Final Results
Persimmon PLC
4 March 2002
4 March 2002
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2001
Highlights
* Benefits of rapid and successful Beazer integration demonstrated by pre-tax
profits* up 80% to £188.2m (2000: £104.3m)
* All margin targets for the enlarged group were exceeded, resulting in
operating margins* of 16.0% in the second half
(2000: 16.2%) and 15.2% for the full year (2000: 15.7%)
* Action taken following acquisition quickly increased Beazer's core housing
operating margins from 12.4% (first half) to 15.1% (second half)
* Core Persimmon margins reached 17.6% in the second half
* Premier Charles Church business making good progress with two new offices
opened since acquisition
* Earnings per share up 32% to 52.9p* (2000 restated: 40.2p**)
* Dividend increased by 10.5% to 13.7p per share (2000: 12.4p)
* Gearing driven down to 63% following acquisition, significantly better than
original target of 70%
* Current year reservations ahead of expectations and strong visitor levels
* excludes goodwill amortisation of £8.6m (2000: £0.3m) and reorganisation costs
of £12.8m (2000: £nil)
** earnings per share in 2000 has to be restated for the impact of FRS19
(Accounting for Deferred Taxation)
Duncan Davidson, Group Chairman, said: 'Current year sales at 1st March 2002 are
5,351 homes with sales revenue of £674 million and we are experiencing strong
demand in all our markets. The year has started very well, and we are confident
of another good result in 2002.'
John White, Group Chief Executive, said: '2001 was an exciting and successful
year. The synergy savings we set out to achieve have been accelerated and
continue to be delivered. We are looking forward with confidence to further
improvement both in the core housing division and at Charles Church.'
For further information, please contact:
Duncan Davidson, Group Chairman Edward Orlebar / Faeth Finnemore
John White, Group Chief Executive Finsbury Group
Mike Killoran, Group Finance Director Tel: 020 7251 3801
Persimmon plc
Tel: 020 7251 3801 on 4 March
Tel: 01904 642 199 thereafter
Print resolution photographs are available for media down load at
www.newscast.co.uk
CHAIRMAN'S STATEMENT
A year ago, on 14th March, 2001 Persimmon completed the acquisition of Beazer
Group plc.
As I reported last August, this acquisition was rapidly and effectively
integrated into Persimmon.
We now report our results for the 12 months to 31st December, 2001, which
include a nine and a half months contribution from the assets acquired with
Beazer.
The net pre-tax profits (before goodwill amortisation and exceptional costs) for
the year increased by 80 per cent to £188 million. (2000: £104 million).
Earnings per share (before those items) rose by 32 per cent to 52.9 pence per
share. (2000 restated: 40.2p).
A key challenge following the Beazer acquisition was to reduce our borrowings
which peaked at £820 million in early May 2001. At 31st December 2001 this had
been reduced to £496 million, representing gearing of 62.6 per cent,
significantly lower than the 70 per cent year-end gearing forecast made at the
time of the acquisition. The net cash inflow from operating activities of £326
million was in excess of the cash element of the consideration paid for the
purchase of Beazer. Interest cover (before goodwill amortisation and
exceptional costs) was 6.1 times.
This reduction in debt was achieved by very tight control over all costs,
particularly land and work-in-progress which since the acquisition has been
reduced by £290 million to £1.3 billion. Land creditors have been reduced from
£160 million at 14th March 2001 to £94 million at 31st December 2001. However,
we remained active in the land market and fully replaced the plots we sold in
the second half of 2001. We now have 52,083 plots owned and under control,
which represents a four year supply. We also control c.20,000 acres of strategic
land.
In 2001 we legally completed the sale of 12,051 homes, with a total revenue of
£1.48 billion. (2000: £740.8 million - excluding BES re-sales). The average
selling price was £122,601. (2000: £105,307). The average net pre-tax profit
per unit (before goodwill amortisation and exceptional costs) was £15,614.
(2000: £14,828). The operating margin was 15.2 per cent (before goodwill
amortisation and exceptional costs), thus already reaching the target which we
set in August. This has been achieved by continuing improvement in the margins
of the original Persimmon business, and a significant uplift in the margins of
the old Beazer operations. We are confident of an improvement in the Charles
Church margins.
We are proposing to increase our dividend by 10.5 per cent to 13.7p per share
(2000: 12.4p per share), which is covered 3.1 times. We paid an interim
dividend of 4.3p per share in October 2001 and will recommend a final dividend
of 9.4p, which will be payable on 26th April 2002 to shareholders on the
Register as at 15th March 2002.
Looking ahead in 2002, we have over 200 new developments to commence during this
year. Current year sales at 1st March 2002 are 5,351 homes with sales revenue
of £674 million. One of the main strengths of Persimmon is our wide spread of
developments across the whole country and in every price bracket. We are
currently experiencing strong demand in all these markets. Our 30 autonomously
managed but carefully monitored subsidiaries are all performing satisfactorily.
The year has started very well, and we are confident of another good result in
2002.
Geoff Grewer joined Persimmon upon its formation in 1972 and has been our
Company Secretary for 30 years. He will be retiring after the Annual General
Meeting in April. I would like to pay a special tribute to the huge
contribution Geoff has made to the growth and development of our Group. We wish
him a long and happy retirement.
2001 has been the most challenging of years for all the Persimmon team. They
have, as always, responded magnificently. I would like to thank every one of
them for all their hard work and achievements.
Duncan Davidson,
Group Chairman.
EXTRACTS FROM CHIEF EXECUTIVE'S REVIEW
The Beazer acquisition was one of the most significant events in Persimmon's 30
year history. The challenge to all our staff to ensure the success of the
acquisition was recognised at the time and was never underestimated. The
demands placed on the whole management and workforce were very clear. I was
confident that the team would rise to this challenge and it therefore gives me
great pleasure that the results for 2001 show clearly the considerable success
that has been achieved.
The action taken following acquisition, quickly increased Beazer's core housing
operating margins (before goodwill amortisation and exceptional costs) from
12.4% (30th June 2001) to 15.1% (31st December 2001). These increases have been
achieved by accelerating synergy savings, keeping a tight control of work in
progress and build costs, and adjusting pricing policies. The vast majority of
former Beazer work in progress has now been completed under our ownership and
the business is now completely integrated within the North and South divisions
with comparable margins.
NORTH DIVISION
This division completed 4,970 units during 2001 at an average selling price of
£95,819, an increase of 11% during the period. The average sales prices and
margins continue to improve with strong demand in all areas. Affordability
remains good and the outlook is promising. Land held for development at 31st
December 2001 was 21,998 plots with an average plot cost of £17,411.
Recent notable strategic land successes in Scotland and the North East will help
to ensure that the North Division continues to perform well. Our North Division
Operational Board ensures that the division continues to operate efficiently,
reacting to local issues and markets quickly, whilst taking advantage of Group
initiatives.
SOUTH DIVISION
Another excellent result has been achieved by this division with sales of £875
million on 6,608 units completed. Average selling prices during the period rose
by 9% to £132,490 per unit. The landbank has 27,916 plots at an average plot
cost of £28,920. The division continues to achieve good successes through its
strategic land portfolio, underpinning margin expectations.
CHARLES CHURCH
During 2001 this division produced 473 completions at 11% operating margins
(before goodwill amortisation and exceptional costs) at an average selling price
of £265,860. Land held for development totalled 2,169 plots at an average plot
cost of £81,148.
Despite the strength of the Charles Church brand, the business had been lacking
construction discipline and management direction in the recent years before our
acquisition. We have addressed this, management has been fundamentally
restructured and refocused and we are confident that we will see an improvement
in this business over the relative short term.
In addition to repairing the Charles Church margins we are investing in this
quality brand and have opened a further two offices. Charles Church is now
operating from six offices across England from Newcastle in the North to Exeter
in the South. We remain on course to deliver the volume expectations we have
previously indicated of c. 1,000 units per annum by 2003.
CURRENT TRADING AND OUTLOOK
We continue to concentrate on maximising profit per plot both in our core
housing business and within Charles Church. The 'Finishing Touches' scheme has
achieved good growth across the Group with the launch of the first show homes
and showrooms dedicated specifically to the selling of sales extras in a number
of locations. We expect revenues to increase further from this source. We plan
to open further similar outlets across the whole of the UK during 2002.
The group has also benefited significantly from the procurement synergies we
have secured from our increased buying power.
With the acquisition of Beazer, the business is well placed to identify and
develop both brownfield and greenfield sites across the complete range of
housing needs in locations across the UK.
We launched our City Developments operation in April 1998 to specialise in
developing apartments in the major cities across the UK. During 2001 we
achieved our target of c. 500 completions per annum, representing 4% of total
volumes, a level which we feel is appropriate for our business. We will
continue to develop mixed-use schemes and apartment schemes whilst carefully
monitoring our level of exposure to these types of developments.
Visitor levels to our show homes have remained high since the beginning of 2002.
Reservations are at very good levels, whilst selling prices move forward
steadily. All markets are strong, with the most noticeable strengthening at the
top end of the market which recovered swiftly from September 11th.
We currently have new outlets opening across the whole of the UK, ensuring that
we take advantage of the traditionally strong 'spring' market. This year has
got off to a very good start, and whilst we are confident that demand will
continue to outstrip supply, we nevertheless hope to see a more normal rate of
price movement over future months so as to ensure a regular flow of business
levels.
SUMMARY
2001 has been an exciting and successful year. The synergy savings we set out
to achieve have been accelerated and continue to be delivered. We look forward
with confidence to further improvement both in the core housing division and at
Charles Church.
Our landbank continues to be one of the strongest in the industry and is
supported by a large strategic land portfolio of c. 20,000 acres.
Our staff are well motivated with high morale. They possess the management
skills, qualities and experience to ensure that Persimmon will perform well in
whatever market conditions appear over future years. My thanks are to them all
for their effort in what has been a very challenging and satisfying year.
PERSIMMON PLC
Consolidated profit & loss account for the year ended 31 December 2001
Year to 31 Year to 31
December December
2001 2000
Note
£'000 £'000
(Restated)
Turnover 2
Continuing operations 862,976 742,164
Acquisitions 614,491 -
1,477,467 742,164
Cost of sales (1,193,954) (595,163)
Gross profit 2 283,513 147,001
Net operating expenses (79,821) (31,289)
Operating profit before goodwill amortisation and exceptional 225,115 116,011
items
Goodwill amortisation 2,6 (8,632) (299)
Exceptional integration costs (12,791) -
Operating profit
Continuing operations 143,133 115,712
Acquisitions 60,559 -
203,692 115,712
Net interest payable and similar charges (36,955) (11,696)
Profit on ordinary activities before taxation 166,737 104,016
Tax on ordinary activities (50,287) (31,195)
Profit on ordinary activities after taxation 116,450 72,821
Dividends (38,014) (22,635)
Retained profit 78,436 50,186
Basic earnings per share 7
Before exceptional items (net of tax) and goodwill 52.9p 40.2p
After exceptional items and goodwill 46.0p 40.1p
Diluted earnings per share 7
Before exceptional items (net of tax) and goodwill 52.4p 40.0p
After exceptional items and goodwill 45.6p 39.8p
Dividend per share 13.7p 12.4p
No separate statement of total recognised gains and losses has been prepared as
the group has no recognised gains or losses other than the profit for the year
as stated above. However, there has been a gain of £1,229,000 since the last
Annual Report relating to a prior year adjustment (see note 9).
PERSIMMON PLC
Consolidated balance sheet as at 31 December 2001
31 December 31 December
2001 2000
Note £'000 £'000
(Restated)
Fixed assets
Tangible assets 25,626 12,135
Intangible assets 6 203,611 3,277
229,237 15,412
Current assets
Stocks and work in progress 1,352,943 693,932
Debtors 117,397 67,131
Cash at bank and in hand 4 20,717 11,654
1,491,057 772,717
Creditors due within one year
Borrowings 4 (67,040) (11,699)
Other creditors (387,905) (205,685)
(454,945) (217,384)
Net current assets 1,036,112 555,333
Total assets less current liabilities 1,265,349 570,745
Creditors due after more than one year
Borrowings 4 (450,095) (116,105)
Other creditors (21,785) (35,005)
(471,880) (151,110)
Net assets 793,469 419,635
Capital and reserves
Called up share capital 27,686 18,288
Share premium account 205,567 201,304
Merger reserve 281,344 3,123
Revaluation reserve 1,242 1,242
Profit and loss account 277,630 195,678
Equity shareholders' funds 793,469 419,635
Net assets per share 286.6p 229.5p
PERSIMMON PLC
Consolidated cash flow statement for the year ended 31 December 2001
Year to Year to
31 December 31 December
Note 2001 2000
£'000 £'000
Net cash inflow from operating activities 3 325,910 61,149
Return on investments and servicing of finance
Interest received 263 36
Interest paid (34,469) (11,536)
Interest paid on finance leases (327) (334)
(34,533) (11,834)
Taxation
UK corporation tax paid (50,175) (28,189)
Capital expenditure
Purchase of tangible fixed assets (5,148) (3,818)
Sale of tangible fixed assets 4,178 693
(970) (3,125)
Acquisitions and disposals
Acquisition of businesses and subsidiaries (325,389) (19,078)
Net overdrafts acquired with subsidiaries (53,137) -
(378,526) (19,078)
Equity dividends paid (25,327) (18,735)
Net cash outflow before management of liquid resources and (163,621) (19,812)
financing
Financing
Bank loans advanced 160,000 120,000
Repayment of bank loans (44,993) (127,893)
Expenses in connection with share issue (4,000) -
Exercise of share options 8,287 658
Repayment of principal under finance leases (1,951) (2,155)
Net cash inflow/(outflow) from financing 117,343 (9,390)
Decrease in cash 4,5 (46,278) (29,202)
PERSIMMON PLC
Notes
1. Accounting policies
The financial information has been prepared on the basis of the accounting
policies set out in the financial statements for the year ended 31 December
2000. In addition, the group has adopted Financial Reporting Standard ('FRS
') 17 (Retirement Benefits) transitional arrangements and FRS 18 (Accounting
Policies) with no material impact on the groups results.
In addition the group has adopted FRS 19 (Accounting for Deferred Taxation)
this year. Full details of the impact on the group's results are set out in
note 9.
2. Cost of sales and net operating expenses
Continuing
Operations
Acquisitions Total Total
2001
2001 2001 2000
£'000 £'000 £'000 £'000
Turnover 862,976 614,491 1,477,467 742,164
Cost of sales (690,524) (503,430) (1,193,954) (595,163)
Gross profit 172,452 111,061 283,513 147,001
Net operating expenses (29,319) (50,502) (79,821) (31,289)
Operating profit before goodwill
amortisation and exceptional items 143,493 81,622 225,115 116,011
Goodwill amortisation (360) (8,272) (8,632) (299)
Exceptional integration costs - (12,791) (12,791) -
Operating Profit 143,133 60,559 203,692 115,712
Goodwill amortisation of £8,272,000 and exceptional integration costs of
£12,791,000 relate to the acquisition of Beazer Group plc and its integration
into the group (see note 6).
3. Reconciliation of operating profit to net cash inflow from operating activities
Year to Year to
31 December 31 December
2001 2000
£'000 £'000
Operating profit 203,692 115,712
Depreciation charge 4,732 3,236
Amortisation of goodwill 8,632 299
(Profit)/loss on sale of tangible fixed assets (216) 26
LTIP charge 1,827 765
Decrease/(increase) in stocks and work in progress 227,737 (92,141)
Increase in debtors (4,071) (16,184)
(Decrease)/increase in creditors (116,423) 49,436
Net cash inflow from operating activities 325,910 61,149
4. Analysis of net debt
At 1 January Cash flow and Acquisitions At 31 December
2001 lease financing (excluding
cash and
overdrafts) 2001
£'000 £'000 £'000
£'000
Net cash:
Cash at bank and in hand 11,654 9,063 - 20,717
Bank overdrafts (3,806) (55,341) - (59,147)
Net cash per cash flow statement: 7,848 (46,278) - (38,430)
Debt and lease financing:
Bank loans - (122,900) (37,100) (160,000)
US & UK senior loan notes (123,998) 7,893 (181,883) (297,988)
Finance leases (3,308) 1,644 (1,338) (3,002)
Debt and lease financing (127,306) (113,363) (220,321) (460,990)
Net Debt (119,458) (159,641) (220,321) (499,420)
Analysed as:
Cash at bank and in hand 11,654 20,717
Borrowings due within one year (11,699) (67,040)
Borrowings due after more than one (116,105) (450,095)
year
Finance leases (3,308) (3,002)
Net debt at end of period (119,458) (499,420)
5. Reconciliation of net cash flow to net debt
Year to Year to
31 December 31 December
2001 2000
£'000 £'000
Decrease in cash (46,278) (29,202)
(Increase)/decrease in debt and lease finance (113,056) 10,048
Increase in net debt from cash flows (159,334) (19,154)
New finance leases (307) (1,135)
Loans and finance leases acquired with subsidiaries (220,321) -
Increase in net debt (379,962) (20,289)
Net debt at beginning of period (119,458) (99,169)
Net debt at end of period (499,420) (119,458)
6. Acquisition
On 14 March 2001, the group acquired the entire issued share capital of
Beazer Group Plc for a total consideration of £612,484,000. The
consideration includes £284,873,000 in respect of the issue of 88,745,560
ordinary shares which, in accordance with FRS1 (Revised 1996), has been
excluded from the cash flow statement as a non-cash transaction.
This acquisition has been accounted for using the acquisition method of
accounting. After the alignment of accounting policies and other
adjustments to the valuation of assets to reflect their fair value, the fair
value of assets acquired is £403,518,000. Goodwill of £208,966,000 has been
capitalised in the consolidated balance sheet in accordance with FRS10
('Goodwill and Intangible Assets') and is being amortised over a period of 20
years. The amortisation charge in the year ended 31 December 2001 is
£8,272,000.
7. Earnings per share
The calculation of basic earnings per share after exceptional items and
goodwill is based on earnings after taxation of £116,450,000 (2000 restated:
£72,821,000) and 253,119,550 ordinary shares (2000: 181,732,010) being the
weighted average number of ordinary shares in issue during the period.
Diluted earnings per share after exceptional items and goodwill is
calculated by dividing earnings after taxation by the weighted average
number of ordinary shares in issue for the period, adjusted for the dilutive
effect of shares held under unexercised options. The weighted average number
of ordinary shares so calculated is 255,591,155 (2000: 182,819,352).
The calculations of basic and diluted earnings per share before exceptional
items and goodwill are based on earnings after taxation of £134,010,000
(2000 restated: £73,120,000).
8. Pension and life assurance schemes
Financial Reporting Standard 17 (Retirement Benefits) and the relevant
transitional rules have been adopted for the first time for the year ended
31 December 2001, with no effect on the group's results. The transitional rules
have introduced extensive new disclosure requirements regarding defined
benefit pension schemes.
In summary, calculation of the illustrative balance sheet figures using the
required valuation assumptions results in a market value of scheme assets of
£100.0m and a present value of scheme liabilities of £135.6m. Net of the
deferred tax asset of £10.6m, the deficit is £25.0m.
Both the Persimmon and acquired Beazer defined benefit pension schemes were
closed to new employees on 30 September 2001. A new defined contribution
stakeholder arrangement has been established. The company has made special
contributions into the Persimmon scheme of £6m in 2000 and £7m into the acquired
Beazer scheme in 2001, which are reflected in the illustrative balance sheet
figures above.
The company continues to review the basis upon which it supports future
pension provision in the light of the significant changes which have already
occurred and are anticipated to occur within the market place.
9. Prior year restatement
The group has adopted FRS 19 (Accounting for Deferred Taxation) this year.
This has resulted in the recognition of a deferred tax asset arising on
timing differences of £762,000 at 31 December 2000 (deferred tax liability of
£467,000 as previously stated). Profit after tax has decreased by £45,000
in the year ended 31 December 2001 as a result of this change in accounting
policy (2000: a decrease of £1,005,000 in profit after taxation).
10. The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2001 or 2000 but is
derived from those accounts. Statutory accounts for the year ended 31 December
2000 have been delivered to the Registrar of Companies, and those for the
year ended 31 December 2001 will be delivered following the company's annual
general meeting. The auditors have reported on those accounts; their reports
were unqualified and did not contain statements under section 237(2) or (3)
of the Companies Act 1985.
11. The annual report will be posted to shareholders on 25 March 2002. Copies
of the annual report will also be available from the Company Secretary,
Persimmon plc, Persimmon House, Fulford, York, YO19 4FE.
Further information on the Group can be found on the Persimmon website at:
www.persimmonhomes.com
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