Preliminary Results
Persimmon PLC
03 March 2003
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
Highlights
• Record sales, profits and earnings: pre-tax profit* up 42% at £267.6 million
(2001: £188.1 million)
• Continued focus on maximising margins and profit per plot: full year
operating margin* increased to 17.5% (2001: 15.2%) with second half
operating margin of 18.6% (2001 second half: 16.0%)
• 26.7% increase in basic earnings per share* to 67.0p (2001: 52.9p)
• Excellent cash generation and strong balance sheet: gearing driven down to
36% (2001: 63%)
• ROACE* improved to 22.0% (2001: 19.4%)
• Unit completions were ahead at 12,352 units (2001: 12,051) with sales
broadly spread throughout the UK. During 2002, Persimmon sold over 90% of
its homes outside the South-East with only circa 4% located within the M25
• Average selling price increased 13.0% to £138,530 (2001: £122,601)
• Long land bank of 53,189 plots to support future performance, circa 4.3
years supply
• Proposed full year dividend to increase by 10.6% to 15.15p per share
(2001: 13.70p)
Duncan Davidson, Group Chairman said: 'We are delighted to report another record
result in our thirtieth year of trading. Over the ten year period from 1993
Persimmon has delivered compound annual growth of 35% in profit before tax* and
20% in basic earnings per share*.
Since the New Year we have been pleased with the level of visitors to our sites,
and the sales rate per site continues to be encouraging. At 1st March 2003
total sales value for the current year was more than £740 million at an average
selling price of circa £146,000, and showing improved margins. We look forward
with confidence to another successful year in 2003.'
* before goodwill amortisation and exceptional integration costs
For further information, please contact:
Duncan Davidson, Group Chairman Edward Orlebar/ Faeth Birch
John White, Group Chief Executive Finsbury
Persimmon plc Tel: +44 (0)20 7251 3801
Tel: +44 (0) 20 7251 3801 on 3 March 2003
Tel: +44 (0) 1904 642199 thereafter
Print resolution images are available for media download at www.newscast.co.uk
CHAIRMAN'S STATEMENT
We are delighted to report another record result in our thirtieth year of
trading. The results announced today are ahead of City expectations, with
Persimmon achieving a net pre-tax profit in 2002 of £267.6 million. This is an
increase of 42% over the £188.1 million profit in 2001 (both figures before
goodwill amortisation and exceptional costs).
Earnings per share rose by 26.7% to 67.0p in 2002, from 52.9p in 2001. Over the
ten year period from 1993 Persimmon has delivered compound annual growth of 35%
in profit before tax and 20% in basic earnings per share. (All figures before
goodwill amortisation and exceptional costs).
Persimmon legally completed the sale of 12,352 homes during 2002, a modest
increase over the 12,051 completions in 2001. This emphasises our continuing
concentration on maximising our margins and profit per unit, with the average
net pre-tax profit per unit (before goodwill amortisation) in 2002 rising by
38.7% to £21,663 from £15,614 in 2001. This achievement is all the more notable
when set against an increase in average selling price per unit of 13.0% to
£138,530.
Our operating margins (before goodwill amortisation) strengthened further to
17.5% in 2002, from 15.2% in 2001. We have also achieved a further increase in
our Return On Average Capital Employed to 22.0% in 2002, from 19.4% in 2001.
As we have previously commented, volumes continue to be restricted by a shortage
of outlets and, once again, we expect fairly flat completions for the new homes
industry this year. Currently Persimmon is selling from circa 10% fewer
outlets, as a result of the continuing difficulties and delays in obtaining
detailed planning consent for our developments. Against this background we have
planned for similar volumes in the first half of 2003 as last year. We
nonetheless expect that further margin improvement will continue. During the
second half of 2003 we anticipate a modest increase in completions as new
outlets are opened.
Since the New Year we have been pleased with the level of visitors to our sites,
and the sales rate per site continues to be encouraging. At 1st March 2003
total sales value for the current year was over £740 million at an average
selling price of circa £146,000, and showing improved margins. We look forward
with confidence to another successful year in 2003.
Demand remains strong across all regions for properties up to £250,000, although
we have seen some softening at the top end of the market. Sales at this higher
level are generally being achieved at asking price, but with purchasers taking
longer to make their decision to buy. We anticipate that only circa 15% of
completions for 2003 will be priced above £250,000. Persimmon has ensured that
it has good exposure across all sectors of the market, and one-third of our
current developments are selling homes priced at under £100,000 each, giving
very good affordability to purchasers at the lower end of the market.
Our spread of property, both in geographical location and product, presents the
ability to sell properties to the whole spectrum of purchaser profile, thereby
protecting the business from down turn in specific markets if they should occur.
During 2002, we sold over 90% of our homes outside the South-East of England,
with only circa 4% located within the M25.
Persimmon has continued to strengthen its long high-quality land bank, which
presently consists of over 53,000 plots with planning consent. This represents
a 4.3 years supply. In addition we control a further circa 20,000 acres of
strategic land which we are taking through the planning system. We have been
very successful in converting our strategic land into sites ready for
development at similar levels to the previous year, with circa 25% of land
replacement from this source. This success will continue to support the profit
margins which we are achieving.
During 2002 Persimmon has continued to work very hard to reduce further our net
borrowings, which at the year end were £337.3 million, giving gearing of 36%.
(2001: net borrowings £496.4 million; gearing of 63%).
We are proposing to increase our full year dividend by 10.6 per cent to 15.15p
per share (2001:13.70p per share), which is covered 4.2 times. We paid an
interim dividend of 4.75p per share in October 2002, and will recommend a final
dividend of 10.4p, which will be payable on 25th April 2003 to shareholders on
the Register at 14th March 2003.
These record results are a tribute to the hard work and success achieved by
every member of the Persimmon team. I thank them all for their continuing
efforts.
Duncan Davidson,
Group Chairman.
CHIEF EXECUTIVE'S REVIEW
2002 was another record year for Persimmon. Sales increased by 16% to £1,711m
(2001: £1,477m) and profit before tax (before goodwill amortisation and
exceptional costs) rose by 42% to £267.6m (2001: £188.1m) mainly as a result of
continuing margin improvement across the Group. All of our operations have
performed strongly in their respective markets and are well positioned to
achieve further growth.
Our excellent performance during the year cannot merely be ascribed to rising
prices in the housing market. Indeed, I have remarked in the past that
challenges exist for our industry even in apparently benign market conditions,
and so we continually ensure that we maximise selling prices, control build
costs and programmes closely, and re-invest in new land at sensible values. Our
success this year, once again, reflects our determination to stick to these
basic disciplines required of a housebuilder.
We have a business that has been developed to provide a truly national presence,
with a wide product offering. This spread gives us flexibility and protection
were there to be any specific regional market downturn. The land bank portfolio
we have under control reflects this mix and will ensure this situation prevails
in our business over future years.
I am confident we will continue to respond well to the differing markets across
the UK, thereby ensuring that we achieve the best possible results.
North Division
During the year we completed 5,138 homes, a 3% increase on 2001 (4,970).
Average selling prices moved forward to over £100,000 for the first time and, at
£109,445, represent a 14% increase on the previous year (2001: £95,819). This
result is as planned, with modest volume growth and good revenue improvement.
Our land bank has been increased further to 23,108 plots, representing a 41/2
year supply at current levels. Our largest development project at Newcastle
Great Park including 1,250 plots and a 200 acre Business Park has achieved
excellent progress during the year and is set to provide increasing returns over
the next few years.
We have also made good progress with our strategic land portfolio, for example,
with the successful promotion of a scheme for 800 units at Bathgate in Scotland.
This development will commence during late 2003. Many other opportunities
within the division's 7,000 acres of strategic land continue to be promoted
through the planning system and we are confident of further successes. The
North Division is now well set for further good growth in all its markets.
South Division
This division completed 6,395 units, a slight reduction on the prior year
(6,608). This was in line with our strategy to concentrate on maximising
selling prices in this particularly buoyant part of the UK. As a result,
selling prices increased by 10% to £146,379, with further margin improvement .
We have been successful in replacing our land bank at acceptable prices and
currently have 27,765 plots owned and under control. In addition we have circa
13,000 acres of high quality strategic land. Our development at Portishead near
Bristol, where we are building 1,270 units, is an example of our investment in
strategic land bearing fruit.
Charles Church
This division completed 819 homes during 2002, up from 473 in 2001 in line with
our previously stated strategy of expanding this business to be delivering circa
1,000 units per annum by 2003.
We have continued to expand this business across other parts of the UK and we
have achieved notable growth in our new areas of activity, in particular the
North East. This geographic expansion will provide a wider range of selling
prices than previously offered. Our experience in 2002 gives us confidence that
we can continue to successfully expand this premium brand business across other
parts of the UK.
This year we plan to achieve further volume growth in line with our stated
strategy whilst maintaining our focus on achieving further margin improvement
across the whole of the Division. We have increased the land bank currently
held for Charles Church to 2,316 plots, (2001: 2,169). This premium brand
generally develops smaller parcels of land and therefore will always carry a
shorter land bank than our core business.
We are continually reminded of the strength of the Charles Church brand, both
from land owners who have a preference to sell to a 'premium' brand provider and
purchasers who associate quality with the name. We are focused on capitalising
on this brand strength, whilst all the time improving performance to ensure the
brand continues to merit its premium status.
Current Trading Outlook
As I have stated earlier, the first four months of 2002 saw extremely strong
demand. The volume of sales during that period was, in my experience,
unprecedented. It is no surprise therefore that demand has returned to a more
normal level and that on a comparative basis, volumes for the first two months
of 2003 are at a slightly lower level than 2002. We expect this difference in
volume of reservations to be redressed over the full year as new outlets are
opened.
In the meantime, we are pleased to report continued strong demand for homes
across all our regions. Prices have continued to rise steadily with our current
selling prices averaging circa £146,000 per home. This represents a 5.4%
increase over last year's average selling price.
Whilst price growth has undoubtedly slowed in the South East, particularly on
properties over £250,000, we are confident that the demand for new homes will
continue to be strong. The level of visitors to our showhomes and the continued
desire of our customers to increase their purchase by buying our 'Finishing
Touches' extras is further indication of an underlying strong market.
We believe that the market in which we are currently operating is more the
'norm' than in the first part of 2002. Given continued low interest rates and
good employment levels we are confident that this will continue, although we
constantly adapt our product offering and geographical spread to ensure we
benefit fully as trends change and market conditions evolve.
Land Bank
During the year we increased our land bank to 53,189 plots (52,083) and have
continued to replace the land which we have used at sensible prices. Our ratio
of plot cost to selling price has reduced to 20.1% (20.6%). This, once again,
demonstrates our ability to successfully acquire land to sustain our position as
a leading housebuilder in the UK.
Our efforts to ensure that we continue to carry a long land bank are supported
by a very strong portfolio of strategic development land across the whole of the
UK. We currently have circa 20,000 acres in this portfolio and we continue to
achieve successes in 'pulling through' strategic land into our owned land bank.
Our total land bank of 60,565 plots (including plots proceeding to contract)
places us in a position of strength as the planning system continues to delay
developments.
Whilst we welcome the recent attempts by the Government to address the problems
caused by planning delays we do not expect to see any significant increase in
volumes of new homes built in the UK in the short to medium term. Our existing
long land bank is therefore key to managing the growth of our business over the
forthcoming years.
Environment
We have always recognised that our business impacts on the environment and our
communities and we have sought to develop in a responsible manner over the
years. During 2002 we undertook a further review of our management of issues
relating to the environment and our environmental policy is to be published on
our web site as part of our first Corporate Responsibility Report.
This report provides examples of the efforts we are making to protect the
environment. On a general note, approximately 55% of our developments during
2002 were on brownfield sites. We will continue to improve our environmental
performance in conjunction with our CSR initiative.
Staff and Training
The Company has continued to invest in the training and development of its
staff, particularly in the areas of Sales and Customer Care, IT and Health &
Safety. Indeed, staff training in Sales and Customer Care has been extensive
this year to support the introduction of the Persimmon Pledge and Masterfile.
Following the success of the Management Development Programme a further intake
of graduate-level candidates will join us during 2003. A Performance Review
process has also been developed and made available to management throughout the
Group.
We welcome the Government's recent initiative in respect of 'Modern
Apprenticeships'. Persimmon is very supportive of the focus on training more
young people in all aspects of our industry.
To support our own Apprentice programme we propose to introduce
post-apprenticeship training to ensure those staff who wish to pursue a career
in management have the necessary skills to achieve this. As the number of
apprentices has increased within our business we are launching an 'Apprentice of
the Year Award' scheme to further highlight the value we place on our
apprentices within the Group. We currently employ 230 apprentices and intend to
increase this number over future years.
Customer Care
As I have already stated we again invested heavily in training for many of our
staff on Customer Care. We are continuing with increased training on this
aspect of our business during 2003.
Whilst the industry has achieved improvements in service to house purchasers it
undoubtedly continues to require continued focus.
We therefore welcome the new Council of Mortgage Lenders initiative to ensure
that all homes are issued with a completion certificate prior to occupation. We
worked closely with the NHBC during 2002 to pilot this scheme well before its
introduction from April 2003. Whilst there may be 'teething problems' with this
scheme, we remain convinced that it will be very good for both the industry and
our customers.
I am confident that Persimmon is at the forefront of customer care. However we
operate in a market where purchasers, quite understandably, have increased
expectations of a new home and a desire to personalise their purchase.
We are very conscious of this and continue to improve our management skills, IT
and administration support to respond to customer requirements.
Summary
Once again we have achieved very commendable results. The improvement in
operating margin is only one example of this. There are many other aspects of
our performance which have been equally successful.
Persimmon has excellent depth and quality of management teams who are highly
motivated. In addition we have a strong land bank, exposure to all markets
across the UK and a broad product portfolio. These are all vital ingredients to
sustaining our position as a leading housebuilder.
We have scope to grow our core business further in many existing regions, whilst
the Charles Church business is well set to expand in new areas of operation.
All of this gives me great confidence for the future.
Finally, I once again thank all our staff at every level in all our many offices
and sites across the UK for their effort and support in achieving these results.
PERSIMMON PLC
Consolidated profit & loss account for the year ended 31 December 2002
Year to 31 Year to 31
December December
Note 2002 2001
(audited) £m
£m
Turnover 1,711.1 1,477.5
Cost of sales (1,345.9) (1,194.0)
Gross profit 365.2 283.5
Net operating expenses (76.2) (79.8)
Operating profit before goodwill amortisation and exceptional 299.8 225.1
items
Goodwill amortisation (10.8) (8.6)
Exceptional integration costs - (12.8)
Operating profit 289.0 203.7
Net interest payable and similar charges (32.2) (37.0)
Profit on ordinary activities before taxation 256.8 166.7
Tax on ordinary activities 5 (80.3) (50.3)
Profit on ordinary activities after taxation 176.5 116.4
Dividends (42.4) (38.0)
Retained profit 134.1 78.4
Basic earnings per share 6
Before exceptional items (net of tax) and goodwill 67.0p 52.9p
After exceptional items and goodwill 63.1p 46.0p
Diluted earnings per share 6
Before exceptional items (net of tax) and goodwill 66.3p 52.4p
After exceptional items and goodwill 62.5p 45.6p
Dividend per share 15.15p 13.70p
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.
PERSIMMON PLC
Consolidated balance sheet as at 31 December 2002
31 December 31 December
2002 2001
Note (audited) £m
£m
Fixed assets
Tangible assets 23.5 25.6
Intangible assets 192.8 203.6
216.3 229.2
Current assets
Stocks and work in progress 1,433.4 1,353.0
Debtors 112.0 117.4
Cash at bank and in hand 3 9.8 20.7
1,555.2 1,491.1
Creditors due within one year
Borrowings 3 (24.9) (67.0)
Other creditors (458.6) (387.9)
(483.5) (454.9)
Net current assets 1,071.7 1,036.2
Total assets less current liabilities 1,288.0 1,265.4
Creditors due after more than one year
Borrowings 3 (322.2) (450.1)
Other creditors (28.8) (21.8)
(351.0) (471.9)
Net assets 937.0 793.5
Capital and reserves
Called up share capital 28.0 27.7
Share premium account 210.4 205.6
Merger reserve 281.4 281.4
Revaluation reserve 1.2 1.2
Profit and loss account 416.0 277.6
Equity shareholders' funds 937.0 793.5
Net assets per share 334.6p 286.6p
PERSIMMON PLC
Consolidated cash flow statement for the year ended 31 December 2002
Year to Year to
31 December 31 December
Note 2002 2001
(audited) £m
£m
Net cash inflow from operating activities 2 287.1 325.9
Return on investments and servicing of finance
Interest received 0.4 0.3
Interest paid (33.2) (34.5)
Interest paid on finance leases (0.3) (0.3)
(33.1) (34.5)
Taxation
UK corporation tax paid (56.9) (50.2)
Capital expenditure
Purchase of tangible fixed assets (9.7) (5.2)
Sale of tangible fixed assets 6.6 4.2
(3.1) (1.0)
Acquisitions and disposals
Acquisition of businesses and subsidiaries 7 (1.6) (325.4)
Net overdrafts acquired with subsidiaries - (53.1)
(1.6) (378.5)
Equity dividends paid (34.8) (25.3)
Net cash inflow/(outflow) before management of liquid
resources and financing 157.6 (163.6)
Financing
Bank loans advanced - 160.0
Repayment of bank loans (127.9) (45.0)
Expenses in connection with share issue - (4.0)
Exercise of share options 3.4 8.3
Repayment of principal under finance leases (1.9) (2.0)
Net cash (outflow)/inflow from financing (126.4) 117.3
Increase/(decrease) in cash 3,4 31.2 (46.3)
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
2001. The continued transitional disclosure requirements of FRS 17:
Retirement Benefits are set out in more detail in note 8.
2. Reconciliation of operating profit to net cash inflow from operating
activities
Year to Year to
31 December 31 December
2002 2001
(audited) £m
£m
Operating profit 289.0 203.7
Depreciation charge 6.4 4.7
Amortisation of goodwill 10.8 8.6
Profit on sale of tangible fixed assets (0.2) (0.2)
LTIP charge 1.5 1.8
(Increase)/decrease in stocks and work in progress (80.4) 227.8
Decrease/(increase) in debtors 7.2 (4.1)
Increase/(decrease) in creditors 52.8 (116.4)
Net cash inflow from operating activities 287.1 325.9
3. Analysis of net debt
At 31 December Cash flow Other non-cash At 1 January
2002 changes 2002
£m £m £m £m
Net cash:
Cash at bank and in hand 9.8 (10.9) - 20.7
Bank overdrafts (17.0) 42.1 - (59.1)
Net cash per cash flow statement: (7.2) 31.2 - (38.4)
Debt and lease financing:
Bank loans (40.0) 120.0 - (160.0)
US & UK senior loan notes (290.1) 7.9 - (298.0)
Finance leases (2.1) 1.9 (1.0) (3.0)
Debt and lease financing (332.2) 129.8 (1.0) (461.0)
Net Debt (339.4) 161.0 (1.0) (499.4)
Analysed as:
Cash at bank and in hand 9.8 20.7
Borrowings due within one year (24.9) (67.0)
Borrowings due after more than one year (322.2) (450.1)
Finance leases (2.1) (3.0)
Net debt at end of period (339.4) (499.4)
4. Reconciliation of net cash flow to net debt
Year to Year to
31 December 31 December
2002 2001
£m £m
Increase/(decrease) in cash 31.2 (46.3)
Decrease/(increase) in debt and lease finance 129.8 (113.1)
Decrease/(increase) in net debt from cash flows 161.0 (159.4)
New finance leases (1.0) (0.3)
Loans and finance leases acquired with subsidiaries - (220.3)
Decrease/(increase) in net debt 160.0 (380.0)
Net debt at beginning of period (499.4) (119.4)
Net debt at end of period (339.4) (499.4)
5. Taxation
Taxation has been calculated at an effective rate of 30.0% of profit on
ordinary activities before taxation and goodwill amortisation
(2001: 28.7%).
6. Earnings per share
The calculation of basic earnings per share after exceptional items and
goodwill is based on earnings after taxation of £176.5m (2001: £116.4m)
and 279,662,777 ordinary shares (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 282,511,605
(2001: 255,591,155).
The calculations of basic and diluted earnings per share before
exceptional items and goodwill are based on earnings after taxation of
£187.3m (2001: £134.0m).
7. 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 £1.6m during the period. There are no further amounts payable.
8. Pension and life assurance schemes
In November 2000 the Accounting Standards Board ('ASB') issued FRS 17
'Retirement Benefits' replacing SSAP 24 'Accounting for Pension Costs'.
FRS 17 was initially due to become fully effective for periods ending on
or after 22 June 2003. However, in November 2002 the ASB issued an
amendment to FRS 17 extending the transitional arrangements and therefore
deferring the mandatory requirement for its full adoption. The
requirements of FRS 17 as amended will now become mandatory for accounting
periods beginning on or after 1 January 2005.
The relevant transitional rules have again been adopted in 2002, with no
effect on the group's results other than extensive 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 £97.9m and a
present value of scheme liabilities of £154.4m. Net of the deferred tax
asset of £17.0m, the deficit is £39.5m.
Up to 1 July 2002 Persimmon plc ('the company') 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'). The 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 group, the Schemes were merged into
the Persimmon Scheme. This merger aims to ensure that the future pension
provision by the Persimmon 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 Persimmon Scheme and the Beazer Scheme has now been wound up.
As part of the merger process the group reviewed the basis upon which it
supports the future pension provision of its employees. Annual bonuses
are no longer pensionable for service after 1 July 2002. The company
decided to continue to provide amended final salary benefits for current
members of the Persimmon Scheme and the company made a special
contribution of £4.0m into the Persimmon Scheme in July 2002. Further
special contributions totalling £6.0m were paid during November and
December 2002 to further support scheme funding.
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. The company's contribution rate was also
increased from 12.5% to 15.5% of pensionable salaries from 1 January 2003.
9. The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2002 or 2001 but is
derived from those accounts. Statutory accounts for the year ended 31
December 2001 have been delivered to the Registrar of Companies, and those
for the year ended 31 December 2002 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.
10. It is proposed to pay a final dividend of 10.4p per share on 25 April 2003
to shareholders on the register at the close of business on 14 March 2003.
The annual report will be posted to shareholders on Monday 24 March 2003.
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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