Interim Results

Persimmon PLC 23 August 2005 23 August 2005 PERSIMMON PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005* Highlights • Record first half pre-tax profits up 7% to £235m (2004: £220m). • 5% increase in earnings per share to 56.2p (2004: 53.5p). • Turnover increased to £1.1bn (2004: £1.0bn). • Completions at similar levels as we continue to focus on maximising margins. Sold 5,954 homes at an average price of £183,581 (2004: 6,058 homes at £171,082). • First half operating margins enhanced to 23.0% (2004: 22.8%). • ROACE** improved to 30.0% (2004: 28.5%). • Charles Church business continues to move forward strongly: completions of 568 (2004: 503). • Land bank increased to 62,157 plots (2004: 60,287 plots). • Interim dividend increased 32% to 12.0p per share (2004: 9.1p). Total dividend payout for the full year will be not less than 30.4p per share (2004: 27.5p). • Net new reservations since 1 July 2005 8% ahead of the prior year. • Well placed for the full year with sales of £980m already booked for second half of 2005 and 11% more outlets open compared to last year. *results have been prepared in accordance with International Financial Reporting Standards. **return on average capital employed based on 12 month average. Duncan Davidson, Group Chairman, said: 'Whilst the current market requires us to be flexible in our approach to both sales and marketing, it is nevertheless one in which we can continue to operate successfully. Our geographic spread combined with our comprehensive range of house types enables Persimmon to react to these regional variations and emphasises the benefits and strengths of our position as a truly national house builder.' 'We remain optimistic for the business in 2005 and are well placed for 2006 and beyond.' For further information, please contact: Duncan Davidson, Group Chairman Edward Orlebar John White, Group Chief Executive Faeth Birch Mike Killoran, Group Finance Director Kirsty Flockhart Persimmon plc Finsbury Group Tel: 020 7251 3801 on 23 August Tel: 020 7251 3801 Tel: 01904 642 199 thereafter Photographs are available for media download from www.newscast.co.uk. A webcast of today's analyst presentation will be available on www.persimmonhomes.com by 2pm today. CHAIRMAN'S STATEMENT Persimmon is pleased to announce its interim results for the six months to 30 June 2005. These figures have been prepared in accordance with International Financial Reporting Standards ('IFRS') which are expected to be effective at 31 December 2005. Persimmon increased pre-tax profits in the period by 7 per cent to £235 million, compared with £220 million in the first half of 2004, a record for the first six month period of any financial year in the company's history. Earnings per share increased to 56.2 pence (H1 2004: 53.5 pence). When we published our restatement of financial information for 2004 under IFRS on 24 May 2005, we demonstrated that the transition from U.K. Generally Accepted Accounting Principles ('UK GAAP') did not have a material effect on our financial results. This remains the case for 2005; for example, profit before tax and goodwill amortisation on a UK GAAP basis for the first half of 2005 was £237 million. As widely publicised, the first six months of 2005 saw more difficult trading conditions for U.K. house builders than for many years. However, due to the inherent strengths of the Persimmon business, we have continued to trade successfully throughout this period. Completed sales of our homes in the first six months were marginally lower at 5,954 units (H1 2004: 6,058 units). Average selling prices rose to £183,581 (H1 2004: £171,082), giving an increased turnover of £1.1 billion, against £1.0 billion in the first half of 2004. We are increasing our interim dividend to 12.0 pence per share, which represents a 32 per cent increase over the 9.1 pence per share interim dividend paid in 2004. This increase reflects our previously stated policy of moving to pay approximately 40 per cent of the anticipated total annual dividend at the interim stage. The total dividend for the full year 2005 will be not less than 30.4 pence per share (2004: 27.5 pence per share), which would represent an increase of 10.5 per cent. The interim dividend will be payable on 21 October 2005 to shareholders on the Register on 2 September 2005. Persimmon's net borrowings (including forward currency swap liabilities) at 30 June 2005 were further reduced to £179.5 million (30 June 2004: £253.5 million). Gearing reduced to 12 per cent from 20 per cent at 30 June 2004. Interest cover was 14.9 times (H1 2004: 14.3 times). Return on average capital employed was 30.0 per cent (H1 2004: 28.5 per cent). The impact of the selective use of incentives and additional marketing costs due to the slowdown in demand has been mitigated to a large extent by our ability to minimise other cost increases. We have therefore been able to deliver operating margins of 23.0 per cent, similar to the high level recorded in the comparative period (H1 2004: 22.8 per cent). If current market conditions continue we would expect some further pressure in respect of increased sales costs, but we do not expect any significant reduction in margins in the second half. During the period, we have continued to make further progress in a number of areas of the business. Completions in the South Division were 3,127 homes (H1 2004: 2,987) with an average selling price of £178,560 (H1 2004: £176,356). The North Division which experienced the most noticeable change in customer sentiment over the last 12 months, saw a reduction in legal completions to 2,259 (H1 2004: 2,568). We have continued to target realistic sales volumes in the prevailing market conditions, whilst offering the appropriate mix of product for sale. By doing so we have maximised selling prices and protected margins. Average selling price increased by 12% to £166,535 (H1 2004: £148,962). Our Charles Church business continued to move forward strongly with legal completions of 568 (H1 2004: 503) at an average selling price of £279,014 (H1 2004: £252,964). This business is now well set to benefit from the platform we have created within the Division and we expect to achieve further good growth in volumes and profits over the forthcoming years. The spread of house types within this business with prices ranging from £150,000 to over £1 million gives extra resilience and will ensure that good levels of sales are achieved with this premium range offering. Last year we commented that we were being cautious about our purchase of new land. We have continued with this stance, whilst successfully acquiring more new exciting development opportunities at attractive prices. Our land bank now consists of 62,157 plots owned and under control with a further 6,521 plots proceeding to contract. In addition we control over 19,000 acres of strategic land which includes a number of potential large schemes which we are continuing to progress through the planning system. We expect to secure a large number of future plots for development through this process in support of the Government's desire to increase housing output in the U.K. Whilst the current market requires us to be flexible in our approach to both sales and marketing, it is nevertheless one in which we can continue to operate successfully. Our geographic spread combined with our comprehensive range of house types enables Persimmon to react to these regional variations and emphasises the benefits and strengths of our position as a truly national house builder. Achieved sales revenue of houses for legal completion during the second half of 2005 is currently at circa £980 million, a similar level to last year. In addition we continue to open new developments across all parts of the U.K. and experience good levels of visitors to our existing showhomes. With 11 per cent more outlets open compared to last year we are well positioned to achieve our sales aspirations. Indeed the number of net new reservations achieved to date since the beginning of July have been circa 8 per cent higher than for the same period of 2004. The recent reduction in interest rates, continuing low unemployment levels and the good fundamentals of the U.K. house building industry, together with the strong position of Persimmon's business, give us great confidence for the future. In anticipation of the normal increase in activity during the autumn months we remain optimistic for the business in 2005 and are well placed for 2006 and beyond. We are very grateful for all the efforts of our many loyal staff, without whom these continuing achievements would not be possible. Duncan Davidson 23 August 2005 Group Chairman Consolidated Income Statement (unaudited) ------------------------ ----- --------- --------- --------- Note Six months to Six months to Year to 30 June 30 June 31 December 2005 2004 2004 (restated) (restated) £m £m £m ------------------------ ----- --------- --------- --------- Revenue 1,093.0 1,036.4 2,131.3 Cost of sales (799.2) (760.4) (1,549.4) ------------------------ ----- --------- --------- --------- Gross profit 293.8 276.0 581.9 Net operating expenses (42.0) (39.9) (83.9) ------------------------ ----- --------- --------- --------- Profit from operations 251.8 236.1 498.0 Net finance costs (16.9) (16.5) (30.0) ------------------------ ----- --------- --------- --------- Profit before tax 234.9 219.6 468.0 Income tax expense 4 (72.0) (67.3) (143.7) ------------------------ ----- --------- --------- --------- Profit after tax 162.9 152.3 324.3 ------------------------ ----- --------- --------- --------- Earnings per share Basic 5 56.2p 53.5p 113.5p Diluted 5 55.9p 53.0p 112.8p The results of the Group relate entirely to continuing operations. Consolidated Balance Sheet (unaudited) ------------------------ ------ ---------- ---------- ---------- Note 30 June 30 June 31 December 2005 2004 2004 (restated) (restated) £m £m £m ------------------------ ------ ---------- ---------- ---------- ASSETS Non-current assets Intangible assets 182.0 182.0 182.0 Property, plant and equipment 29.2 26.7 28.2 Deferred tax assets 32.1 16.0 22.4 -------------------- ------ ---------- ---------- ---------- 243.3 224.7 232.6 ------ ---------- ---------- ---------- Current assets Inventories 2,138.1 1,852.6 1,992.8 Trade and other receivables 95.3 109.4 98.7 Cash and cash equivalents 3 96.1 24.7 84.6 -------------------- ------ ---------- ---------- ---------- 2,329.5 1,986.7 2,176.1 -------------------- ------ ---------- ---------- ---------- Total assets 2,572.8 2,211.4 2,408.7 -------------------- ------ ---------- ---------- ---------- LIABILITIES Non-current liabilities Interest bearing loans and 3 (234.5) (246.6) (223.7) borrowings Forward currency swaps 3 (25.9) (21.9) (35.2) Deferred tax liabilities (9.2) (3.6) (2.2) Retirement benefit obligation (66.8) (54.3) (66.3) Other liabilities (59.0) (62.2) (61.1) -------------------- ------ ---------- ---------- ---------- (395.4) (388.6) (388.5) -------------------- ------ ---------- ---------- ---------- Current liabilities Trade and other payables (543.3) (472.0) (511.5) Current tax liabilities (84.2) (74.1) (81.2) Forward currency swaps 3 (1.4) (0.2) (2.2) Interest bearing loans and 3 (16.3) (11.9) (19.7) borrowings -------------------- ------ ---------- ---------- ---------- (645.2) (558.2) (614.6) -------------------- ------ ---------- ---------- ---------- Total liabilities (1,040.6) (946.8) (1,003.1) -------------------- ------ ---------- ---------- ---------- Net assets 1,532.2 1,264.6 1,405.6 -------------------- ------ ---------- ---------- ---------- SHAREHOLDERS' EQUITY Ordinary share capital issued 29.2 28.7 28.9 Share premium 226.6 217.9 221.2 Own shares (4.0) (3.2) (3.2) Hedge reserve 3.1 8.4 5.2 Merger reserve 281.4 281.4 281.4 Other reserve 1.2 1.2 1.2 Retained earnings 994.7 730.2 870.9 -------------------- ------ ---------- ---------- ---------- Total shareholders' equity 1,532.2 1,264.6 1,405.6 -------------------- ------ ---------- ---------- ---------- Consolidated Cash Flow Statement (unaudited) -------------------- --------- --------- --------- Note Six months to Six months to Year to 30 June 30 June 1 December 2005 2004 2004 (restated) (restated) £m £m £m -------------------- --------- --------- --------- Cash flows from operating activities: Net profit after income taxes 162.9 152.3 324.3 Adjustment for: Tax 72.0 67.3 143.7 Pensions charge 0.4 - 0.9 Depreciation charge 3.6 3.4 7.0 (Profit)/loss on disposal of property, plant and equipment (0.2) (0.1) 0.1 Net finance costs 16.9 16.5 30.0 Share based payment charge 1.0 0.9 2.1 --------------------------- --------- --------- --------- Operating profit before working capital changes 256.6 240.3 508.1 Changes in working capital: Increase in inventories (145.3) (197.0) (337.2) Decrease/(increase) in trade and other receivables 3.4 (0.7) 10.0 Increase in trade and other payables 25.2 98.0 134.2 --------------------------- --------- --------- --------- Net cash from operations 139.9 140.6 315.1 Interest paid (13.5) (14.9) (26.4) Tax paid (70.3) (55.5) (127.6) --------------------------- --------- --------- --------- Net cash from operating activities 56.1 70.2 161.1 Cash flows from investing activities: Purchases of property, plant and equipment (4.3) (6.1) (12.9) Proceeds from sale of property, plant and equipment 0.7 0.6 2.5 Interest received 0.3 0.3 0.6 --------------------------- --------- --------- --------- Net cash used in investing activities (3.3) (5.2) (9.8) Cash flows from financing activities: Repayment of borrowings (1.6) (16.6) (16.6) Finance lease principal payments (0.6) (0.4) (0.9) Exercise of share options 3.3 2.6 6.0 Dividends paid to group (38.2) (18.2) (43.1) shareholders --------------------------- --------- --------- --------- Net cash used in financing activities (37.1) (32.6) (54.6) --------------------------- --------- --------- --------- Increase in net cash and cash equivalents 2 15.7 32.4 96.7 --------------------------- --------- --------- --------- Net cash and cash equivalents at beginning of period 79.4 (17.3) (17.3) --------------------------- --------- --------- --------- Net cash and cash equivalents at end of period 3 95.1 15.1 79.4 --------------------------- --------- --------- --------- Consolidated Statement of Recognised Income and Expense (unaudited) ------------------------ ----- --------- --------- --------- Note Six months to Six months to Year to 30 June 30 June 31 December 2005 2004 2004 (restated) (restated) £m £m £m ------------------------ ----- --------- --------- --------- Losses on cash flow hedges (3.0) (4.3) (8.9) Actuarial losses on defined benefit schemes - - (11.1) Taxation taken directly to equity 1.4 1.3 6.0 ------------------------ ----- --------- --------- --------- Net expense recognised directly in equity (1.6) (3.0) (14.0) Profit for the period 162.9 152.3 324.3 ------------------------ ----- --------- --------- --------- Total recognised income for the period 161.3 149.3 310.3 ------------------------ ----- --------- --------- --------- Notes (unaudited) 1. Accounting Policies The financial information has been prepared in accordance with International Financial Reporting Standards (IFRS) expected to be endorsed by the European Union (EU) and effective (or available for early adoption) at 31 December 2005. Comparative information for the six months ended 30 June 2004 and the year ended 31 December 2004 has been restated on an IFRS basis. Full details of IFRS policies applied and reconciliations of comparative figures between UK GAAP and IFRS are available in our announcement of restatement of financial information for 2004 issued on 24 May 2005. A copy of the announcement is available under the Investor Relations area of our website, www.persimmonhomes.com. 2. Reconciliation of Net Cash Flow to Net Debt ------------------------ ---------- ---------- ---------- Note Six months to Six months to Year to 30 June 30 June 31 December 2005 2004 2004 (restated) (restated) £m £m £m ------------------------ ---------- ---------- ---------- Increase in net cash and cash equivalents 15.7 32.4 96.7 Decrease in debt and finance 2.2 17.0 17.5 leases ------------------------ ---------- ---------- ---------- Decrease in net debt from cash 17.9 49.4 114.2 flows New finance leases (0.8) (0.4) (0.9) Non cash flow movements (2.9) (4.3) (8.9) ------------------------ ---------- ---------- ---------- Decrease in net debt 14.2 44.7 104.4 Net debt at beginning of period (196.2) (300.6) (300.6) ------------------------ ---------- ---------- ---------- Net debt at end of period 3 (182.0) (255.9) (196.2) ------------------------ ---------- ---------- ---------- 3. Analysis of Net Debt --------------------------- ------- ---------- ---------- Note 30 June 30 June 31 December 2005 2004 2004 (restated) (restated) £m £m £m --------------------------- ------- ---------- ---------- Cash and cash equivalents 96.1 24.7 84.6 Bank overdrafts (1.0) (9.6) (5.2) --------------------------- ------- ---------- ---------- Net cash and cash equivalents 95.1 15.1 79.4 US and UK senior loan notes due within one year (14.3) (1.6) (13.4) US and UK senior loan notes due after more than one year (233.0) (244.9) (222.5) Forward currency swaps (27.3) (22.1) (37.4) Finance leases (2.5) (2.4) (2.3) --------------------------- ------- ---------- ---------- Net debt at end of period 2 (182.0) (255.9) (196.2) --------------------------- ------- ---------- ---------- 4. Taxation Taxation has been calculated at 30.6% of profit before taxation (six months to 30 June 2004: 30.8% and year ended 31 December 2004: 30.8%). This is the estimated effective tax for the year to 31 December 2005. 5. Earnings Per Share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders of £162.9m (six months to 30 June 2004: £152.3m and year ended 31 December 2004: £324.3m) by the weighted average number of ordinary shares in issue, excluding those held by the Employee Share Ownership Trust and the Employee Benefit Trust which are treated as cancelled. The weighted average number of ordinary shares in issue during the year is 289,689,694 (30 June 2004: 284,261,574 and 31 December 2004: 285,707,897). For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares from the start of the accounting period. The company has only one category of potentially dilutive 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 year. The weighted average number of ordinary shares so calculated is 291,318,992 (30 June 2004: 287,078,220 and 31 December 2004: 287,530,169). 6. Basis of Preparation EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidated financial statements of the Group, for the year ending 31 December 2005, be prepared in accordance with IFRS adopted for use in the EU (adopted IFRS). This interim financial information has been prepared on the basis of the recognition and measurement requirements of IFRS in issue that are either endorsed by the EU and effective (or available for early adoption) at 31 December 2005 or are expected to be endorsed and effective (or available for early adoption) at 31 December 2005, the Group's first annual reporting date at which it is required to use adopted IFRS. Based on these adopted and unadopted IFRS the Directors have made assumptions about the accounting policies expected to be applied when the first IFRS financial statements are prepared for the year ending 31 December 2005. In particular, the Directors have assumed the following IFRS issued by the International Accounting Standards Board will be adopted by the EU in sufficient time that it will be available for use in the annual IFRS financial statements for the year ended 31 December 2005: IAS 19 (Employee Benefits) (Revised) In addition, the adopted IFRS that will be effective (or available for early adoption) in the annual financial statements for the year ended 31 December 2005 are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly, the accounting policies for the period will only be determined finally when the annual consolidated financial statements are prepared for the year ended 31 December 2005. The figures for the half years to 30 June 2005 and 30 June 2004 are unaudited. The figures included in the Income Statement for the year to 31 December 2004, the Balance Sheet at 31 December 2004 and the Cash Flow Statement for the year to 31 December 2004 have been adjusted to comply with IFRS expected to be effective (or available for early adoption) at 31 December 2005. The latest published accounts for the year to 31 December 2004, prepared under UK GAAP, have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified. Persimmon issued the restatement of its financial information for 2004 under IFRS on 24 May 2005, including reconciliations of comparative figures to the latest published accounts. The report of the Auditors on this restatement was unqualified. 7. The Interim Report was approved by the Board of Directors on 22 August 2004 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 on 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

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