Interim Results
Persimmon PLC
27 August 2002
27 August 2002
PERSIMMON PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2002
Highlights
• Record sales, profits and earnings achieved. This represents Persimmon's twelfth consecutive six-month
increase in sales, profits and earnings since the first half of 1996.
• Profit before tax and goodwill amortisation increased by 40% to £117.2 million (2001: £83.9 million*)
including a full six-month contribution from Beazer which was acquired on 14 March 2001.
• Earnings per share (before goodwill and exceptional costs) increased 15% to 29.6p (2001: 25.7p) per
share.
• Average selling price in the period was £134,431 (2001: £119,645).
• Group operating margins (before goodwill and exceptional costs) improved to 16.4% (2001: 14.4%) with
strong increases achieved in both Core Housing and Charles Church.
• Excellent cash generation and strong balance sheet with gearing driven down to 45% (2001: 77%).
• Interim dividend up 10.5% to 4.75p per share (2001: 4.30p per share).
• Strongest ever forward sold position with sales of circa £1.62 billion already achieved in the year.
* Excludes reorganisation costs of £12.0m in 2001 relating to the acquisition of Beazer
Duncan Davidson, Group Chairman, said: 'Our consistent profit and dividend
increases have been achieved by adhering to the basic principles of good
homebuilding. Confidence in our future performance comes from the knowledge
that, not only do we have an excellent forward order book with no signs of a
slowdown in demand, but also because we have a long, well-bought land bank, a
disciplined approach to build, prudent financing and good opportunities for
growth within the existing portfolio.'
For further information, please contact:
Duncan Davidson, Group Chairman Edward Orlebar / Faeth Birch/ Jenna Littler
John White, Group Chief Executive Finsbury Group
Mike Killoran, Group Finance Director Tel: 020 7251 3801
Persimmon plc -
Tel: 020 7251 3801 on 27 August
Tel: 01904 642 199 thereafter
Photographs are available for media download from www.newscast.co.uk
CHAIRMAN'S STATEMENT
Persimmon produced another excellent result in the six months to 30th June 2002.
Pre-tax profits (before goodwill and exceptional costs) increased by 40% to
£117.2 million (2001: £83.9 million). Earnings per share (before goodwill and
exceptional costs) increased to 29.6p (2001: 25.7p) per share. We completed the
sale of 6,100 homes (2001: 5,835) with an average selling price of £134,431
(2001: £119,645). Total sales revenue was £820.0 million (2001: £698.1 million).
This performance represents the twelfth consecutive six-month period in which
profits (before goodwill and exceptional costs) have increased, with an
uninterrupted annual compound growth of 42% in profit before tax and 27% in
basic earnings per share.
Our operating margin (before goodwill and exceptional costs) of 16.4% in the
first half of 2002 further demonstrates the great success we have made of
repairing the margins which, as anticipated, were diluted following the
acquisition of Beazer in March 2001. Persimmon delivered operating profits
(before goodwill and exceptional costs) of £134.2 million (2001: £100.2 million)
in the six months. Pre-tax profit per unit (before goodwill and exceptional
costs) has increased to a record £19,219 during the period (2001: £15,614).
Our strong performance and cash generation has meant that we have further
reduced our borrowings to £392 million at 30 June 2002 (30 June 2001: £575
million). This gives a gearing level of 45% (2001: 77%). Our strong balance
sheet places us in an excellent position to take advantage of further
opportunities which may arise.
We have continued to replace and increase our landbank which now exceeds 52,500
plots, representing over 4 year's supply. The importance of holding a long
landbank has increased as the lengthy delays in achieving detailed planning
consents continue. We expect to commence work on over 100 new developments
during the remainder of this year. These new sites will support continued sales
growth although the ability of the industry to increase sales outlets remains a
major challenge.
In our North Division, we completed 2,471 homes (2001: 2,476) with an average
selling price of £103,453 (2001: £93,260). In the South Division, completions
were 3,239 (2001: 3,206) with an average selling price of £143,672 (2001:
£131,421).
Charles Church, our premium brand, continues to move forward and we are
confident of further strong growth in both volume and margins in this business.
We have been encouraged by customer interest in new areas of operation and our
first business in the north is performing very well. However, as yet, Charles
Church remains a small part of our business completing 390 units in the period.
We remain on track to complete circa 800 units during 2002 and 1,000 units per
annum thereafter.
The nature of UK house building has changed over the last decade. Management
teams are now presented with longer lead-in times for developments, more complex
sites, but with greater procurement opportunities. We believe that economies of
scale and depth of management will continue to deliver enhanced stakeholder
returns.
We continue to focus on the basics of the business: providing the right product
in the right location, maximising selling prices, controlling building costs and
prudent purchasing of new land. Despite sticking to the basics, we are as always
innovative. We have increased the use of factory finished products in all our
homes, and circa 10% of our homes incorporate timber frame or steel frame
construction. We are also developing further our relationships with our
partners in the supply chain. We continue to improve our offer to purchasers
including the promotion of an extensive range of sales extras under our
successful Finishing Touches initiative.
OUTLOOK
The housing market remains strong and affordability is good. Visitor levels are
high with robust demand for new homes exceeding supply. The outlook for the
housing market is positive with interest rates set to remain at low levels.
As indicated in our trading statement of 27 June 2002 our forward sales into the
second half of this year were the strongest ever, at £564 million. Sales have
continued in line with expectations and as a result sales for the second half
are now circa £800 million, giving total sales to date for 2002 of circa £1.62
billion. We expect to see a good performance in the remainder of 2002 to give
us a strong carry forward of sales into 2003.
With our Core Housebuilding operations performing very well and Charles Church
responding to our initiatives we are confident of another excellent performance
for the full year.
We are increasing our interim dividend by 10.5% to 4.75p per share. This
dividend will be payable on 25 October 2002 to shareholders on the Register on 6
September 2002. As before we are offering a scrip dividend alternative.
The Persimmon team have achieved excellent results in the six months and have
responded extremely positively to the challenges we set them on a daily basis.
I thank them all for their efforts and achievements.
Duncan Davidson
27th August 2002
Consolidated profit & loss account (unaudited)
Six months to Six months to Year to 31
30 June 30 June December
Note 2002 2001 2001
£'000 £'000 £'000
Turnover
Continuing operations 820,028 698,129 1,477,467
Cost of sales (652,802) (566,942) (1,193,954)
Gross profit 167,226 131,187 283,513
Net operating expenses (38,430) (46,126) (79,821)
Operating profit before goodwill amortisation 134,201 100,209 225,115
and exceptional items
Goodwill amortisation (5,405) (3,126) (8,632)
Exceptional integration costs - (12,022) (12,791)
Operating profit
Continuing operations 128,796 85,061 203,692
Net interest payable and similar charges (16,964) (16,299) (36,955)
Profit on ordinary activities before taxation 111,832 68,762 166,737
Tax on ordinary activities (35,101) (20,972) (50,287)
Profit on ordinary activities after taxation 76,731 47,790 116,450
Dividends (13,296) (11,980) (38,014)
Retained profit 63,435 35,810 78,436
Basic earnings per share 5
Before exceptional items (net of tax) and goodwill 29.6p 25.7p 52.9p
After exceptional items and goodwill 27.6p 20.7p 46.0p
Diluted earnings per share 5
Before exceptional items (net of tax) and goodwill 29.3p 25.4p 52.4p
After exceptional items and goodwill 27.4p 20.5p 45.6p
Dividend per share 4.75p 4.30p 13.70p
Consolidated balance sheet (unaudited)
Restated
30 June 30 June 31 December
Note 2002 2001 2001
£'000 £'000 £'000
Fixed assets
Tangible assets 28,788 25,496 25,626
Intangible assets 198,206 201,865 203,611
226,994 227,361 229,237
Current assets
Stocks and work in progress 1,376,946 1,390,711 1,352,943
Debtors due after one year - - 83
Debtors due within one year 127,156 112,719 117,314
Cash at bank and in hand 4 714 63,357 20,717
1,504,816 1,566,787 1,491,057
Creditors due within one year
Borrowings 4 (30,829) (33,534) (67,040)
Other creditors (447,538) (378,503) (387,905)
(478,367) (412,037) (454,945)
Net current assets 1,026,449 1,154,750 1,036,112
Total assets less current liabilities 1,253,443 1,382,111 1,265,349
Creditors due after more than one year
Borrowings 4 (362,202) (605,095) (450,095)
Other creditors (26,936) (29,948) (21,785)
(389,138) (635,043) (471,880)
Net assets 864,305 747,068 793,469
Capital and reserves
Called up share capital 27,944 27,549 27,686
Share premium account 209,108 202,614 205,567
Merger reserve 281,344 281,344 281,344
Revaluation reserve 1,242 1,242 1,242
Profit and loss account 344,667 234,319 277,630
Equity shareholders' funds 864,305 747,068 793,469
Net assets per share 309.3p 271.2p 286.6p
Consolidated cash flow statement (unaudited)
Six months to Six months to Year to
30 June 30 June 31 December
Note 2002 2001 2001
£'000 £'000 £'000
Net cash inflow from operating activities 164,291 179,611 325,910
Return on investments and servicing of finance
Interest received 164 - 263
Interest paid (18,280) (15,603) (34,469)
Interest paid on finance leases (143) (141) (327)
(18,259) (15,744) (34,533)
Taxation
UK corporation tax paid (13,890) (10,631) (50,175)
Capital expenditure
Purchase of tangible fixed assets (6,525) (2,306) (5,148)
Sale of tangible fixed assets 773 183 4,178
(5,752) (2,123) (970)
Acquisitions and disposals
Acquisition of businesses and subsidiaries 6 (1,599) (323,882) (325,389)
Net overdrafts acquired with subsidiaries - (54,443) (53,137)
(1,599) (378,325) (378,526)
Equity dividends paid (22,062) (13,670) (25,327)
Net cash inflow/(outflow) before financing 102,729 (240,882) (163,621)
Financing
Bank loans advanced - 315,000 160,000
Repayment of bank loans (87,893) (36,993) (44,993)
Expenses in connection with share issue - (4,000) (4,000)
Exercise of share options 2,452 5,697 8,287
Repayment of principal under finance leases (1,080) (954) (1,951)
Net cash (outflow)/inflow from financing (86,521) 278,750 117,343
Increase/(decrease) in cash 3 16,208 37,868 (46,278)
Reconciliation of operating profit to net cash inflow from operating activities
Six months to Six months to Year to
30 June 30 June 31 December
2002 2001 2001
£'000 £'000 £'000
Operating profit 128,796 85,061 203,692
Depreciation charge 3,152 2,451 4,732
Amortisation of goodwill 5,405 3,126 8,632
Profit on sale of tangible fixed assets (62) (38) (216)
LTIP charge 965 823 1,827
(Increase)/decrease in stocks and work in progress (24,003) 184,841 227,737
(Increase)/decrease in debtors (9,759) 4,080 (4,071)
Increase/(decrease) in creditors 59,797 (100,733) (116,423)
Net cash inflow from operating activities 164,291 179,611 325,910
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 2001.
The group adopted FRS 19 (Accounting for Deferred Taxation) in 2001. This resulted in the recognition of
a deferred tax asset on timing differences of £762,000 at 31 December 2000 (deferred tax liability of
£467,000 as previously stated). Profit after tax decreased by £45,000 in the year ended 31 December 2001
as a result of this change in accounting policy.
2. Taxation
Taxation has been calculated at 29.9% of profit on ordinary activities before taxation and goodwill
amortisation (six months to 30 June 2001: 29.2% and year ended 31 December 2001: 28.7%). This is the
estimated effective tax rate before goodwill amortisation for the year to 31 December 2002.
3. Reconciliation of net cash flow to net debt
Six months to Six months to Year to
30 June 30 June 31 December
2002 2001 2001
£'000 £'000 £'000
Increase/(decrease) in cash 16,208 37,868 (46,278)
Decrease/(increase) in debt and lease finance 88,973 (277,053) (113,056)
Decrease/(increase) in net debt from cash flows 105,181 (239,185) (159,334)
New finance leases (500) (149) (307)
Loans and finance leases acquired with - (220,321) (220,321)
subsidiaries
Decrease/(increase) in net debt 104,681 (459,655) (379,962)
Net debt at beginning of period (499,420) (119,458) (119,458)
Net debt at end of period (394,739) (579,113) (499,420)
4. Analysis of net debt
30 June 30 June 31 December
2002 2001 2001
£'000 £'000 £'000
Cash at bank and in hand 714 63,357 20,717
Bank overdrafts (22,936) (17,641) (59,147)
Bank loans (80,000) (323,000) (160,000)
US and UK senior loan notes (290,095) (297,988) (297,988)
Finance leases (2,422) (3,841) (3,002)
Net debt at end of period (394,739) (579,113) (499,420)
5. Earnings per share
The calculation of basic earnings per share after exceptional items and goodwill is based on earnings
after taxation of £76,731,000 (six months to 30 June 2001: £47,790,000 and year ended 31 December 2001:
£116,450,000) and 277,857,071 ordinary shares (30 June 2001: 230,421,910 and 31 December 2001:
253,119,550) 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 280,316,821 (30 June 2001: 233,395,824 and 31 December 2001: 255,591,155).
The calculations of basic and diluted earnings per share before exceptional items (net of tax) and
goodwill are based on earnings after taxation of £82,136,000 (six months to 30 June 2001: £59,331,000 and
year ended 31 December 2001: £134,010,000).
6. Acquisitions
Following the acquisition of Birse Homes Ltd in 1995, in accordance with the terms of the purchase
agreement the Group paid deferred consideration of £1,599,000 during the period. There are no further
amounts payable.
7. Pension and life assurance schemes
Prior to 1 July 2002 the group operated two defined benefit schemes ('the Schemes') being the Persimmon
plc Pension and Life Assurance Scheme ('Persimmon Scheme') and the Beazer Group Pension Scheme ('Beazer
Scheme'). Full details can be found in the December 2001 Annual Report.
The assets of these Schemes were held in separate trustee administered funds and both Schemes were closed
to new employees on 30 September 2001 when a new defined contribution stakeholder arrangement was
established for all new employees.
On 1 July 2002, following independent legal and actuarial advice provided to the Trustees of the Schemes
and the company, the Schemes were merged into the Persimmon plc Pension and Life Assurance Scheme ('the
Merged Scheme'). This merger is intended to ensure that the future pension provision of the Merged
Scheme is placed on a sustainable footing, providing consistent benefits for members of the old Persimmon
and Beazer Schemes. All assets and liabilities of the Beazer Scheme were transferred into the Merged
Scheme and a full valuation of the Merged Scheme at 1 July 2002 is currently taking place. Details of
this valuation will be provided in the 2002 Annual report.
As part of the merger process the company reviewed the basis upon which it supports the future pension
provision of its employees. The company decided to continue to provide amended final salary benefits for
current members of the Merged Scheme and the company made a further special contribution of £4 million
into the Merged Scheme on 1 July 2002. In maintaining final salary benefits for current members the
contribution rate of members increased to 8.0% in recognition of the increasing funding costs of
providing this benefit.
8. Basis of preparation
The figures for the half years to 30 June 2002 and 30 June 2001 are unaudited. The figures included in
the Profit and Loss Account for the year to 31 December 2001, the Balance Sheet at 31 December 2001 and
the Cash Flow Statement for the year to 31 December 2001 are extracts from the latest published accounts
which have been delivered to the Registrar of Companies. The report of the auditors on those accounts
was unqualified.
9. The Interim Statement is being sent to all shareholders and is available upon request 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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