TIDMPSN
RNS Number : 5953O
Persimmon PLC
22 August 2017
PERSIMMON PLC
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2017
Persimmon plc today announces half year results for the six
months ended 30 June 2017.
Highlights
-- Profit before tax increased 30% to GBP457.4m (2016: GBP352.3m)
-- Revenue up 12% to GBP1.66bn (2016: GBP1.49bn)
-- Legal completions increased 8% to 7,794 (2016: 7,238) - an additional
556 new homes delivered
-- Average selling price of GBP213,262 up 4% (2016: GBP205,762)
-- Further expansion of underlying operating margin* to 27.6% (2016:
23.8%), an increase of 380bps
-- Return on average capital employed** increased by 33% to 47.3%
(2016: 35.6%)
-- 9,319 plots of new land secured in the period bringing consented
land bank to 98,712 plots
-- Continued success in securing planning consent for the Group's
strategic land bank with 3,308 plots converted in the period,
35% of the new plots acquired
-- Net free cash generation*** of GBP284.5m in the period (2016:
GBP229.9m)
-- Net cash of GBP1,120.4m at 30 June 2017 (2016: GBP462.0m), prior
to GBP339.5m capital return paid on 3 July 2017
-- Basic earnings per share increased 30% to 119.5p (2016: 92.0p)
-- Current forward sales 15% ahead at GBP2.005bn (2016: GBP1.747bn)
-- Return of surplus capital under the Capital Return Plan of 25p
per share (GBP77.1m) paid 31 March 2017 in addition to the scheduled
payment of 110p per share (GBP339.5m) paid after the balance
sheet date on 3 July 2017
-- Commitment to return surplus capital of at least 110 pence per
share to shareholders each July until 2021
(* stated before goodwill impairment)
(** 12 month rolling average stated before goodwill
impairment)
(*** net free cash generation stated before Capital Return Plan
payments)
Jeff Fairburn, Group Chief Executive, said: "The successful
execution of the Group's long term strategy continues to support
excellent trading results as seen again in the first half of 2017.
Our focus on meeting market demand to deliver high quality
sustainable growth in each of our 29 regional businesses is
delivering excellent outcomes for our customers, our shareholders,
and all our stakeholders."
"The market remains confident. Customer interest in our
developments remains strong with encouraging levels of interest
through both our websites and our sales outlets as we trade through
the quieter summer weeks. Our private reservation rate over recent
weeks is c. 2% ahead year on year. Whilst we remain vigilant to
changes in market conditions we also recognise we are in a strong
position to take advantage of opportunities that arise. We are
looking forward to a good autumn sales season."
"With a high quality land bank, very strong balance sheet and
excellent forward sales the Group has built a platform for its
future success."
For further information, please
contact:
Jeff Fairburn, Group Chief Executive Simon Rigby
Mike Killoran, Group Finance Director Jos Bieneman
Persimmon plc Ellen Wilton
Citigate Dewe Rogerson
Tel: +44 (0) 20 7638 9571 (on 22 Tel: +44 (0) 20 7638 9571
August 2017)
Tel: +44 (0) 1904 642199 (thereafter)
Analysts unable to attend in person may listen to the
presentation live at 09:30am by using the details below:
Telephone number: +44(0)20 3427 1906
Password: Persimmon
Webcast link: https://edge.media-server.com/m6/p/osykig2q
(An archived webcast of today's analyst presentation will be
available on www.persimmonhomes.com/corporate this afternoon.)
HALF YEAR REPORT - TUESDAY 22 AUGUST 2017
CHAIRMAN'S STATEMENT
Persimmon's results for the first six months of 2017 are strong.
Our disciplined high quality growth continues to deliver excellent
free cash generation and a robust financial position.
Profit before tax increased by 30% to GBP457.4 million (2016:
GBP352.3 million), underlying operating margin* of 27.6% (2016:
23.8%) improved 380bps, cash balances of GBP1,120.4 million were
held at the end of June (2016: GBP462.0 million) and the consented
land bank totalled 98,712 plots (December 2016: 97,187 plots).
Management continue to execute the long-term strategy commenced
in 2012 successfully. This aims to sustain the delivery of superior
levels of shareholder value and cash generation through the housing
cycle. The Group invested c. GBP550 million of cash in land over
the twelve-month period ended 30 June 2017 whilst also generating
c. GBP740 million of free net cash inflow before capital returns,
equivalent to c. 239 pence per share. On 31 March 2017 the Group
paid an interim dividend of 25 pence per share as an additional
return of surplus capital under the Capital Return Plan ("the
Plan"). On 3 July 2017, after the balance sheet date, the Group
paid the sixth instalment under the Plan of 110 pence per share, or
GBP339.5 million, bringing the total returned to shareholders under
the Plan to date to c. GBP1.5 billion (or 485 pence per share).
RESULTS
The Group traded strongly throughout the first half of 2017
increasing total revenues by 12% over the prior year to GBP1,662.2
million (2016: GBP1,489.3 million). With our focus on build and
cash delivery the Group increased sales volumes by 8% to 7,794 new
home legal completions (2016: 7,238) with an average selling price
which was 4% higher at GBP213,262 (2016: GBP205,762).
The strength of the market through the first half is reflected
in the Group's average weekly private sales rate per site of 0.80,
which was c. 7% ahead year-on-year (2016: 0.75). Each of our
regional businesses focuses on achieving sales rates that are
appropriate to their regional market conditions. Our new
Nottinghamshire business based in Mansfield which opened at the
beginning of the year has made a good start to trading and
delivered over 170 new homes in the first half. We look forward to
further growth in this important regional market moving forward.
The Group now has 29 regional businesses delivering new homes right
across the UK.
In the private sales market both the Persimmon and Charles
Church brands achieved increased average selling prices year on
year. The Persimmon sales price increased by 3.7% to GBP213,982 and
the sales price for Charles Church rose by 9.4% to GBP347,819. As
seen over more recent periods the improvement in Charles Church
average pricing reflects our greater focus on delivering higher
value new homes in premium locations with no overlap with the
Persimmon range and offer. Charles Church delivered 900 new homes
in the period (2016: 973) whilst Persimmon legally completed 5,630
new homes (2016: 5,143). With 84% of Group sales being secured in
the private market, sales to the Group's housing association
partners totalled 1,264 new homes (2016: 1,122 new homes) a similar
proportion of the sales mix year on year.
The Group's gross margin improved by 360 basis points over the
first half of 2016 to 30.5% (2016: 26.9%). This further progress is
a result of our continuous drive to invest in high quality land,
opening up these new sites as promptly as possible, and growing the
regional businesses' build and sales delivery whilst exercising
strong control over our costs. This has enabled the Group to reduce
the land cost recoveries associated with our legal completions and
improve our build efficiencies and overhead recoveries. We are
pleased to report that the majority of the margin improvement year
on year, being 320 basis points, has been secured through strong
control over our development costs, with the remainder delivered
from improved land cost recoveries. With the Group's growth in
sales, gross profits have increased 27% year on year to GBP507.3
million (2016: GBP400.8 million).
Underlying operating profit* increased by 30% to GBP459.4
million (2016: GBP354.5 million) reflecting the further progress of
the Group's operating margin* to 27.6%, an increase of 380 basis
points over last year (2016: 23.8%).
The combination of strong trading and capital discipline
resulted in a total capital value per share generated in the first
six months of the year (before capital returns) of 126.5 pence
(2016: 69.6 pence). Total capital returns of 135 pence per share
recognised in the period resulted in a decrease in reported net
assets per share at 30 June of 8.9 pence to 878.4 pence from 887.3
pence at 31 December 2016.
The Group's underlying return on average capital employed**
improved year on year by 33% to 47.3% (2016: 35.6%) and underlying
basic earnings per share* for the first six months of 2017 of 121.2
pence increased by 30% over the prior year (2016: 93.3 pence).
From the launch of our long-term strategy at the start of 2012
to 30 June 2017 the Group has delivered c. 72,500 new homes across
the UK, increasing the number of new homes delivered to customers
by over 65%. We have also invested c. GBP2.94 billion in new land
and opened c. 1,100 new sales outlets whilst returning a total of
c. GBP1.5 billion of surplus capital to shareholders, GBP630
million more than was originally planned at this point.
RETURNS TO SHAREHOLDERS
The Group will achieve the objectives of its long-term strategy
by ensuring the business operates at optimal scale in its regional
markets whilst executing disciplined, well-judged land investment
at the right time through the cycle. Persimmon will return capital
that is considered surplus to the reinvestment needs of the
business back to shareholders through the cycle. During the period,
on 31 March 2017, the Group returned 25p per share (or GBP77.1
million) of surplus capital to shareholders, whilst also
recognising at the balance sheet date the commitment to return a
further 110p per share (or GBP339.5 million) on 3 July 2017.
Total surplus capital of GBP4.85 per share, or c. GBP1.5
billion, has now been paid to shareholders. The remaining Capital
Return scheduled to 2021 of GBP4.40 per share is planned to be paid
in equal instalments of GBP1.10 per share over the next four years.
The seventh instalment under the Plan is scheduled for early July
2018 and will be finalised with the 2017 Full Year results of the
Group to be announced on Tuesday 27 February 2018.
LAND
One of the major challenges the industry faces in increasing
output is the expansion in the number of active outlets which are
under development to meet the demand from local communities across
the UK. With the National Planning Policy Framework requiring
planning authorities to plan and deliver sufficient land in
sustainable locations to fulfil their local housing need for the
next five years, the land market has remained attractive. We have
maintained our disciplined approach to land replacement, continuing
to invest through the first half of the year to ensure we are
better placed to bring new opportunities to the market. The Group
acquired a total of 9,319 new plots of land across 47 sites during
the period, including 3,308 plots in 16 locations converted from
our strategic land bank. The Group's land spend was GBP369 million
in the first half of the year (2016: GBP305 million).
The Group owned and controlled 98,712 plots in its consented
land bank at 30 June 2017 (December 2016: 97,187 plots) with c. 49%
previously held by the Group as strategic land. Within this total,
the Group owned 53,180 plots with detailed planning consent. The
Group is developing all sites where it has secured a detailed
consent. In addition to its consented land bank the Group owns and
controls c. 16,340 acres of strategic land. The Group's planning
teams continue to work hard in partnership with local communities
and planning authorities to bring this land through the planning
system so we can make a start on our development plans as swiftly
as possible.
A key element of our long-term strategy is to judge the timing
of our investment in high quality new land well so as to support
the sustained delivery of superior shareholder value through the
housing cycle. We will remain cautious with respect to new land
investment for as long as the uncertainties facing the market
persist, particularly those associated with the risks to the UK
economy resulting from the UK's exit from the EU. However, we
continue to identify attractive opportunities which will result in
further investment on a selective basis.
CURRENT TRADING
Through the second half of 2016 the Group experienced stronger
market conditions than expected post the EU Referendum on 23 June
2016, particularly through the traditionally slower summer weeks.
Against these stronger comparatives, customer interest over the
last seven weeks from 1 July has remained robust and our average
weekly private sales rate per site was 2% ahead of the same period
last year. Our website leads, the number of customers visiting our
sales offices and the consistent lower levels of cancellations are
encouraging. Pricing has remained firm.
Resourcing sites with the required trade skills to meet the
demands of our build programmes remains a challenge. We have
progressed development works on 25 sites which will be released for
sale on commencement of the autumn sales season in early September
to ensure customers are able to move into their new home in line
with our development expectations. The Group is managing to contain
the inflationary pressures in the supply chain well, capturing the
benefits of the increasing utilisation of the Group's standard
house types and improving direct overhead efficiency as each
regional business grows to its optimal scale. We will continue to
pursue strong control over our costs to deliver the best outcomes
for our shareholders.
The value of our forward sales, including legal completions from
1 July 2017, is now 15% stronger than at the same point last year
at GBP2.005 billion (2016: GBP1.747 billion). We have 6,669 new
homes sold forward into the private sale market (2016: 5,836) with
an average selling price of c. GBP231,500 (2016: GBP224,200).
We continue to monitor market activity closely whilst also
remaining vigilant regarding broader external conditions. We will
maintain strong discipline over operations to ensure we fulfil our
strategic objectives.
OUTLOOK
The housing market across our regions remains confident and
consumer sentiment is resilient. The potential headwinds of higher
inflation are being mitigated by healthy employment levels and a
competitive but disciplined mortgage market. Customers are finding
good levels of support from mortgage lenders who have approved c.
195,000 loans during the second quarter of 2017, a very similar
level compared with the same period last year despite the
heightened uncertainties associated with the result of the recent
UK General Election.
With our extensive network of sales outlets across the UK
offering attractive house types at affordable prices, we expect to
see the normal seasonal increase in sales interest from customers
as the summer holidays come to an end in early September. Since 30
June we have opened 22 new outlets for sales whilst 42 existing
outlets have fully sold through. We plan to open a further c. 80
new outlets through to the end of the year, including the 25
outlets where we are already pushing forward with our build
programmes and which will commence sales release in early
September. The Group's current 355 active outlets will be added to
as these 25 outlets are released for sale over the next few weeks
(2016: 375 active outlets). We will continue to invest in bringing
new land into production promptly to expand the Group's outlet
network to offer new homes to as many local communities as
possible. We look forward to engaging with the Government on its
Housing White Paper consultation process over the coming months,
specifically in relation to planning improvements.
Management are aiming to maintain the sustainable growth of the
business and will increase build activity to reach our optimal
scale in each of our regional markets. We will continue to invest
in the management of our build programmes and improve the
availability of newly built homes for our customers. We anticipate
our cash generation will remain strong.
Persimmon's performance over the first half of 2017 has been
excellent. By focussing on the consistent execution of our strategy
over recent years, the Group is in an enviable position to adapt to
changing market conditions and to take advantage of market
opportunities as events unfold. We remain mindful of the risks the
Group faces. We will continue to concentrate on delivering the best
possible outcomes for our shareholders based upon maximising the
cash efficiency of the business and continuing to invest in the
Group's high quality land bank.
On behalf of the Board, I thank the entire Persimmon team for
their continued hard work. All of the Group's employees, workers,
subcontractors, and other stakeholders are congratulated for
producing these outstanding results. The Board is confident of the
future success of the Group.
Nicholas Wrigley
Chairman
21 August 2017
* stated before goodwill impairment (2017: GBP5.4m, 2016:
GBP4.0m)
** 12 month rolling average stated before goodwill
impairment
PERSIMMON PLC
Condensed Consolidated Statement of Comprehensive Income
For the six months to 30 June 2017 (unaudited)
Six months Six months Year to
to 30 June to 30 June 31 December
2017 2016 2016
-------------------------------------- ------ ------------ ------------ -------------
Note
Total Total Total
GBPm GBPm GBPm
-------------------------------------- ------ ------------ ------------ -------------
Revenue 1,662.2 1,489.3 3,136.8
Cost of sales (1,154.9) (1,088.5) (2,265.4)
------ ------------
Gross profit 507.3 400.8 871.4
Other operating income 6.0 6.4 6.8
Operating expenses (59.3) (56.7) (107.7)
Profit from operations before impairment
of intangible assets 459.4 354.5 778.5
Impairment of intangible assets (5.4) (4.0) (8.0)
-------------------------------------- ------ ------------ ------------ -------------
Profit from operations 454.0 350.5 770.5
Finance income 9.8 9.7 19.8
Finance costs (6.4) (7.9) (15.5)
-------------------------------------- ------ ------------ ------------ -------------
Profit before tax 457.4 352.3 774.8
Tax 3.1 (88.8) (69.3) (149.5)
-------------------------------------- ------ ------------ ------------ -------------
Profit after tax
(all attributable to equity holders
of the parent) 368.6 283.0 625.3
-------------------------------------- ------ ------------ ------------ -------------
Other comprehensive expense
Items that will not be reclassified
to profit:
Remeasurement charges on defined
benefit pension schemes 10 (1.8) (58.2) (23.4)
Tax 3.2 0.3 10.5 4.4
-------------------------------------- ------ ------------ ------------ -------------
Other comprehensive expense for the
period, net of tax (1.5) (47.7) (19.0)
---------------------------------------------- ------------ ------------ -------------
Total comprehensive income for
the period 367.1 235.3 606.3
Earnings per share (i)
Basic 4 119.5 92.0p 203.0p
Diluted 4 115.4 89.2p 197.0p
-------------------------------------- ------ ------------ ------------ -------------
(i) Earnings per share is calculated in accordance with IAS 33 :
Earnings Per Share.
PERSIMMON PLC
Condensed Consolidated Balance Sheet
At 30 June 2017 (unaudited)
30 June 30 June 31 December
Note 2017 2016 2016
GBPm GBPm GBPm
--------------------------------- ------- ---------- ---------- --------------
Assets
Non-current assets
Intangible assets 208.2 217.6 213.6
Property, plant and equipment 49.2 40.1 43.0
Investments accounted for using
the equity method 3.0 3.0 3.0
Available for sale financial
assets 7 132.7 163.2 148.7
Trade and other receivables 7.0 9.2 8.8
Deferred tax assets 59.5 37.0 42.5
Retirement benefit assets 10 42.4 5.8 23.3
--------------------------------- ------- ---------- ---------- --------------
502.0 475.9 482.9
--------------------------------- ------- ---------- ---------- --------------
Current assets
Inventories 6 2,722.1 2,742.5 2,645.0
Trade and other receivables 119.5 125.2 103.7
Cash and cash equivalents 1,120.4 462.0 913.0
--------------------------------- ------- ---------- ---------- --------------
3,962.0 3,329.7 3,661.7
Total assets 4,464.0 3,805.6 4,144.6
--------------------------------- ------- ---------- ---------- --------------
Liabilities
Non-current liabilities
Trade and other payables (338.7) (308.3) (333.3)
Deferred tax liabilities (20.8) (15.1) (17.7)
Partnership liability (37.4) (40.5) (41.7)
Retirement benefit obligations 10 - (45.0) -
--------------------------------- ------- ---------- ---------- --------------
(396.9) (408.9) (392.7)
--------------------------------- ------- ---------- ---------- --------------
Current liabilities
Trade and other payables (944.9) (956.4) (935.0)
Capital Return liability 5 (339.5) - -
Partnership liability (5.4) (5.4) (5.4)
Current tax liabilities (66.3) (91.1) (74.1)
(1,356.1) (1,052.9) (1,014.5)
Total liabilities (1,753.0) (1,461.8) (1,407.2)
Net assets 2,711.0 2,343.8 2,737.4
Equity
Ordinary share capital issued 30.9 30.8 30.8
Share premium 11.0 9.7 10.6
Capital redemption reserve 236.5 236.5 236.5
Other non-distributable reserve 276.8 276.8 276.8
Retained earnings 2,155.8 1,790.0 2,182.7
Total equity 2,711.0 2,343.8 2,737.4
PERSIMMON PLC
Condensed Consolidated Statement of Changes in Shareholders'
Equity
For the six months to 30 June 2017 (unaudited)
Share Share Capital Other Retained Total
capital premium redemption non- earnings
reserve distributable
GBPm GBPm GBPm reserve GBPm GBPm
GBPm
--------------------------------- --------- --------- ------------ --------------- ---------- --------
Six months ended 30 June 2017:
Balance at 31 December 2016 30.8 10.6 236.5 276.8 2,182.7 2,737.4
Profit for the period - - - - 368.6 368.6
Other comprehensive expense - - - - (1.5) (1.5)
Transactions with owners:
Dividends on equity shares - - - - (416.6) (416.6)
Issue of new shares 0.1 0.4 - - - 0.5
Exercise of share options/share
awards - - - - (0.9) (0.9)
Share-based payments - - - - 22.6 22.6
Satisfaction of share options
from own shares held - - - - 0.9 0.9
--------------------------------- --------- --------- ------------ --------------- ---------- --------
Balance at 30 June 2017 30.9 11.0 236.5 276.8 2,155.8 2,711.0
Six months ended 30 June 2016:
Balance at 31 December 2015 30.7 9.3 236.5 276.8 1,902.5 2,455.8
Profit for the period - - - - 283.0 283.0
Other comprehensive expense - - - - (47.7) (47.7)
Transactions with owners:
Dividends on equity shares - - - - (338.3) (338.3)
Issue of new shares 0.1 0.4 - - (0.1) 0.4
Own shares purchased - - - - (1.0) (1.0)
Exercise of share options/share
awards - - - - (0.8) (0.8)
Share-based payments - - - - (8.3) (8.3)
Satisfaction of share options
from own shares held - - - - 0.7 0.7
--------------------------------- --------- --------- ------------ --------------- ---------- --------
Balance at 30 June 2016 30.8 9.7 236.5 276.8 1,790.0 2,343.8
Year ended 31 December 2016:
Balance at 31 December 2015 30.7 9.3 236.5 276.8 1,902.5 2,455.8
Profit for the year - - - - 625.3 625.3
Other comprehensive expense - - - - (19.0) (19.0)
Transactions with owners:
Dividends on equity shares - - - - (338.3) (338.3)
Issue of new shares 0.1 1.3 - - (0.1) 1.3
Own shares purchased - - - - (1.0) (1.0)
Exercise of share options/share
awards - - - - (1.0) (1.0)
Share-based payments - - - - 13.3 13.3
Satisfaction of share options
from own shares held - - - - 1.0 1.0
--------------------------------- --------- --------- ------------ --------------- ---------- --------
Balance at 31 December 2016 30.8 10.6 236.5 276.8 2,182.7 2,737.4
PERSIMMON PLC
Condensed Consolidated Cash Flow Statement
For the six months to 30 June 2017 (unaudited)
Note Six months Six months Year to
to to 31 December
30 June 30 June 2016
2017 2016 GBPm
GBPm GBPm
----------------------------------------- ----- ----------- -------------------------- -------------
Cash flows from operating activities:
Profit for the period 368.6 283.0 625.3
Tax charge 3.1 88.8 69.3 149.5
Finance income (9.8) (9.7) (19.8)
Finance costs 6.4 7.9 15.5
Depreciation charge 4.1 3.9 8.0
Impairment of intangible assets 5.4 4.0 8.0
Share-based payment charge 6.7 4.1 14.0
Net imputed interest income 3.2 2.2 3.9
Other non-cash items (0.4) (2.7) (3.9)
----------------------------------------- ----- ----------- -------------------------- -------------
Cash inflow from operating activities 473.0 362.0 800.5
Movements in working capital:
(Increase)/decrease in inventories (75.1) (92.7) 7.8
Increase in trade and other receivables (44.7) (32.1) (18.3)
Increase in trade and other payables 16.0 35.6 11.1
Decrease in available for sale
financial assets 24.0 22.1 44.6
----------------------------------------- ----- ----------- -------------------------- -------------
Cash generated from operations 393.2 294.9 845.7
Interest paid (3.4) (3.4) (4.0)
Interest received 1.8 1.5 3.1
Tax paid (94.4) (52.2) (146.6)
----------------------------------------- ----- ----------- -------------------------- -------------
Net cash inflow from operating
activities 297.2 240.8 698.2
----------------------------------------- ----- ----------- -------------------------- -------------
Cash flows from investing activities:
Purchase of property, plant and
equipment (10.3) (7.4) (14.7)
Proceeds from sale of property,
plant and equipment 0.1 0.7 0.8
----------------------------------------- ----- ----------- -------------------------- -------------
Net cash outflow from investing
activities (10.2) (6.7) (13.9)
----------------------------------------- ----- ----------- -------------------------- -------------
Cash flows from financing activities:
Financing transaction costs - (0.9) (0.9)
Payment of Partnership Liability (3.0) (2.8) (2.8)
Own shares purchased - (1.0) (1.0)
Share options consideration 0.5 0.5 1.3
Dividends paid (77.1) (338.3) (338.3)
Net cash outflow from financing
activities (79.6) (342.5) (341.7)
----------------------------------------- ----- ----------- -------------------------- -------------
Increase/(decrease) in net cash
and cash equivalents 9 207.4 (108.4) 342.6
Cash and cash equivalents at the beginning
of the period 913.0 570.4 570.4
------------------------------------------------ ----------- -------------------------- -------------
Cash and cash equivalents at the
end of the period 1,120.4 462.0 913.0
----------------------------------------- ----- ----------- -------------------------- -------------
Notes to the condensed consolidated half year financial
statements (unaudited)
1. Basis of preparation
The half year condensed financial statements for the six months
to 30 June 2017 have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority
and with International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union. The half year financial
statements are unaudited, but have been reviewed by the auditors
whose report is set out at the end of this report. This report
should be read in conjunction with the Group's annual financial
statements for the year ended 31 December 2016, which have been
prepared in accordance with IFRSs as adopted by the European
Union.
The comparative figures for the financial year ended 31 December
2016 are not the company's statutory accounts for that financial
year. Those accounts have been reported on by the company's auditors
and delivered to the Registrar of Companies. The report of the
auditors was (i) unqualified, (ii) did not include a reference
to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and (iii) did not contain
a statement under section 498 (2) or (3) of the Companies Act
2006.
The accounting policies applied are consistent with those of
the annual financial statements for the year ended 31 December
2016, as described in those annual financial statements.
The Group has not applied the following new and revised IFRSs
that have been issued but are not yet effective and in some cases
have not yet been endorsed by the European Union:
- IFRS 15 Revenue from Contracts with Customers
- IFRS 9 Financial Instruments
- IFRS 16 Leases
- Amendments to IFRS 2: Classification and Measurement of Share-based
Payment Transactions
- Amendments to IAS 12: Recognition of Deferred Tax Assets for
Unrealised Losses
- Amendments to IAS 7: Disclosure Initiative
Where material, the expected impact to the Group Financial Statements
on adoption of the above standards is detailed in the Group annual
financial statements for the year ended 31 December 2016. This
assessment has not changed in the period to 30 June 2017.
Going concern
After making due enquiries, and in accordance with the FRC's
'Guidance on Risk Management, Internal Control and Related Financial
and Business Reporting' issued in 2014, the Directors have a
reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing these condensed consolidated half year financial statements.
2. Segmental analysis
The Group has only one reportable operating segment, being housebuilding
within the UK, under the control of the Executive Board. The
Executive Board has been identified as the Chief Operating Decision
Maker as defined under IFRS 8: Operating Segments.
3. Tax
3.1 Analysis of the tax charge for the period
Six months Six months Year to
to to 31 December
30 June 30 June 2016
2017 2016 GBPm
GBPm GBPm
------------------------------------------------------ ----------- -------------
Tax charge comprises:
UK corporation tax in respect of the
current period 86.5 71.1 153.6
Adjustments in respect of prior periods - (6.1) (11.3)
------------------------------------------ ----------- ----------- -------------
86.5 65.0 142.3
------------------------------------------ ----------- ----------- -------------
Deferred tax relating to origination
and reversal of temporary differences 2.3 0.2 3.0
Adjustments recognised in the current
period in respect of prior periods
deferred tax - 4.1 4.2
------------------------------------------ ----------- ----------- -------------
2.3 4.3 7.2
------------------------------------------ ----------- ----------- -------------
88.8 69.3 149.5
------------------------------------------ ----------- ----------- -------------
3.2 Deferred tax recognised in other comprehensive income
Six months Six months Year to
to to 31 December
30 June 30 June 2016
2017 2016 GBPm
GBPm GBPm
------------------------------------------ ----------- ----------- -------------
Recognised on remeasurement charges
on pension schemes (0.3) (10.5) (4.4)
3.3 Deferred tax recognised directly in equity
Six months Six months Year to
to to 31 December
30 June 30 June 2016
2017 2016 GBPm
GBPm GBPm
------------------------------------------ ----------- ----------- -------------
Arising on transactions with equity
participants
Related to equity-settled transactions (15.9) 12.4 0.7
------------------------------------------ ----------- ----------- -------------
As at 30 June 2017, the Group has recognised deferred tax assets
on deductible temporary differences at 17%, the rate enacted at
the end of the reporting period.
4. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
period (excluding those held in the employee benefit trusts and any
treasury shares all of which are treated as cancelled) which were
308.5m (June 2016: 307.7m,December 2016: 308.0m).
Diluted earnings per share is calculated by dividing the profit
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue adjusted to
assume conversion of all potentially dilutive ordinary shares from
the start of the period, giving a figure of 319.4m (June 2016:
317.3m, December 2016: 317.5m).
Underlying earnings per share excludes goodwill impairment. The
earnings per share from continuing operations were as follows:
Six months Six months Year to
to to 30 June 31 December
30 June 2016 2016
2017
-------------------------------------------- ------------ ------------ --------------
Basic earnings per share 119.5p 92.0p 203.0p
Underlying basic earnings per share 121.2p 93.3p 205.6p
Diluted earnings per share 115.4p 89.2p 197.0p
Underlying diluted earnings per share 117.1p 90.4p 199.5p
-------------------------------------------- ------------ ------------ --------------
The calculation of the basic and diluted earnings per share is based
upon the following data:
Six months Six months Year to
to to 30 June 31 December
30 June 2016 2016
2017 GBPm GBPm
GBPm
-------------------------------------------- ------------ ------------ --------------
Underlying earnings attributable to
shareholders 374.0 287.0 633.3
Goodwill impairment (5.4) (4.0) (8.0)
-------------------------------------------- ------------ ------------ --------------
Earnings attributable to shareholders 368.6 283.0 625.3
-------------------------------------------- ------------ ------------ --------------
5. Dividends/Return of capital
On 31 March 2017 an additional and fifth payment of the Capital
Return Plan of 25p per share (or GBP77.1m) was paid as an interim
cash dividend.
As at 30 June 2017 the Group balance sheet included a Capital Return
liability of GBP339.5m in relation to the sixth payment of the Capital
Return Plan of 110p per share (or GBP339.5m). This was paid as a
second interim cash dividend after the balance sheet date on 3 July
2017.
Six months Six months Year to
to 30 June to 31 December
2017 30 June 2016
GBPm 2016 GBPm
GBPm
-------------------------------------------------- ------------ ----------- -----------------
2016 Dividend to all shareholders of
110p per share - 338.3 338.3
2017 Dividend to all shareholders of
25p per share 77.1 - -
-------------------------------------------------- ------------ ----------- -----------------
Total return to shareholders 77.1 338.3 338.3
------------------------------------------------------- ------------ ----------- -----------------
6. Inventories
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
-------------------------------------------------- ------------ ----------- -----------------
Land 1,970.8 2,085.5 1,946.4
Work in progress 676.1 587.4 617.2
Part exchange properties 32.2 27.4 37.1
Showhouses 43.0 42.2 44.3
------------------------------------------------------- ------------ ----------- -----------------
2,722.1 2,742.5 2,645.0
------------------------------------------------------- ------------ ----------- -----------------
At 30 June 2017 the Group conducted a further review of the net
realisable value of its land and work in progress portfolio. This
review did not give rise to an exceptional credit or debit to the
consolidated statement of comprehensive income (2016: GBPnil). Our
approach to the net realisable value review has been consistent
with that conducted at 31 December 2016 which was fully disclosed
in the financial statements for the year ended on that date.
The key judgements in estimating the future net present realisable
value of a site were the estimation of likely sales prices, house
types and costs to complete the developments. Sales prices and costs
to complete were estimated on a site by site basis based upon existing
market conditions. If the UK housing market were to improve or deteriorate
in the future then further adjustments to the carrying value of
land and work in progress may be required.
Following this review GBP29.1m (2016: GBP42.7m) of inventories are
valued at fair value less costs to sell rather than at historical
cost.
7. Available for sale financial assets
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
--------------------------------------- -------- -------- ------------
Available for sale financial assets
at beginning of period 148.7 177.9 177.9
Additions - 0.4 0.5
Settlements (24.0) (23.2) (45.6)
Gains (Finance income) 8.0 8.1 15.9
--------------------------------------- -------- -------- ------------
Available for sale financial assets
at end of period 132.7 163.2 148.7
--------------------------------------- -------- -------- ------------
There have been no gains/losses recognised in other comprehensive
income other than those recognised through finance income in
profit and loss. Of the gains recognised in finance income for
the period GBP2.6m (2016: GBP3.3m) was unrealised.
8. Financial Instruments
In aggregate, the fair value of financial assets and liabilities
are not materially different from their carrying value.
Financial assets and liabilities carried at fair value are categorised
within the hierarchical classification of IFRS 7 Revised (as
defined within the standard) as follows:
30 June 30 June 31 December
2017 2016 2016
Level 3 Level 3 Level 3
GBPm GBPm GBPm
------------------------------------------ ----------- ---------- -------------
Available for sale financial assets 132.7 163.2 148.7
----------------------------------------------- ----------- ---------- -------------
Available for sale financial assets
Available for sale financial assets are carried at fair value.
The fair value is determined by reference to the rates at which
they could be exchanged by knowledgeable and willing parties.
Fair value is determined by discounting forecast cash flows for
the residual period of the contract by a risk adjusted rate.
There exists an element of uncertainty over the precise final
valuation and timing of cash flows arising from these assets.
As a result the Group has applied inputs based on current market
conditions and the Group's historic experience of actual cash
flows resulting from such arrangements. These inputs are by nature
estimates and as such the fair value has been classified as level
3 under the fair value hierarchy laid out in IFRS 13: Fair Value
Measurement.
Significant unobservable inputs into the fair value measurement
calculation include regional house price movements based on the
Group's actual experience of regional house pricing and management
forecasts of future movements, weighted average duration from
inception to settlement of 10 years (2016: 10 years) and discount
rate of 8% (2016: 8%) based on current observed market interest
rates on secured second loans.
The discounted forecast cash flow calculation is dependent upon
the estimated future value of the properties on which the available
for sale financial assets are secured. Adjustments to this input,
which might result from a change in the wider property market,
would have a proportional impact upon the fair value of the asset.
Furthermore, whilst not easily assessable in advance, the resulting
change in security value may affect the credit risk associated
with the counterparty, influencing fair value further.
9. Reconciliation of net cash flow to net cash
Six months Six months Year to
to to 31 December
30 June 30 June 2016
2017 2016 GBPm
GBPm GBPm
---------------------------------------- ------------ ------------ -------------
Increase/(decrease) in net cash
and cash equivalents in cash flow 207.4 (108.4) 342.6
Net cash at beginning of period 913.0 570.4 570.4
Net cash at end of period 1,120.4 462.0 913.0
----------------------------------------- ---- ------------ ------------ -------------
10. Retirement benefit assets/obligations
The amounts recognised in the consolidated statement of comprehensive
income are as follows:
Six months Six months Year to
to 30 June to 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
----------------------------------------- ------------ ------------ -------------
Current service cost 1.2 1.2 2.4
Administrative expense 0.4 0.4 0.7
----------------------------------------- ------------ ------------ -------------
Pension cost recognised as operating
expense 1.6 1.6 3.1
Pension cost recognised as net finance
credit (0.3) (0.3) (0.8)
----------------------------------------- ------------ ------------ -------------
Total defined benefit pension cost
recognised in profit or loss 1.3 1.3 2.3
Remeasurement charges recognised
in other comprehensive expense 1.8 58.2 23.4
----------------------------------------- ------------ ------------ -------------
Total defined benefit scheme charge
recognised 3.1 59.5 25.7
----------------------------------------- ------------ ------------ -------------
The amounts included in the balance sheet arising from the Group's
obligations in respect of the Pension Schemes are as follows:
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
----------------------------------------- ------------ ------------ -------------
Fair value of Pension Scheme assets 637.1 536.0 605.6
Present value of funded obligations (594.7) (575.2) (582.3)
----------------------------------------------- ------------ ------------ -------------
Net pension asset/(liability) 42.4 (39.2) 23.3
----------------------------------------------- ------------ ------------ -------------
An update on the 31 December 2016 IAS 19 valuation, adjusted
for current market conditions, has been obtained from the schemes'
actuary as at 30 June 2017 and has been used as the basis for
these figures.
11. Related parties
There are no disclosable related party transactions (as required
by DTR 4.2.8R) during the period (2016: none).
12. Seasonality
In common with the rest of the UK housebuilding industry, the
Group experiences the highest level of sales in spring and autumn,
which also results in peaks and troughs in the Group's working
capital profile. Therefore, any economic weakness which affects
the peak selling seasons can have a disproportionate impact on
the reported results.
Principal risks
Risk Impact Mitigation
UK's exit from Following the referendum We continue to closely monitor
the EU vote on 23 June 2016 and the impact of this increased
the commencement of negotiations uncertainty on the UK economy
to leave the European Union, and the housing market through
together with the result the review of external information
of the UK General Election and changes in the behaviour
on 8 June 2017, uncertainty of our customer base. Close
surrounding the outlook management of work in progress
for the UK economy has levels matching supply to
increased. Such uncertainty demand will continue and
may reduce consumer confidence land investment decisions
such that demand and pricing will continue to be assessed,
for new homes may be impacted including measures to ensure
affecting revenues, profits exposure to market disruption
and cash flows and may is mitigated. The overall
result in the impairment shortage of supply of housing
of asset values. In addition, in the UK may provide a
the devaluation of the degree of support to the
UK currency and a possible housing market should these
tightening of the availability circumstances arise. Action
of construction skills taken by the Government
due to potential changes to adjust policy to support
to legislation governing UK economic performance
free movement of labour may provide further mitigation
may impact costs and build as might any response with
activity. respect to interest rates
by the Bank of England.
We will continue to employ
robust tendering processes
to maintain strong cost
control over Group sourcing.
In addition, we will remain
focused on our training
initiatives to improve the
supply of the necessary
construction skills the
Group requires.
National and The housebuilding industry We control the level of
regional economic is sensitive to changes build on-site by closely
conditions in unemployment, interest managing our work in progress
rates and consumer confidence. levels. We carry out extensive
Any deterioration in economic due diligence prior to our
conditions may significantly land investment decisions
decrease demand and pricing to capture best returns.
for new homes, which could We monitor our geographical
have a material effect spread to mitigate the effects
on our business revenues, of local microeconomic fluctuations.
margins and profits and We monitor lead indicators
result in the impairment on the future direction
of asset values. of the UK housing market
so as to manage our exposure
to any future market disruption.
Mortgage availability Any restrictions in the We monitor Bank of England
availability of mortgages commentary on credit conditions.
for our customers could We ensure that our investment
reduce demand for our homes in land and work in progress
and affect revenues, profits is appropriate for our level
and cash flows. Early withdrawal of sales and our expectations
of the Government sponsored for market conditions. We
Help to Buy scheme could monitor the Council of Mortgage
reduce demand from first Lenders' monthly reports
time buyers and other customers and lenders' announcements
impacting revenues, profits, for trends in lending. The
and cash flows. Government's Help to Buy
scheme, which currently
is anticipated to remain
available until 2021, supports
customers to gain access
to the housing market across
the UK with very competitive
mortgage rates.
Health and safety The health and safety of We ensure that the Board's
our employees, subcontractors, health and safety strategy
home owners and visitors is implemented by our comprehensive
to our construction sites management systems and controls,
is of paramount importance overseen by our Group Health
to us. Accidents on our and Safety Department to
sites could lead to reputational minimise accidents on our
damage and financial penalties. sites.
Regulatory Our business is subject We operate comprehensive
compliance to extensive and complex management systems to ensure
laws and regulations relating regulatory compliance. We
to planning, construction, hold a landbank sufficient
and the environment. Our to provide security of supply
obligations to comply with for short to medium term
legislation can result requirements and engage
in delays causing us to extensively with planning
incur substantial costs stakeholders.
and prohibit or restrict
land development and construction.
Non compliance could also
result in damage to the
Group's reputation.
Materials Expansion in UK housebuilding We closely monitor our build
has driven an increase programmes and our supply
in demand for materials chain enabling us to manage
and may cause availability and react to any supply
constraints and/or costs chain issues. We build good
to increase ahead of our relationships with suppliers
expectations. to maintain consistency
of supply and management
of costs. To strengthen
our control over brick supply
and cost, we have recently
constructed our own brick
plant, which will commence
supply to Group operations
in the second half of 2017.
This complements our existing
off site manufacturing capability
at Space4, the Group's business
producing timber frames
and highly insulated wall
panels and roof cassettes
which provides a modern
method of constructing new
homes.
Labour Having an appropriately We closely monitor our build
skilled workforce is a programmes to enable us
key requirement for housebuilding. to manage our labour requirements.
Expansion in UK housebuilding We operate in-house apprentice
has increased demand for and training programmes
skilled labour which may to supply the Group with
create site resourcing skilled labour.
shortfalls and/or increase We are committed to playing
labour costs ahead of our a full and active role in
expectations. external initiatives to
address the skills shortage
such as the Home Building
Skills Partnership, a joint
initiative of the Construction
Industry Training Board
and the Home Builders Federation.
Where appropriate, we use
the Group's Space4 modern
method of construction which
reduces the site based skilled
labour required in the construction
of our homes.
Strategy The Board has adopted its The Group's strategy is
strategy as it believes agreed by the Board at an
it is the one most likely annual strategy meeting
to add the greatest sustainable and thereafter regularly
value for shareholders reviewed at Board meetings
and stakeholders. It is and by the Executive Directors.
possible that, with time, The Board engages with management
factors become known that and employees to ensure
indicate that the strategy the strategy is communicated
currently being pursued and understood and that
is not the most effective all employees have a clear
or efficient and that alternative understanding of the potential
strategies may be more benefits and risks of the
appropriate. strategy.
Statement of Directors' responsibilities in respect of the Half
Year Report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU
-- the Half Year Report includes a fair review of the information
required by:
DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have
occurred during the first six months of the financial
year and their impact on the condensed set of financial
statements and a description of the principal risks and
uncertainties for the remaining six months of the year;
and
DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken
place in the first six months of the current financial
year and that have materially affected the financial
position or performance of the entity during that period;
and any changes in the related party transactions described
in the last annual report that could do so.
The Directors of Persimmon Plc are:
Nicholas Wrigley Chairman
Jeff Fairburn Group Chief Executive
Mike Killoran Group Finance Director
David Jenkinson Group Managing Director
Jonathan Davie Non-Executive Director
Marion Sears Non-Executive Director
Rachel Kentleton Non-Executive Director
Nigel Mills Non-Executive Director
Simon Litherland Non-Executive Director (appointed 3(rd)
April 2017)
By order of the Board
Jeff Fairburn Mike Killoran
Group Chief Executive Group Finance Director
21 August 2017
The Group's annual financial reports, half year reports and
trading updates are available from the Group's website at
www.persimmonhomes.com/corporate.
Independent Review Report to Persimmon Plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises the Condensed
Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Balance Sheet, the Condensed Consolidated Statement of
Changes in Shareholders' Equity, the Condensed Consolidated Cash
Flow Statement and the related notes 1 to 12. We have read the
other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
21 August 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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