) (0.3) (0.7)entitiesProfit on disposal of property, plant and (0.8) (0.5) (0.7)equipmentShare-based payment charge 3.1 2.5 5.3Other non-cash items (0.1) (4.0) (8.3)-------------------------------------------------------------------------------------------Profit from operations before working 322.3 296.5 642.8capital movements Movements in working capital:(Increase)/decrease in inventories (228.9) 141.2 186.0(Increase)/decrease in trade and other (4.6) 31.2 32.0receivablesIncrease/(decrease) in trade and other 52.1 (51.8) (67.8)payables-------------------------------------------------------------------------------------------Net cash from operations 140.9 417.1 793.0 Interest paid (30.3) (27.6) (57.6)Interest received 0.3 0.6 0.5Tax paid (49.0) (62.2) (146.8)-------------------------------------------------------------------------------------------Net cash from operating activities 61.9 327.9 589.1 Cash flows from investing activities:Acquisition of subsidiary - (508.5) (508.5)Repayment of loan by jointly controlled 0.1 - 1.0entitiesPurchases of property, plant and equipment (4.9) (5.3) (9.6)Proceeds from sale of property, plant and 4.1 1.1 2.6equipment-------------------------------------------------------------------------------------------Net cash used in investing activities (0.7) (512.7) (514.5) Cash flows from financing activities:Repayment of borrowings (11.9) (237.1) (265.8)Drawdown of loan facilities - 487.3 257.3Finance lease principal payments (0.7) (0.5) (1.5)Exercise of share options 0.4 1.0 3.2Dividends paid (58.2) (40.0) (59.6)-------------------------------------------------------------------------------------------Net cash (used in)/from financing (70.4) 210.7 (66.4)activities-------------------------------------------------------------------------------------------(Decrease)/increase in net cash and cash (9.2) 25.9 8.2equivalents 6-------------------------------------------------------------------------------------------Net cash and cash equivalents at 15.9 7.7 7.7beginning of period-------------------------------------------------------------------------------------------Net cash and cash equivalents at end of 6.7 33.6 15.9period 7------------------------------------------------------------------------------------------- PERSIMMON PLCConsolidated Statement of Recognised Income and Expense (unaudited) Six months to Six months to Year to 30 June 30 June 31 December Note 2007 2006 2006 £m £m £m -------------------------------------------------------------------------------------------Effective portion of changes in fair value 7.6 (18.7) (7.0)of cash flow hedgesActuarial gains/(losses) on defined 35.5 (16.2) (4.7)benefit pension schemesTaxation on items taken directly to equity (12.9) 10.5 3.5-------------------------------------------------------------------------------------------Net income/(expense) recognised directly 30.2 (24.4) (8.2)in equity Profit for the period 196.6 179.1 396.4-------------------------------------------------------------------------------------------Total recognised income for the period 226.8 154.7 388.2(all attributable to equity holdersof the parent)------------------------------------------------------------------------------------------- Notes (unaudited) 1. Accounting Policies This interim information has been prepared by applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2006, except for the following changes: Other operating income Other operating income comprises profits from the sale of land holdings and ground rents, rent receivable, and other incidental sundry income. Deposits New property deposits and on account contract receipts are held within current trade and other payables until the legal completion of the related property or cancellation of the sale. Financial Instruments The Group adopted IFRS 7 (Financial Instruments: Disclosures) on 1 January 2007. The standard serves to consolidate and expand upon existing disclosure requirements, further details of which will be presented in the financial statements for the year ending 31 December 2007. Adoption of IFRS 7 has had no impact on the income statement or balance sheet. 2. Restatement During the period the Group has amended the disclosure of other operating income and deposits received from customers, which has had no impact on gross profit, profit from operations or net assets. For enhanced clarity, other operating income is now separately disclosed from operating expenses on the face of the income statement. Other operating income for the six months ended 30 June 2006 amounted to £10.8m (year ended 31 December 2006: £29.6m). New property deposits and on account contract receipts previously classified as a reduction in inventories are now disclosed within current trade and other payables. It was deemed that deposits should follow the principles applicable to deferred income. Deposits received at 30 June 2006 amounted to £43.1m (31 December 2006: £49.1m). 3. Taxation Taxation has been calculated at 30.0% of profit before taxation (six months ended 30 June 2006: 30.0% and year ended 31 December 2006: 30.0%). This is the estimated effective tax rate for the year ending 31 December 2007. 4. Dividends The final dividend for 2006 of 32.7p (2005: 19.0p) was approved by shareholders during the period and a charge of £97.7m (2005: £55.9m) was taken to reserves. The directors propose an interim dividend of 18.5p (2006: 13.8p). No charge has yet been made for this dividend in accordance with IAS 10 (Events After the Balance Sheet Date). 5. Earnings Per Share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period, excluding those held in the Employee Share Ownership Trust and the Employee Benefit Trust, which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares from the start of the accounting period. The Company has only one category of dilutive potential ordinary shares: those share options and awards granted to directors and employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. Diluted earnings per share is calculated by dividing earnings by the diluted weighted average number of shares. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below: Earnings Weighted Earnings Earnings Weighted Earnings Earnings Weighted 30 June average before 30 June average before 31 average 2007 number of reorganisation 2006 number of reorganisation December number of ordinary costs* ordinary costs* 2006 ordinary £m shares 30 June £m shares 31 December shares 30 June 2006 30 June 2006 31 December 2007 £m 2006 £m £m 2006----------------------------------------------------------------------------------------------------------- For basic earnings 196.6 300,016,777 190.0 179.1 295,189,559 407.3 396.4 296,155,856per share Options and - 1,723,271 - - 1,776,837 - - 1,762,783awards ----------------------------------------------------------------------------------------------------------- For diluted earnings 196.6 301,740,048 190.0 179.1 296,966,396 407.3 396.4 297,918,639per share ----------------------------------------------------------------------------------------------------------- * Reorganisation costs net of related tax credit of £4.5m 6. Reconciliation of Net Cash Flow to Net Debt Note Six months to Six months to Year to 30 June 30 June 31 December 2007 2006 2006 £m £m £m------------------------------------------------------------------------------------ (Decrease)/increase in net cash and (9.2) 25.9 8.2cash equivalentsDecrease/(increase) in debt and finance 12.6 (263.1) 10.0lease obligations------------------------------------------------------------------------------------Decrease/(increase) in net debt from 3.4 (237.2) 18.2cash flowsNet debt acquired - (394.9) (394.9)New finance lease obligations (1.0) (0.4) (1.9)Non-cash movements 12.2 (15.6) (17.4)------------------------------------------------------------------------------------Decrease/(increase) in net debt 14.6 (648.1) (396.0)Net debt at beginning of period (664.2) (268.2) (268.2)------------------------------------------------------------------------------------Net debt at end of period 7 (649.6) (916.3) (664.2)------------------------------------------------------------------------------------ 7. Analysis of Net Debt Note 30 June 30 June 31 December 2007 2006 2006 £m £m £m-------------------------------------------------------------------------------Cash and cash equivalents 14.1 39.3 18.9Bank overdrafts (7.4) (5.7) (3.0)-------------------------------------------------------------------------------Net cash and cash equivalents 6.7 33.6 15.9Bank loans - (230.0) -US and UK senior loan notes due within one (48.6) (18.6) (48.8)yearUS, UK & EU senior loan notes due after (506.4) (584.7) (509.1)more than one yearOther loan notes due within one year (5.9) (24.8) (17.8)Forward currency swaps (92.2) (89.4) (101.5)Finance lease obligations (3.2) (2.4) (2.9)-------------------------------------------------------------------------------Net debt at end of period 6 (649.6) (916.3) (664.2)------------------------------------------------------------------------------- 8. Basis of Preparation The announcement has been prepared in accordance with the recognition and measurement criteria of IFRSs and the disclosure requirements of the Listing Rules. The figures for the half years to 30 June 2007 and 30 June 2006 are unaudited. The figures included in the Income Statement for the year to 31 December 2006, the Balance Sheet at 31 December 2006, the Cash Flow Statement for the year to 31 December 2006 and the Statement of Recognised Income and Expense for the year to 31 December 2006 are extracts from the latest published accounts, adjusted for the restatement detailed in note 2, which have been delivered to the Registrar of Companies. The report from the auditors on those accounts was (i) unqualified, (ii) did not include a reference to any matters which the auditors drew attention to without qualifying their report, and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 9. The Interim Report was approved by the Board of Directors on 20 August 2007 and is being sent to all shareholders. Further copies are available upon request from the Company Secretary, Persimmon plc, Persimmon House, Fulford, York YO19 4FE. Further information about the Group can be found on the Persimmon website at:www.persimmonhomes.com This information is provided by RNS The company news service from the London Stock Exchange