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REG-Persimmon Plc Half Yearly Report - Part 1 Released: 25/08/2009
com:20090825:RnsY9310X
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RNS Number : 9310X
Persimmon PLC
25 August 2009
TUESDAY 25 AUGUST 2009
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009
* Pre-tax profit of £9.8 million after the exceptional release of £27.9 million
of net realisable value provision (H1 2008: £36.9 million - after exceptional
charge of £64.0m)
* Legal completions for H1 2009 of 4,006 units (H1 2008: 5,501) at an average
selling price of £155,524* (H1 2008: £181,485)
* Total sales revenue of £611.8 million** (H1 2008: £998.4 million)
* Operating profit of £36.5 million*** (H1 2008: £75.7 million)
* Borrowings reduced to £494.2 million**** (H1 2008: £905.5 million) - ahead of
expectations
* Year end debt now expected to be below £400 million - improvement on previous
guidance
* Recent visitor levels exceeded those of last year and cancellation rates have
been significantly lower throughout the period at c.16% (FY 2008: c. 30%)
* Current forward sales including legal completions since 1 July 2009 increased
c.9% to c.£910 million (2008: £836 million)
* 64,347 plots of land owned and under control - representing c.7 years supply
of land
* Investment in part exchange stock has decreased significantly to £11.4
million at end June (30 June 2008: £120.0 million)
* Recent introduction of HomeBuy Direct shared equity scheme by the Government
continues to gain momentum and provides opportunities for first time buyers.
Carrying value of shared equity asset on the balance sheet at 30 June 2009 £47.2
million (30 June 2008: £19.8 million)
John White, Group Chairman said: "We expect sales rates to remain resilient due
to the successful destocking that has occurred in the industry combined with the
continuing good levels of underlying demand for new homes in the UK. Recently,
selling prices have stabilised in most parts of mainland UK. Future volume
increases and price movements will be dependent upon mortgage availability, job
prospects and the health of the general economy.
Our strong balance sheet, reduced debt, long landbank and strategic land
opportunities, combined with an experienced management team provides an
excellent platform to create value for shareholders."
* calculated from nominal value of turnover - before £11.2m adjustment to fair
value shared equity sales (H1 2008: £nil)
** stated after £11.2m adjustment to fair value shared equity sales (H1 2008:
£nil)
*** including the exceptional release of £27.9 million of net realisable value
provision (H1 2008: £64.0m exceptional charge)
**** stated before finance leases and financing expenses
For further information, please contact:
Edward Orlebar
Charlotte McMullen
Marylene Guernier
John White, Group Chairman
Mike Farley, Group Chief Executive
Mike Killoran, Group Finance Director
Persimmon plc M: Communications
Tuesday 25th August: Tel: +44 (0) 20 7920 2333 Tel: +44 (0) 20 7920 2333
For Future Enquiries: Tel: +44 (0)1904 642199
Analysts wishing to listen to the presentation at 10:30am remotely may dial +44
(0)20 3037 9100
A webcast of today's analyst presentation will be available on
http://corporate.persimmonhomes.com/ this afternoon.
CHAIRMAN'S STATEMENT
RESULTS
During the six months ended 30 June 2009 Persimmon legally completed 4,006 units
(H1 2008: 5,501) at an average selling price of £155,524 (H1 2008: £181,485).
Total sales revenue for the period was £623.0 million (H1 2008: £998.4 million)
before adjusting for the fair value of shared equity sales of £11.2 million
leaving reported revenues at £611.8 million.
Pre-tax profit for the period was £9.8 million (H1 2008: £36.9 million)
including the release of £27.9 million of net realisable value provision as an
exceptional item. Operating profit was £36.5 million (H1 2008: £75.7 million) on
the same basis.
Total net borrowings at 30 June 2009 were £494.2 million (H1 2008: £905.5
million). We continue to achieve debt reductions ahead of our expectations and
now anticipate reducing borrowings ahead of previous guidance. We expect year
end debt to be below £400 million, well within the total facilities for the
Group of over £1 billion. These new and amended credit facilities were finalised
and signed on 13 March 2009.
Net interest charge for the period was £26.7 million (H1 2008: £38.8 million).
As previously stated, the Board does not intend to pay a dividend this year.
We reported at the time of our trading update that we did not expect to make
further provisions against the value of our landholdings in the absence of any
substantial change in current market conditions. We reiterate this stance today.
As mentioned above, our trading experience over the last six months has resulted
in the release of £27.9 million of net realisable value provision previously
incurred, which demonstrates the realistic current book value of our
landholdings of c. £1.7 billion.
CURRENT TRADING
Net reservations continue to run ahead of the comparative weeks of 2008. Sales
in the historically quieter summer weeks have held up well and are ahead of our
expectations. In recent weeks visitor levels have exceeded those of last year,
whilst cancellation rates have been significantly lower at c. 16% (Full Year
2008: c. 30%). Mortgage availability continues to be a concern, particularly the
scarcity of higher loan to value products. However, the overall situation in
respect of the mortgage market and valuations has recently shown signs of
improvement.
Current forward sales, including legal completions since 1 July 2009, are c.
£910 million (2008: £836 million). The average selling price of homes reserved
since 1 July 2009, is c. £174,000 compared to c. £163,650 over the same period
in 2008. This reflects a higher proportion of traditional housing sales,
particularly in the South, and a lower proportion of housing association sales.
We expect sales rates to remain resilient due to the successful destocking that
has occurred in the industry combined with the continuing good levels of
underlying demand for new homes in the UK.
The recent introduction of the HomeBuy Direct shared equity scheme by the
Government is gaining momentum. The scheme provides shared equity loans held
equally by the Government and Persimmon. This allows us to spread our equity
over an increased volume of house sales. We are using this scheme to good effect
and plan to continue with it. We are confident this remains a most attractive
offer in the current mortgage market, particularly to first time buyers, and
that it will deliver additional returns over the medium term.
We continue to carry shared equity receivables at fair value, having made
further provision of £11.2 million on first half completions (H1 2008: £nil) to
reflect the deferred receipt of these outstanding sales proceeds. The carrying
value of the shared equity asset on the balance sheet at 30 June 2009 was £47.2
million (2008: £19.8 million).
Whilst investment in shared equity continues, the investment in part exchange
stock has decreased significantly. Part exchange stock owned was £11 million at
30 June 2009 (2008: £120 million).
LAND
We currently have 64,347 plots of land owned and under control with residential
planning permission. This represents c. 7 years supply of land. We remain
focussed on improving planning consents on existing sites. We believe there are
good opportunities to improve returns by addressing issues surrounding Section
106 Agreements and overall house type and mix improvements. Our exposure to
inner city apartment schemes continues to be negligible.
We are making good progress with the planning of our strategic land portfolio.
This land will provide an excellent source of our new land requirements over
future years and can be acquired, in most cases, at a discount to the prevailing
market value, which will enhance margins in the future.
With our strong, consented landbank and significant strategic land portfolio
which is well spread geographically and focussed on traditional house types, we
can grow the business without the need to buy large amounts of new land. Indeed
the current opportunities available in this respect are limited. However, we
have selectively acquired a number of smaller sites for early development at
appropriate prices which will deliver a good level of return for the business.
We will continue with this carefully managed strategy for the foreseeable
future, although with the combination of our current credit facilities and
strong cash generation we are in an excellent position to add new land to our
portfolio as opportunities arise.
OUTLOOK
Recently, selling prices have stabilised in most parts of mainland UK, including
more latterly in the North of England. In the South, where the market is
stronger, we have achieved an increased rate of sales per site per week. Future
volume increases and price movements will be dependent upon mortgage
availability, job prospects and the health of the general economy.
We have continued to monitor all areas of expenditure in our business and are
beginning to see the full benefits of the actions we took last year to cut
overheads. Whilst we have been careful to maintain our national coverage,
operating expenses are currently running at a reduced rate of c. £6.5 million
per month. This will generate an overhead saving to the business in excess of
£50 million per annum when compared with the level of the latter months of 2007,
the period prior to our restructuring. Despite this, we expect that margin
recovery to more normal levels will take some time to achieve.
However our strong balance sheet, reduced debt, long landbank and strategic land
opportunities, combined with an experienced management team provides an
excellent platform to create value for shareholders. We are therefore confident
that we remain in a strong position to grow our business once again as
conditions improve.
PERSIMMON PLC
Condensed Consolidated Statement of Comprehensive Income (unaudited)
For the six months to 30 June 2009
Six months to 30 June 2009 Six months to 30 June 2008 Year to 31 December 2008
Before exceptional items Exceptional items Before exceptional items Exceptional items Before exceptional items Exceptional items
£m (Note 2) £m (Note 2) £m (Note 2)
Note £m Total £m Total £m Total
£m £m £m
Revenue 611.8 - 611.8 998.4 - 998.4 1,755.1 - 1,755.1
Cost of sales (571.6) 27.9 (543.7) (821.1) (49.0) (870.1) (1,489.8) (688.2) (2,178.0)
Gross profit / (loss) 40.2 27.9 68.1 177.3 (49.0) 128.3 265.3 (688.2) (422.9)
Other operating income 5.4 - 5.4 13.9 - 13.9 21.4 - 21.4
Operating expenses (36.5) - (36.5) (51.6) (15.0) (66.6) (91.0) (222.9) (313.9)
Share of results of jointly controlled entities (0.5) - (0.5) 0.1 - 0.1 0.8 - 0.8
Profit / (loss) from operations before impairment of
intangible assets 10.0 27.9 37.9 139.7 (64.0) 75.7 198.3 (710.1) (511.8)
Impairment of intangible assets (1.4) - (1.4) - - - (1.8) (201.0) (202.8)
Profit / (loss) from operations 8.6 27.9 36.5 139.7 (64.0) 75.7 196.5 (911.1) (714.6)
Finance income 2.3 - 2.3 2.6 - 2.6 4.1 6.3 10.4
Finance costs (29.0) - (29.0) (41.4) - (41.4) (75.8) - (75.8)
Profit / (loss) before tax (18.1) 27.9 9.8 100.9 (64.0) 36.9 124.8 (904.8) (780.0)
Tax 3 5.2 (5.2) - (28.7) 18.2 (10.5) (20.7) 175.7 155.0
Profit / (loss) after tax (12.9) 22.7 9.8 72.2 (45.8) 26.4 104.1 (729.1) (625.0)
(all attributable to equity holders of the parent)
Other comprehensive(expense)/income
Effective portion of changes in fair value of cash flow (0.6) - (0.6) 1.9 - 1.9 (0.8) - (0.8)
hedges
Net actuarial losses on defined benefit pension schemes 9 (26.1) - (26.1) (4.3) - (4.3) (43.8) - (43.8)
Tax on other comprehensive (expense)/income 7.5 - 7.5 0.7 - 0.7 (11.3) - (11.3)
Other comprehensive (expense)/income for the period, net of tax (19.2) - (19.2) (1.7) - (1.7) (55.9) - (55.9)
Total comprehensive (expense)/income for the period (32.1) 22.7 (9.4) 70.5 (45.8) 24.7 48.2 (729.1) (680.9)
Earnings per share i
Basic 5 3.3p 8.8p (208.3p)
Diluted 5 3.3p 8.8p (208.3p)
Non-GAAP measures - Underlying earnings per share ii
Basic 5 (3.8p) 24.1p 35.3p
Diluted 5 (3.8p) 24.0p 35.2p
i Earnings per share is calculated in accordance with IAS 33 'Earnings Per
Share'
ii Underlying earnings per share excludes exceptional items and goodwill
impairment
PERSIMMON PLC
Condensed Consolidated Balance Sheet (unaudited)
As at 30 June 2009
30 June 30 June 31 December
Note 2009 2008 2008
£m £m £m
ASSETS
Non-current assets
Intangible assets 263.2 467.7 264.7
Property, plant and equipment 36.0 44.9 45.1
Investments 3.4 3.2 3.9
Trade and other receivables 52.0 25.2 31.4
Forward currency swaps 8 15.7 - 96.0
Deferred tax assets 14.0 51.7 6.5
384.3 592.7 447.6
Current assets
Inventories 6 2,307.6 3,528.3 2,546.5
Trade and other receivables 130.5 160.7 138.2
Forward currency swaps 8 - - 20.8
Cash and cash equivalents 8 0.3 14.0 0.8
Assets held for sale 5.7 - -
2,444.1 3,703.0 2,706.3
Total assets 2,828.4 4,295.7 3,153.9
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings 8 (385.2) (667.3) (571.2)
Forward currency swaps 8 (9.5) (46.8) -
Deferred tax liabilities (26.5) (30.8) (26.5)
Retirement benefit obligation 9 (116.3) (61.4) (95.3)
Other liabilities (101.1) (142.0) (132.0)
(638.6) (948.3) (825.0)
Current liabilities
Interest bearing loans and borrowings 8 (93.7) (191.6) (147.6)
Forward currency swaps 8 (2.5) (16.7) -
Trade and other payables (471.9) (745.3) (551.9)
Current tax liabilities (74.2) (119.0) (74.2)
(642.3) (1,072.6) (773.7)
Total liabilities (1,280.9) (2,020.9) (1,598.7)
Net assets 1,547.5 2,274.8 1,555.2
SHAREHOLDERS' EQUITY
Ordinary share capital issued 30.3 30.3 30.3
Share premium 233.6 233.6 233.6
Hedge reserve (0.4) 2.1 0.1
Other non-distributable reserve 281.4 281.4 281.4
Retained earnings 1,002.6 1,727.4 1,009.8
Total shareholders' equity 1,547.5 2,274.8 1,555.2
PERSIMMON PLC
Condensed Consolidated Statement of Changes in Shareholders' Equity (unaudited)
As at 30 June 2009
Share capital£m Share premium£m Hedge reserve£m Other non distributable reserve£m Retained earnings£m Total shareholders' equity£m
6 months ended 30 June 2009:
Balance at 31 December 2008 30.3 233.6 0.1 281.4 1,009.8 1,555.2
Profit for the period - - - - 9.8 9.8
Other comprehensive expense - - (0.5) - (18.7) (19.2)
Transactions with owners:
Exercise of share options/share awards - - - - 0.2 0.2
Share option charge and taxation thereon - - - - 0.9 0.9
Other reserve movement - - - - 0.6 0.6
Balance at 30 June 2009 30.3 233.6 (0.4) 281.4 1,002.6 1,547.5
6 months ended 30 June 2008:
Balance at 31 December 2007 30.3 233.6 0.7 281.4 1,799.4 2,345.4
Profit for the period - - - - 26.4 26.4
Other comprehensive expense - - 1.4 - (3.1) (1.7)
Transactions with owners:
Exercise of share options/share awards - - - - 2.4 2.4
Own shares purchased - - - - (2.2) (2.2)
Share option charge and taxation thereon - - - - 2.6 2.6
Dividends approved and paid - - - - (98.1) (98.1)
Balance at 30 June 2008 30.3 233.6 2.1 281.4 1,727.4 2,274.8
Year ended 31 December 2008:
Balance at 31 December 2007 30.3 233.6 0.7 281.4 1,799.4 2,345.4
Loss for the year - - - - (625.0) (625.0)
Other comprehensive expense - - (0.6) - (55.3) (55.9)
Transactions with owners:
Exercise of share options/share awards - - - - 3.2 3.2
Own shares purchased - - - - (2.4) (2.4)
Share option charge and taxation thereon - - - - 3.7 3.7
Dividends approved and paid - - - - (113.1) (113.1)
Other reserve movement - - - - (0.7) (0.7)
Balance at 31 December 2008 30.3 233.6 0.1 281.4 1,009.8 1,555.2
PERSIMMON PLC
Condensed Consolidated Cash Flow Statement (unaudited)
For the six months to 30 June 2009
Six months to Six months to Year to
30 June 30 June 31 December
Note 2009 2008 2008
£m £m £m
Cash flows from operating activities:
Profit / (loss) for the period 9.8 26.4 (625.0)
Adjustments for:
Tax - 10.5 (155.0)
Finance income (2.3) (2.6) (4.1)
Finance costs 29.0 41.4 75.8
Depreciation charge 3.4 4.5 8.7
Amortisation of intangible assets 0.1 0.1 0.3
Impairment of intangible assets 1.4 - 1.8
Share of results of jointly controlled entities 0.5 (0.1) (0.8)
Profit on disposal of property, plant and equipment - (0.4) (0.7)
Share-based payment charge 0.9 3.3 4.4
Exceptional non-cash items (27.9) 61.8 892.7
Other non-cash items 1.5 0.4 (3.1)
Profit from operations before working capital movements 16.4 145.3 195.0
Movements in working capital:
Decrease / (increase) in inventories 266.8 (190.7) 187.8
(Increase) / decrease in trade and other receivables (11.5) 11.5 (8.1)
(Decrease) / increase in trade and other payables (118.9) 24.2 (173.6)
Net cash from operations 152.8 (9.7) 201.1
Interest paid (24.7) (34.7) (67.6)
Interest received 0.9 2.6 4.1
Tax (paid) / received - (43.4) 106.2
Net cash from / (used in) operating activities 129.0 (85.2) 243.8
Cash flows from investing activities:
Received from jointly controlled entities - 0.1 0.1
Purchase of property, plant and equipment (0.3) (2.1) (6.9)
Proceeds from sale of property, plant and equipment 0.3 1.3 2.2
Net cash used in investing activities - (0.7) (4.6)
Cash flows from financing activities:
Repaymentof borrowings (105.1) (75.7) (162.2)
Drawdown of loan facilities - 280.0 65.0
Other financing expenses (21.3) - -
Finance lease principal payments (0.6) (0.7) (1.4)
Own shares purchased - (2.2) (2.4)
Exercise of share options - 0.6 0.8
Dividends paid to Group shareholders - (98.1) (113.1)
Net cash (used in) / fromfinancing activities (127.0) 103.9 (213.3)
Increase in net cash and cash equivalents 7 2.0 18.0 25.9
Net cash and cash equivalents at beginning of period (22.9) (48.8) (48.8)
Net cash and cash equivalents at end of period 8 (20.9) (30.8) (22.9)
Notes to the condensed consolidated half year financial statements (unaudited)
1. Basis of preparation and approval of the half yearfinancial
statements
The half year financial statements for the six months to 30
June 2009 have been prepared in accordance with the Disclosure
and Transparency Rules of the Financial Services Authority and
with International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union. This report
should be read in conjunction with the Group's annual financial
statements for the year ended 31 December 2008, which have been
prepared in accordance with IFRSs as adopted by the European
Union.
Except as described below, the accounting policies applied are
consistent with those of the annual financial statements for
the year ended 31 December 2008, as described in those annual
financial statements.
The following new standards and amendments to standards are
mandatory for the first time for the financial year beginning 1
January 2009:
* IAS 1 (revised), 'Presentation of financial statements'. The
most significant change within IAS 1(revised) is the
requirement to produce a statement of comprehensive income
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