REG - Persimmon Plc - Final Results <Origin Href="QuoteRef">PSN.L</Origin> - Part 2
27/02/2017 07:06
- Part 2: For the preceding part double click ID:nRSa8552Xa
around half of the 3.8% overall increase, with the change in mix explained
in the brand performance review above adding to this gain. For 2016 our
southern regional markets accounted for c. 55% of total revenues, reflecting
both a greater proportion of higher value Charles Church homes in these
regional markets as well as the distribution of our active sales outlet
network across the UK.
Profitability
Operational improvements combined with reduced land recoveries associated with
opening new sales outlets from more recent land investments added a further
290 basis points to the Group's underlying operating margin** which reached
24.8% (2015: 21.9%) for the full year. In line with our expectations, we
maintained our margin progress through the second half of the year achieving a
margin of 25.7% in the second six months (2015: 23.0%), margins in the first
half being 23.8%.
Given the continued challenges in achieving a detailed planning consent and
making a start on site, coupled with our strong sales rates, opening up new
sales outlets is key to maintaining the strength of our sales network. We
opened 255 new sales outlets in the year (2015: 252 new sales outlets). Our
hard work to open outlets as promptly as possible has been rewarded. Land cost
recoveries have improved and secured an additional 160 basis point
contribution to the Group's gross margin year on year. The value of the
Group's land recoveries totalled 16.4% of sales for 2016, down from 18.0% in
2015. The continued improvement in land cost recoveries results from the
quality of the land we have acquired across the UK as well as the focus on
optimising the planning consents we secure to deliver our developments to our
local markets. These critical value-added activities are combined with strong
control over our development costs.
The growth in the number of new homes we build and deliver to customers
provides us with the opportunity to capture productivity gains and overhead
efficiencies across the Group. We continue to increase the coverage of our
Group house types across our regional markets as we secure new development
consents and open new sales outlets. This has allowed us to achieve benefits
from further consolidated procurement processes and site construction
activities. The Group house types also support our efforts to improve our
build programme management and site processes to capture productivity gains.
Our site management teams, site workers, sub-contractors and suppliers have
all worked extremely hard to support the Group's progress. These efforts have
delivered a further reduction in our build and direct costs by 80 basis points
to 55.8% of sales (2015: 56.6% of sales) for 2016.
Having opened five new businesses in just over 24 months the Group continues
to invest in our management teams, processes and systems to ensure sustainable
growth is supported. With our growth in volume in 2016, the Group's operating
expense efficiency improved contributing a further 70 basis points to the
Group's operating margin year on year. With further growth we expect this
trend will continue.
Cash generation, net finance income, and financial assets
The Group's long term strategy has strong cash generation through the housing
cycle at its core. By exercising capital discipline, together with maximising
the cash efficiency of operational activities, management will deliver strong
cash generation whilst minimising financial risk through the cycle. In 2016 we
generated £681m of free cash before capital returns, or 221 pence per share
(2015: £483m, 158 pence per share) and held £913m of cash balances at 31
December 2016 (2015: £570m).
Net finance income for 2016 was £4.3m (2015: £3.3m). Within this the imputed
interest generated on the Group's shared equity receivables totalled £15.9m
(2015: £15.7m) whilst the imputed interest payable on land creditors totalled
£12.0m (2015: £14.4m).
A key feature of our strategy is the disciplined reinvestment of the free cash
generated by the Group. The level of reinvestment will vary over the cycle
depending upon actual and prospective conditions in the sales and land
markets. During 2016 we increased our investment in development work in
progress to support higher levels of output to meet increased demand in the
market. However, we remained mindful of the risks associated with the UK's
decision to leave the EU and its potential impacts on the UK economy and the
UK housing market, as we still are today. In 2016 we were successful in
growing our cash margins whilst also optimising the cash efficiency of our
land replacement activity. The Group also maintained its superior asset turn.
The resulting strong cash generation provided the Group with the confidence
and ability to invest in substantial new land holdings at a rate of c. 123% of
2016 consumption.
We have focused on taking advantage of attractive investment opportunities in
a supportive land market where a number of the acquisitions offered good
deferred payment terms. However, due to the reduction in absolute number and
value of land acquisitions completed year on year the Group has reduced its
deferred land creditor obligations slightly, by £18m to £555m at the year end.
As a result the growth of the business was financed through the generation of
cash inflows from operations before working capital requirements, which
totalled £800m in 2016 (2015: £654m), without reducing the cash resources
available to shareholders.
The Group has continued to receive strong cash inflows from customers relating
to the early redemption of outstanding shared equity loans provided by the
Group in earlier years. The carrying value of the outstanding shared equity
loans, designated as "Available for sale financial assets", reduced in the
year by £29m to £149m (2015: £178m). The Board has reviewed the carrying value
of these receivables and has concluded that the value is appropriate.
The cash efficiency of our business processes combined with our capital
discipline is fundamental to the delivery of the Capital Return Plan. The 23%
increase in the rate of return on average capital employed* in the business to
reach 39.4% (2015: 32.1%) results from our focus on what we believe is the
right capital structure for the Group. We are confident that our operational
approach will support the execution of our long term strategy. The continued
acceleration and significant increase in the value of the Capital Return Plan
underscores this confidence.
Land and construction
At 31 December 2016 the carrying value of the Group's land assets was £1,946m,
£101m lower than the prior year (2015: £2,047m).
To sustain the business and support the Group's future growth we acquired
18,709 new plots of land during 2016. The Group owned 70,792 plots at the end
of the year. Of these total land interests 52,765 plots had an implementable
residential planning consent providing c. 3.5 years of forward supply at 2016
output levels. These plots will provide the necessary support to operations as
we seek to increase our output levels to optimal sustainable market share in
each of our regional markets in the future. We hope to secure an implementable
consent on the remaining plots as promptly as the planning system will allow.
Disciplined investment in new land opportunities at the appropriate point in
the housing market cycle at attractive values is critical in sustaining
superior shareholder value creation over the longer term.
We are currently promoting an additional 26,395 plots through the planning
system. The Group has entered into conditional contracts to eventually acquire
this land should we be successful in securing a full detailed implementable
consent.
Each of our 29 house building businesses is focused on securing high quality
returns by acquiring high quality replacement land in their regional markets.
The quality of these investments is confirmed by the strong profitability and
cash generation of the business and in the quality of the land bank we hold
for future development. We continue to invest in the Group's land and planning
skills and expertise which allows us to create significant value by
identifying compelling acquisition opportunities both in the short term land
market and for strategic land investment. Our planning teams continue to focus
on optimising our development schemes and bringing the sites into production
as quickly as possible.
A fundamental element of the Group's business model is the continued
investment in strategic land and successfully promoting this land through the
planning system to deliver plots with detailed residential consent. During the
year we acquired interests in a further c. 900 acres of strategic land and we
converted 11,268 plots of land from our strategic land portfolio, representing
c. 74% of the Group's land consumption.
Strategic land in sustainable locations offers local communities the optimal
opportunity for new homes to be delivered to meet their housing needs. We
focus on securing development opportunities that fulfil all the specific
planning requirements to enable the Group to achieve a detailed residential
planning consent as quickly as possible. The consistent application of the
National Planning Policy Framework in delivering more land for development
underpins the industry's confidence to make the substantial investment in land
and work in progress that is required to support an increase in output,
increasing the supply of new homes to communities across the UK.
We remain determined to pursue our planning applications with local planning
authorities and we are confident that our strategic land portfolio of c.
16,600 acres will yield up to c. 100,000 forward plots for future development
by the business in due course.
At 31 December 2016 the carrying value of our work in progress of £617m was
£99m higher than the prior year (2015: £518m). The Group is making substantial
investments in infrastructure on opening new sites to support prompt delivery
of new home sales in increasing numbers. We remain focused on increasing build
rates to meet market demand and to deliver as many new homes as is possible on
all of the Group's sites that have an implementable detailed planning consent.
The Group is carrying a larger volume of plot foundations into the new year
providing a strong platform for build completions in 2017.
At the end of the year the Group's work in progress investment represented 20%
of 2016 sales, an industry leading asset turn. This supports superior cash
generation and returns whilst minimising operational and financial risks. We
expect substantial additional investment will be made in work in progress to
support the Group's future growth.
The Board reviewed the net realisable value of land and work in progress at 31
December 2016 using consistent principles to prior years and concluded that
the carrying value was appropriate. At the year end the Group retained an
impairment provision of £48.5m (2015: £62.9m) which is considered adequate to
address the potential impact of current market uncertainties on future
revenues and direct costs for the relevant sites.
Shareholders' equity, treasury policy and related risks
The housing market is cyclical. Persimmon's long term strategy is designed to
mitigate the risks associated with this cycle. By maintaining the disciplined
application of capital over the long term we will retain flexibility of
funding to support investment in land and work in progress at the appropriate
point in the cycle, whilst returning a substantial amount of surplus capital
to shareholders. This approach will deliver and sustain greater shareholder
value creation over the long term. It will also support the development of the
business over the long term whilst minimising financial risk by maintaining a
strong financial position.
The excellent progress made to date, together with our confidence regarding
the Group's prospects, is reflected in the Directors' decision to enhance the
Capital Return Plan further on the announcement of these results for 2016. The
Board has decided to make an additional payment of surplus capital of 25 pence
per share, or c. £77m, to shareholders as a first interim dividend for the
2016 financial year.
This is a further improvement on the 45% increase to the Capital Return Plan
announced on 23 February 2016 when the Board announced an increase of 280
pence per share, (c. £860m) to the Capital Return Plan to a total of £9.00 per
share, or c. £2.76bn, over the Capital Return Plan period. The Board has
confirmed that the scheduled capital return of £1.10 per share will be paid as
planned on 3 July 2017, as a second interim dividend for the 2016 financial
year.
The Capital Return Plan now totals £9.25, or c. £2.85bn, to be paid over the
ten year period to 2021, representing a 49% increase over the original Capital
Return Plan.
The fourth instalment under the Capital Return Plan of £338m was accelerated
and paid to shareholders on 1 April 2016.
The Group's total retained profit after tax for 2016 of £625.3m was 20% higher
than the prior year (2015: £521.9m). The Group's retained earnings were offset
by an after tax remeasurement loss of £19.0m associated with the Group's
pension scheme asset of £23.3m but supplemented by share based payments of
£13.3m.
Total net asset value of the Group for the year ended 31 December 2016 of
£2,737m (2015: £2,456m) increased by 11% or £281m. Net assets per share
increased 11% over the prior year end to 887.3 pence (2015: 800.7 pence). Cash
balances held at the year end increased by £343m and totalled £913m (2015:
£570m).
The Group will focus on generating strong liquidity on a consistent basis. The
Group maintains revolving credit facilities which, if required, will only be
used to support the short term seasonal working capital needs of the business.
The Group extended the maturity of its £300m revolving credit facility to 31
March 2021 in 2016. The generation of strong annual after tax earnings,
management of the Group's equity, and debt and cash management facilities,
together with changes to planned shareholder capital returns will continue to
provide the appropriate resources through the housing cycle for the Group to
deliver its operational plans. This approach will mitigate the financial risks
the Group faces which include credit risk, liquidity risk, interest rate
volatility and debt capital market pricing risk.
Corporate Responsibility
Our Corporate Responsibility Committee reviews, monitors and evaluates
sustainability performance within the business. Committee membership is drawn
from all parts of the Group's operations to maintain clear alignment with the
Group's strategy. By organising its work into the five areas set out below,
"Our Customers", "Our Environment", "Our People", "Our Wellbeing" and "Our
Communities", we ensure that the interests of all stakeholders in the Group
are addressed. Detailed information on our approach to Corporate
Responsibility together with case studies can be found in our 2016
Sustainability Report available at www.corporate.persimmonhomes.com.
Our Customers
Delivering good quality new homes and great service to our customers is the
Group's priority. All members of our team are responsible for delivering high
levels of customer satisfaction.
Our land replacement processes focus on acquiring new land in locations which
deliver high amenity value to local communities providing great confidence to
our customers that they are buying a new home in the right location for their
family. Through the drive for excellence in execution of our development plans
we have the opportunity to create places where our customers wish to live and
work. The Group's house type designs and approach to development scheme
layouts is focused on creating sustainable environments that offer a
compelling choice for our customers to enjoy.
We continue to invest in the skills and systems that support our sales teams
to provide excellent levels of service to our customers, particularly in
respect of the specification of our homes and the amenity value of each of our
developments. We understand that buying a new home, and then preparing to move
in, is complicated and at times challenging. Our sales teams have the
expertise to provide information and guidance on the home buying process and
will support our customers with the practicalities of moving day to make it as
straightforward and enjoyable as possible.
As part of our design process we listen to our customers comments regarding
house type design, finishes and features to ensure our new homes offer choices
that our customers prefer. A key part of our sales and development process is
to offer good availability and choice of house types on all our developments.
We believe an important element to delivering good service to our customers is
to enable them to reserve their new home at an early stage in the development
process so as to create as much certainty as possible in support of their
buying decision. This allows greater opportunity for our customers to choose
from a range of bespoke extras which we offer through our Finishing Touches
range so as to deliver a home tailored to their needs and preferences. We aim
to make the legal process of buying the home as straightforward and prompt as
is possible working closely with the customer's solicitor and mortgage
provider to conclude matters efficiently.
Supporting the affordability of new homes for our customers by providing a
comprehensive range of selling prices and by exercising strong control over
development costs is of paramount importance to us. Our site sales teams
support our customers in deciding on the right choice of new home for their
family. In 2016 the Group's average selling price was £206,765 with c. 50% of
our private new homes being sold for £200,000 or less. Our typical house type
mix on a development provides a comprehensive range and is designed to
generate strong interest from first time buyers and first time movers. The
Government's Help to Buy shared equity loan scheme is providing greater access
to the owner occupier market, principally for first time buyers, by supporting
the buyer to purchase a newly built home with a 5% deposit. Mortgage lenders
are also keen to support these customers and offer the most favourable
interest rates on loans associated with this scheme. During the year 6,970 of
our customers bought a new home with a Government Help to Buy shared equity
loan.
We also seek to provide strong support to existing home owners to achieve
their move into a newly built home. We offer Part Exchange facilities to
remove the worries that usually accompany the uncertainties associated with
home buying chains. During 2016 10% of our private sale customers took
advantage of this opportunity to assist their move.
As a key part of the Group's drive to support the sustainability of
communities we delivered 2,218 homes (2015: 2,147) to our housing association
partners during the year. This low cost housing delivered by our Westbury
Partnerships business represented c. 15% of our sales and helps support social
inclusion within the local communities that we serve.
During 2016 we have continued to invest additional resources in new customer
focused initiatives to improve our customers' buying experience and our
NHBC/HBF 3 star rating. This is yielding further improvement in performance
with the majority of the Group's operating businesses showing progress. Prior
to customers moving into their new home we have improved our communication
processes with them to provide greater understanding of the progress we are
making in constructing their new home. We have strengthened our build
management processes to facilitate delivery to expected timeframes. Additional
support is being provided through reinvigorated processes to demonstrate the
features of the new home to customers, assistance with identifying any small
remaining issues on moving in day and providing improved systems and processes
for our customer care teams to support the prompt rectification of any
outstanding matters. Customer care performance is reflected in relevant
employees' remuneration to support a closer alignment to the Group's
objectives. Whilst these initiatives are delivering tangible improvements in
our customer satisfaction ratings we remain determined to deliver further
advancement this year.
Our Environment
As part of our development approach we aim to minimise the impact we have on
the environment. Key elements of our processes for assessing and designing our
developments have the objective of minimising both our direct and indirect
impact on the environment. To support our execution of more efficient
development activity we identify all major environmental risks that we face in
both the short and long term. Our development processes include appropriate
management actions that will mitigate these risks. Addressing these issues at
the start of our development plans ensures our environmental performance
remains robust and helps the Group secure more sustainable business
processes.
The most important indirect environmental impact of our development activities
is the ongoing effect of our new homes. Our focus is to build new homes to
high sustainability standards harnessing the benefits of good design, and
improvements in materials and building techniques to deliver new homes with
high sustainable qualities. Our Space4 business manufactures components to
support a modern method of housing construction as discussed above. Space4
focuses on a fabric first approach to the construction of new homes with
strong sustainability credentials. The off-site manufacture of timber frames
together with wall panels and roof cassettes which are highly insulated
delivers new homes that are highly thermally efficient and air tight with
minimal waste. The new homes built using Space4 technology support the
delivery of an average energy efficiency for the Group's new homes as measured
by the Standard Assessment Procedure (SAP) of 83, which is 40% more energy
efficient than existing housing stock which has an average SAP rating of 59.
Importantly, Space4 adds to the Group's capability to implement future changes
to building regulations that target reductions in carbon emissions and other
measures that will combat global warming. As a further extension of our
off-site manufacturing capability we are in the process of establishing our
own concrete brick manufacturing facility (as mentioned earlier in this
report). This facility has been procured on the basis of achieving very low
energy usage, concrete brick manufacture uses very little energy when compared
to the firing process of manufacturing clay brick. Having the capability to
produce around two thirds of the Group's current brick requirements, this
plant will make an important contribution to reducing the Group's indirect
impact on the environment by reducing energy usage and carbon emissions within
our supply chain.
We monitor our operational efficiency and direct environmental impact by
measuring the amount of waste that we generate and recycle for each home we
build. In 2016 we again increased the amount of waste we recycled to 93%
(2015: 92%) thereby minimising the amount of waste sent to landfill despite
the amount of waste per home built increasing a little to 6.6 tonnes (2015:
6.3 tonnes).
In 2016 we again collated data captured across the Group and from our
suppliers to identify the amount of energy used in construction activities on
our development sites. We have then used DEFRA environmental reporting
guidelines and emission factors from DEFRA's Greenhouse Gas Conversion Factors
Repository as a methodology for calculating our emissions.
Our Scope 1 direct emissions for gas, transport and construction site fuel use
in 2016 were 28,047 tonnes CO2e (2015: 27,647 tonnes CO2e). Our Scope 2
indirect emissions for electricity in 2016 were 4,552 tonnes CO2e (2015: 3,910
tonnes CO2e). Our total operational carbon footprint in 2016 was 32,599 tonnes
CO2e (2015: 31,557 tonnes CO2e), an increase of 3.3%. This increase is
principally attributable to the growth in number of homes built by the Group
and the accompanying level of activity throughout our business year on year.
Legal completions of new homes sold by the Group increased by 4% over the
prior year.The amount of CO2e per home sold in 2016 was 2.15 tonnes, a 0.9%
decrease on the prior year (2015: 2.17 tonnes CO2e).
We have continued to review our energy use and have pursued actions aimed at
reducing our energy costs and minimising consumption where possible. These
measures include an assessment of the cost and benefit of upgrading site
machinery, the continued reduction in the CO2 emissions from our motor fleet,
and a reduction in print and copying volumes across the business.
Our People
We believe that having a highly skilled and diverse workforce supported by a
merit-based culture is an important part of the Group's growth and success, as
well as being fundamental to supporting the wellbeing of our workforce. Our
people are key to supporting the Group's successful growth in its operations
across the UK. The right skills to buy land, plan our developments, build
quality homes and provide good service to our customers are critically
important.
Since 2013 the Group has experienced a rapid increase in the number of its
employees in line with the acceleration of the Group's growth as the market
recovered from the downturn of 2008/2009. To support and control the Group's
growth we have continued to invest in the Group's workforce with the total
number of our employees increasing to an average of 4,526 (2015: 4,188). Our
strengthened selection, engagement, induction and training processes provide
opportunity for all our staff to fulfil their responsibilities to the best of
their ability. The opening of five new businesses over recent years has
provided the opportunity for a good number of our staff to take on greater
responsibilities as they have mastered their skills in key functional areas of
the business. We support and mentor our talented staff to help them realise
their potential. Persimmon has a long established tradition of promoting from
within the business wherever possible. Reward for successfully contributing to
the performance of the business over the long term is a priority for the Group
and secures the human resource platform that is instrumental in driving the
business forward.
Importantly, we have continued to support a large number of trainees and
apprentices in our business, the Group currently employs c. 550 trainees. We
are pleased with the progress we are making with our "Combat to Construction"
and "Upskill to Construction" training programmes. These are focused on UK
service personnel leaving the armed services and more mature trainees that
wish to retrain and gain the trade skills necessary to pursue a successful
career with the Group.
We believe that all employees and subcontractors can perform to their full
potential with the right support and training. We have again increased our
training commitment for both young and mature apprentices and trainees across
all disciplines in our business, including planning, technical, construction
management and sales. We provided over 10,500 training days to employees and
our construction workforce in 2016 (2015: 10,210) an average of 2.3 days per
employee (2015: 2.4). We are keen to harness the Government's new
Apprenticeship Levy, which is introduced from April 2017, to support our
traditional apprenticeship programmes to increase the number of skilled trades
people to support the future growth of the Group's business.
The Group is committed to having a full and active role in the Home Building
Skills Partnership, a joint initiative between the Construction Industry
Training Board and the Home Builders Federation which aims to train over
40,000 new trades people by 2019 to help address the skills shortage that
presents such a key challenge to expanding output by the industry. This
initiative commenced in April 2016 and the initial working group is pulling
together a skills strategy and implementation objectives with publication of
this anticipated for Spring 2017.
We believe that a diverse work force supported by a vibrant merit-based
working environment is an important part of the Group's success. As at 31
December 2016 we employed 4,483 people, 25% of which were female. We have two
female and six male directors on the Company's Board and 19 female colleagues
in our 154 strong senior management team.
Further information on our employees and human rights can be found on our
website www.corporate.persimmonhomes.com in the corporate responsibility
section. We have no material issues to report concerning human rights. Our
Modern Slavery Statement can also be found on this web site.
Our Wellbeing
The wellbeing, health and safety of our employees, workforce, and customers is
the top operational priority for the Group.
The Group ensures that the investment in Group Health and Safety resources
devoted to ensuring our development sites and offices remain safe and healthy
environments is appropriate. The growth of the Group's development activities
and office network has been supported by an increase in Health and Safety
department employees to 28 staff under the direction of our Group Health and
Safety Director.
The Health and Safety team's structure and considerable experience enables
them to help each of our operational management teams to strive to achieve
high levels of health and safety performance across all aspects of our
operations, especially recognising the significant increase in construction
activity on our development sites.
Our approach to health and safety is based on careful planning and management
of our construction activities on site. We emphasise a pro-active approach
with both collective and individual responsibility for health and safety risk
identification and mitigation. All our workforce are required to obtain health
and safety certification prior to starting work on site and this certification
forms part of their application for a Construction Skills Certification Scheme
(CSCS) card.
We have continued to focus on monitoring the effective implementation of the
Group's health and safety policies as well as ensuring detailed incident led
investigations are carried out promptly when necessary. Each operating
business aims for full compliance with Group policies and procedures with
performance above and beyond required standards being reviewed for
incorporation into future policy if appropriate. The internal risk management
framework and work implemented by the Group Health and Safety department is
verified by an external independent advisor on a rotational basis to ensure
compliance standards are maintained. Our health and safety colleagues provide
additional support to local operating businesses to provide any bespoke
training needs and improvement actions required.
During 2016 we reported 47 incidents under the Reporting of Incidents Diseases
and Dangerous Occurrences Regulations (RIDDORS) to the Health and Safety
Executive which was level with 2015 despite our increased levels of
construction activity. We managed to reduce our Annual Incident Injury Rate
marginally to 3.59 accidents per thousand workers (2015: 3.62).
Our Communities
We believe that by delivering much needed new housing whilst also creating and
improving the local environment in which our communities live and work we help
increase the sustainability of those communities into the future. We seek to
actively engage the local community in the development process, from
consultation and feedback through the planning journey to continued
communication of the development's progress as it proceeds. We aim to sell the
majority of the new homes we build into the local community to satisfy their
housing needs. During 2016 we implemented a consistent approach across the
Group to strengthen effective and targeted community consultation which is
tailored to the local residents' context.
We have continued to support improved sustainability by bringing derelict and
poor quality land back into use on behalf of local communities. The Group used
brownfield or previously used land to deliver c. 45% of the new homes we
legally completed in the year, often decontaminating polluted land and
regenerating old industrial sites.
The Group's developments are designed to promote social inclusion,
incorporating housing for families with a broad span of household incomes. In
2016 we delivered £237m of social housing for lower income families (2015:
£221m) and invested in £65m of infrastructure on our developments (2015: £47m)
to provide the schools, new roads, open space and community facilities to
support the social and environmental development of the new communities we
create. Of the £65m spent on infrastructure, £17m related to educational
amenity provision delivering an additional 420 school places for our local
communities.
Our Community Champions initiative run by the Persimmon Charitable Foundation
provides funding for the numerous small charities and voluntary organisations
at the heart of the communities we serve. This initiative is now well into its
third year and we have been overwhelmed with the response. In 2016 we passed
the £1m mark for donations made and have reached £1.1m of donations by the end
of the year. Charities apply to the Persimmon Charitable Foundation (via our
website www.persimmonhomes.com/charity) for funding support up to a value of
£1,000 to match fundraising they have achieved themselves. Each of our
operating businesses have the opportunity of supporting two applicants every
month. Since we started the campaign, we have supported over 1,200 different
organisations in the communities we serve right across the UK.
In addition, the company together with its employees have raised and donated a
further £108,000 to good causes.
Current trading outlook
Customer activity in the new build housing market through the early weeks of
the new year has been encouraging. We are offering new homes for sale on
around 4% more sales outlets than for the same period last year and site
visitor numbers are c. 7% stronger over the first eight weeks of 2016.
Consumer confidence remains resilient, employment levels are strong and
interest rates remain low. The volume of visitors to our Persimmon and Charles
Church homefinder websites is in line with the prior year.
We have experienced the usual seasonal pick up in sales reservations week by
week. Whilst we are facing challenging comparatives in the first quarter of
2017, reflecting the additional activity stimulated by the tax changes
introduced by the Government from early April 2016, we anticipate a more
normal seasonal pattern this year.
The strength of the 2016 autumn sales season together with our early spring
sales have supported a 9% year on year increase in current forward sales
(including legal completions taken in 2017 to date) to £1.89bn (2016:
£1.74bn). Our private sales reservation volumes in our forward sales are 6%
ahead of last year allowing for our weekly private sales rate per site for the
first eight weeks of the year being 4% behind the prior year at this point.
The Government has recently confirmed its support for first time buyers
through the Help to Buy scheme in the Housing White Paper and the revamped
Starter Homes initiative should assist greater numbers of first time buyers to
gain access to the market later this year. With our attractively designed core
house types offered at affordable price points and our emphasis on site
layouts which provide a full range of products to all customers, particularly
for first time buyers and first time movers we are confident that the Group is
well positioned in its regional markets for the year ahead. We will focus on
increasing production to meet this demand.
We believe that UK market fundamentals remain strong supported by long term
unfulfilled demand for housing, despite the uncertainties associated with the
UK's vote to leave the EU and the challenges presented by headwinds in the
wider global economy. The Bank of England's vigilance in ensuring disciplined
lending practices continues. This oversight, together with providing guidance
and direction to lenders via the Financial Policy Committee which complements
appropriate monetary policy settings and Government fiscal policy measures,
will help support the sustainability of the UK housing market. In turn this
will create the opportunity for the industry to continue to invest in skills,
land and new home construction to deliver the continued expansion in output
that will provide access to housing for local communities across the UK.
Our spring sales will be supported by the 90 new sales outlets we plan to open
in the first half of 2017, of which we have already opened 51 new outlets so
far. Gross margins in our forward order book indicate that, for 2017, margins
are set for some modest improvement over 2016 as we open our new sites and we
continue to work hard to secure further operational gains.
We intend to continue to invest in new land during 2017 to support the further
growth of our regional businesses towards optimal sustainable scale. We will
remain focused on ensuring our land replacement activity secures attractive
returns and payment terms whilst we retain our flexibility to react to
changing conditions. We are excited by the prospects of converting more of our
strategic land as planning authorities identify their preferred locations to
satisfy housing needs as incorporated in their five year plans. We believe our
strong balance sheet and excellent free cash generation will support this land
replacement activity whilst also providing confidence in the delivery of the
Capital Return Plan to our shareholders.
The Group has performed particularly well in 2016 due to the hard work of the
entire Persimmon team. We remain confident that this team has the focus,
expertise, drive and vision to continue to deliver for our customers and
shareholders. We believe the UK new build housing market will provide great
opportunities for those companies with the correct strategic aims, operational
capabilities and balance sheet strength to navigate future changes in trading
conditions as they unfold. We thank all our loyal employees and supply chain
partners for their dedication and continued contribution to the Group's
success.
Jeff Fairburn Mike Killoran
Group Chief Executive Group Finance Director
24 February 2017
* 12 month rolling average and stated before goodwill impairment
**stated before goodwill impairment of £8.0m (2015: £8.3m)
PERSIMMON PLCConsolidated Statement of Comprehensive IncomeFor the year ended 31 December 2016
2016 2015
Note Total£m Total£m
Revenue 3,136.8 2,901.7
Cost of sales (2,265.4) (2,164.4)
Gross profit 871.4 737.3
Other operating income 6.8 11.6
Operating expenses (107.7) (122.7)
Profit from operations before impairment of intangible assets 778.5 634.5
Impairment of intangible assets (8.0) (8.3)
Profit from operations 770.5 626.2
Finance income 19.8 22.1
Finance costs (15.5) (18.8)
Profit before tax 774.8 629.5
Tax 2 (149.5) (107.6)
Profit after tax (all attributable to equity holders of the parent) 625.3 521.9
Other comprehensive (expense)/income
Items that will not be reclassified to profit:
Remeasurement (losses)/gains on defined benefit pension schemes 8 (23.4) 7.5
Tax 2 4.4 (1.1)
Other comprehensive (expense)/income for the year, net of tax (19.0) 6.4
Total recognised income for the year 606.3 528.3
Earnings per share
Basic 4 203.0p 170.3p
Diluted 4 197.0p 166.4p
PERSIMMON PLCConsolidated Balance SheetAs at 31 December 2016
Note 2016£m 2015£m
Assets
Non-current assets
Intangible assets 213.6 221.6
Property, plant and equipment 43.0 37.4
Investments accounted for using the equity method 3.0 3.0
Available for sale financial assets 148.7 177.9
Trade and other receivables 8.8 10.1
Deferred tax assets 42.5 46.6
Retirement benefit assets 8 23.3 18.0
482.9 514.6
Current assets
Inventories 5 2,645.0 2,645.3
Trade and other receivables 103.7 91.5
Cash and cash equivalents 7 913.0 570.4
3,661.7 3,307.2
Total assets 4,144.6 3,821.8
Liabilities
Non-current liabilities
Trade and other payables (333.3) (372.6)
Deferred tax liabilities (17.7) (18.3)
Partnership liability (41.7) (44.6)
(392.7) (435.5)
Current liabilities
Trade and other payables (935.0) (846.8)
Partnership liability (5.4) (5.4)
Current tax liabilities (74.1) (78.3)
(1,014.5) (930.5)
Total liabilities (1,407.2) (1,366.0)
Net assets 2,737.4 2,455.8
Equity
Ordinary share capital issued 30.8 30.7
Share premium 10.6 9.3
Capital redemption reserve 236.5 236.5
Other non-distributable reserve 276.8 276.8
Retained earnings 2,182.7 1,902.5
Total equity 2,737.4 2,455.8
PERSIMMON PLCConsolidated Statement of Changes in Shareholders' EquityFor the year ended 31 December 2016
Share capital£m Share premium£m Capitalredemptionreserve£m Other non- distributable reserve£m Retained earnings£m Total £m
Balance at 1 January 2015 30.6 103.4 136.7 281.4 1,640.5 2,192.6
Profit for the year - - - - 521.9 521.9
Other comprehensive income - - - - 6.4 6.4
Transactions with owners:
Allotment of B/C shares - (95.2) - (4.6) - (99.8)
Redemption and cancellation of B/C shares - - 99.8 - (99.8) -
Dividends on equity shares - - - - (191.3) (191.3)
Issue of new shares 0.1 1.1 - - - 1.2
Exercise of share options/share awards - - - - (0.6) (0.6)
Share-based payments - - - - 24.8 24.8
Satisfaction of share options from own shares held - - - - 0.6 0.6
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 income - - - - (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
The other non-distributable reserve arose prior to transition to IFRSs and
relates to the issue of ordinary shares to acquire the shares of Beazer Group
Plc in 2001.
PERSIMMON PLCConsolidated Cash Flow StatementFor the year ended 31 December 2016
Note 2016£m 2015£m
Cash flows from operating activities:
Profit for the year 625.3 521.9
Tax charge 2 149.5 107.6
Finance income (19.8) (22.1)
Finance costs 15.5 18.8
Depreciation charge 8.0 7.1
Impairment of intangible assets 8.0 8.3
Share-based payment charge 14.0 11.2
Net imputed interest income 3.9 1.3
Other non-cash items (3.9) (0.5)
Cash inflow from operating activities 800.5 653.6
Movements in working capital:
Decrease/(increase) in inventories 7.8 (232.0)
Increase in trade and other receivables (18.3) (27.8)
Increase in trade and other payables 11.1 196.5
Decrease in available for sale financial assets 44.6 35.6
Cash generated from operations 845.7 625.9
Interest paid (4.0) (4.4)
Interest received 3.1 1.2
Tax paid (146.6) (128.3)
Net cash inflow from operating activities 698.2 494.4
Cash flows from investing activities:
Purchase of property, plant and equipment (14.7) (11.1)
Proceeds from sale of property, plant and equipment 0.8 1.3
Net cash outflow from investing activities (13.9) (9.8)
Cash flows from financing activities:
Financing transaction costs (0.9) -
Payment of Partnership Liability (2.8) (2.7)
Own shares purchased (1.0) -
Share options consideration 1.3 1.2
B Share Redemption 3 - (99.8)
Dividends paid 3 (338.3) (191.3)
Net cash outflow from financing activities (341.7) (292.6)
Increase in net cash and cash equivalents 7 342.6 192.0
Cash and cash equivalents at the beginning of the year 570.4 378.4
Cash and cash equivalents at the end of the year 7 913.0 570.4
Notes
1. Basis of preparation
The results for the year have been prepared on a basis consistent with the accounting policies set out in the Persimmon Plc Annual Report for the year ended 31 December
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