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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Persimmon Plc | LSE:PSN | London | Ordinary Share | GB0006825383 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-5.50 | -0.43% | 1,286.00 | 1,282.50 | 1,283.00 | 1,288.00 | 1,265.00 | 1,279.00 | 1,061,629 | 16:35:17 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Gen Contr-single-family Home | 2.77B | 255.4M | 0.7996 | 16.05 | 4.1B |
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
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(END) Dow Jones Newswires
August 22, 2017 02:01 ET (06:01 GMT)
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