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Persimmon Plc Final Results

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idpickering
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Persimmon Plc Final Results

#120652

Postby idpickering » February 27th, 2018, 7:19 am




Excellent performance in 2017 with another year of disciplined high quality growth


·

Legal completions increased by 872 new homes to 16,043 (2016: 15,171) and average selling price increased by 3.2% to £213,321 (2016: £206,765)


·

Revenue for the year up 9% to £3.42bn (2016: £3.14bn)


·

Operating margin* increased to 28.2% (2016: 24.8%); with second half improvement to 28.8%


·

25% increase in underlying profit before tax* to £977.1m (2016: £782.8m)


·

26% increase in underlying basic earnings per share* to 258.6p (2016: 205.6p)


·

18% increase in cash generation (pre capital returns) to £806m (2016: £681m)


·

51.5% return on average capital employed**, an increase of 31% (2016: 39.4%)


·

17,301 plots of land acquired in the year, with 8,296 plots successfully converted from the Group's strategic land portfolio


·

Net cash of £1,303m at 31 December 2017 (2016: £913m)


·

10% increase in post tax return on equity to 26.5% (2016: 24.1%)


·

7.5% increase in forward sales at £2.03bn (2017: £1.89bn)


·

Interim and Final dividends declared of 125p and 110p per share respectively



And later;

The Directors propose to return 125 pence of surplus capital to shareholders for each ordinary share in issue held at 6.00pm on 9 March 2018 with payment made on 29 March 2018 as an interim dividend in respect of the financial year ended 31 December 2017. This is an additional payment of surplus capital over and above the previously announced Capital Return Plan schedule. In line with the previously announced schedule, the Directors propose to return a further 110 pence of surplus capital to shareholders for each ordinary share in issue held at 6.00pm on 15 June 2018 with payment made on 2 July 2018 as a final dividend in respect of the financial year ended 31 December 2017. The total return to shareholders is therefore 235 pence per share (2017: 135 pence per share) in respect of the financial year ended 31 December 2017.



https://www.investegate.co.uk/persimmon ... 00059833F/

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Re: Persimmon Plc Final Results

#120659

Postby Dod101 » February 27th, 2018, 8:08 am

The dividend announcement surely allows the management enrichment plan to be fully implemented this year, ie the LTIP to be fully implemented now rather than the original December 2021?

This is a company with totally the wrong culture as was illustrated by the fact of the resignations of the Company Chairman and the chairman of the
Remuneration Committee for failing in setting up the LTIP properly. Why anyone holds this company I do not know.


Dod

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Re: Persimmon Plc Final Results

#120673

Postby cshfool » February 27th, 2018, 8:42 am

"Why anyone holds this company I do not know."

How about massively rising yield, great capital gain (esp since the Brexit bump), sector leading ROCE and a company swimming in cash? Why anyone would n't buy a lot more of this I don't know. Up a useful 10%+ today, so clearly the market disagrees with you Dod, as do I.

csh

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Re: Persimmon Plc Final Results

#120677

Postby daveh » February 27th, 2018, 9:11 am

Dod101 wrote:The dividend announcement surely allows the management enrichment plan to be fully implemented this year, ie the LTIP to be fully implemented now rather than the original December 2021?

This is a company with totally the wrong culture as was illustrated by the fact of the resignations of the Company Chairman and the chairman of the
Remuneration Committee for failing in setting up the LTIP properly. Why anyone holds this company I do not know.


Dod


I hold the company because the announced final and interim is a yield on original cost of 33%, the company is paying me very well for holding them through the financial crisis.

They have reduced the LTIP payments to the senior management (by a qtr) and the executives responsible for authorising it (the LTIP) have resigned - would you have preferred them not to have resigned?

I purchased in early' 08, looking at my records just before the dividend was cut, for ~650p per share. I held through the financial crisis as a good Dorisian would, and almost bought near the bottom*, but didn't because they weren't paying a dividend. Hindsight shows it would have been a wonderful buy, though I'd probably now be selling as the amount of dividend they are paying now would mean that PSN would breach my limits for income from any one share if I owned significantly more shares than I do now.

* There was a set of accounts just before they resumed the dividend when net debt had fallen considerably and they were making a decent profit so it was clear they were on the mend and (AFAIR) the price was still in the £2-3 region. I'm guessing it would have been first half of 2010 as they paid a small dividend in December of that year. I thought of buying more at that point, as I thought there was no longer a chance of them going bust and we clearly needed lots more houses so it looked like they would do well into the future. I didn't buy, because of the lack of dividend and the lack of conviction in my thoughts. Hindsight says that was an error because they have gone on to perform a lot better than I expected.

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Re: Persimmon Plc Final Results

#120686

Postby Dod101 » February 27th, 2018, 9:41 am

I expect if I held Persimmon I would feel differently but the enormous amount that they have given to the management who participate in the LTIP is disgusting and as a matter of principle should be outlawed. I am very happy to live without this sort of thing and I am surprised that Corbyn et al do not latch on to that. They are maybe too dim to understand it though and that may be the idea.

Dod

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Re: Persimmon Plc Final Results

#120697

Postby Minesadouble » February 27th, 2018, 10:18 am

Dod101 wrote:I expect if I held Persimmon I would feel differently but the enormous amount that they have given to the management who participate in the LTIP is disgusting and as a matter of principle should be outlawed. I am very happy to live without this sort of thing and I am surprised that Corbyn et al do not latch on to that. They are maybe too dim to understand it though and that may be the idea.

Dod


Don’t usually disagree with your views, but I’ll make an exception here. I don’t hold but believe the LTIP was set correctly. The Government interfered with the market, with Help to Buy and the Management had a considerable tailwind to help achieve the objectives. Had the Government interfered and done something detrimental to the market, (as it often does eg stamp duty hikes and BTL changes) I doubt their LTIP objectives would have been reduced.
Good luck to the Management and Shareholders. Nowt disgusting about making money.
Lesson here is not for Persimmon but the Government: don’t keep fiddling and interfering with the market.

Disc. I don’t hold, (but wish I had!)

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Re: Persimmon Plc Final Results

#120706

Postby kempiejon » February 27th, 2018, 10:40 am

Have I got this right Persimmon will offer 235p per share in dividends and I can buy them at about 2800 so an 8% outlier high yield? Until the market catches up I guess, if not, well that's next month shortlist, I will chase that yield.

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Re: Persimmon Plc Final Results

#120720

Postby Bouleversee » February 27th, 2018, 12:11 pm

Dod101 wrote:The dividend announcement surely allows the management enrichment plan to be fully implemented this year, ie the LTIP to be fully implemented now rather than the original December 2021?

This is a company with totally the wrong culture as was illustrated by the fact of the resignations of the Company Chairman and the chairman of the
Remuneration Committee for failing in setting up the LTIP properly. Why anyone holds this company I do not know.


Dod


Why anyone doesn't hold this company, I don't know. I first bought 1325 in 2002 @ 443.98 and added 123 in April 2017 @ 2111.3. My total cost was £8608.62 and when I looked this morning they are now worth £39,985.36. I don't actually recall the dividend being cut and haven't checked back but there have been some very generous returns of capital, which I think could be taken as dividends, in years when no dividends are shown in fundamentals. The dividend just declared will give me £3,402.80, not a bad yield on my original investment. It is one of the few shares which have given me both excellent growth and a good income. I agree that the LTIP was ill advised but those responsible have paid the price. I also think it is regrettable that the CEO and other directors, who just happened to be in the right place at the right time, did not voluntarily give up the egregious bonuses the scheme awarded them and had to be forced into giving up some of them by major shareholders. What a pity those same shareholders didn't veto the LTIP when it was proposed instead of voting it through. Nevertheless, egregious salaries and bonuses are not exclusive to Persimmon and at least their shareholders have had a decent share of the profits. Persimmon is a good company, builds good quality properties, doesn't sell dodgy leaseholds and operates largely in a part of the country where prices are more likely to go up than down. The only obvious things that I can think of that could adversely affect them would be government policy/interference and increases in interest rates.

Dod also said:

"I expect if I held Persimmon I would feel differently but the enormous amount that they have given to the management who participate in the LTIP is disgusting and as a matter of principle should be outlawed. I am very happy to live without this sort of thing and I am surprised that Corbyn et al do not latch on to that. They are maybe too dim to understand it though and that may be the idea."

Don't be too sure. Didn't McDonell say they would put a stop to such payments. Following on from my previous paragraph, it would not surprise me entirely if a govt. of whatever colour introduced a windfall tax, even though govt. policy was partly, though not entirely, responsible for the enhanced profits and they may not be allowed to hold land for long without building on it. It's a risk I will take, however. Even if they do less well in the future, so long as they continue to pay a reasonable dividend and there is no major drop in the s.p., I shall be quite content. There will always be a demand for housing and, unlike some of my holdings, I can't see them going bust in the foreseeable future. I almost added more earlier in the year but didn't get around to it. Pity!

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Re: Persimmon Plc Final Results

#120730

Postby absolutezero » February 27th, 2018, 12:22 pm

A share I continue to hold.
Why?
Rising profits and a brilliant return in the form of dividends since I have held it from 2010 onwards.

The Directors' remuneration is a very different matter. And one I always vote against.
But from a shareholder POV, it's been a good company to hold.

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Re: Persimmon Plc Final Results

#120747

Postby Breelander » February 27th, 2018, 1:03 pm

One I've held since 2007. When they announced they were switching from paying dividends to a capital return plan around 2011 (along the same lines as the Berkeley Group) I had my doubts, but decided to hold.

I'm glad I did, as PSN have consistently increased the payments over and above their original plan. Berkeley on the other hand have reneged on their original plan, increasingly switching to share buybacks to 'return' capital to their shareholders.

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Re: Persimmon Plc Final Results

#120748

Postby daveh » February 27th, 2018, 1:04 pm

kempiejon wrote:Have I got this right Persimmon will offer 235p per share in dividends and I can buy them at about 2800 so an 8% outlier high yield? Until the market catches up I guess, if not, well that's next month shortlist, I will chase that yield.


Yes 235p for this year, 2019 and 2020 and 110p in 2021, all as part of their Capital Return Plan. It was supposed to pay out 620p to 2021 when announced by the board in 2012, however they have failed to keep to the plan over the years and have "only" been able to pay out 720p so far with another 580 planned to the end of 2021 to take the total payout to 1300p more than double what was originally announced in 2012. :D

However we don't know what happens beyond 2021, that will depend on the state of the house building market and the companies finances at that point.

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Re: Persimmon Plc Final Results

#120750

Postby scrumpyjack » February 27th, 2018, 1:24 pm

The huge dividends over the next 3 years are unlikely to be maintained after that. My guess is that management have large shareholdings, can see the high risk of a Momentum government in 3 years or so which will certainly hugely increase taxes on dividends and high incomes. It makes sense therefore to get out whatever cash the company can release ASAP and not wait.

Re management greed, I voted against this and thought it was an appalling scheme when it was announced. It struck me as incredible that the city supinely voted it through. However Persimmon has undoubtedly been well managed. Management avoided the financial disasters of other builders like Barratt in the credit crunch, did not need dilutive rights issues and has kept growing the business well. But most of their profitability has been due to the buoyant housing market, which has lifted all builders, and not to management brilliance.

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Re: Persimmon Plc Final Results

#120751

Postby Minesadouble » February 27th, 2018, 1:29 pm

Bouleversee wrote:
Why anyone doesn't hold this company, I don't know. I first bought 1325 in 2002 @ 443.98 and added 123 in April 2017 @ 2111.3. My total cost was £8608.62 and when I looked this morning they are now worth £39,985.36. I don't actually recall the dividend being cut and haven't checked back but there have been some very generous returns of capital, which I think could be taken as dividends, in years when no dividends are shown in fundamentals. The dividend just declared will give me £3,402.80, not a bad yield on my original investment. It is one of the few shares which have given me both excellent growth and a good income. I agree that the LTIP was ill advised but those responsible have paid the price. I also think it is regrettable that the CEO and other directors, who just happened to be in the right place at the right time, did not voluntarily give up the egregious bonuses the scheme awarded them and had to be forced into giving up some of them by major shareholders. What a pity those same shareholders didn't veto the LTIP when it was proposed instead of voting it through.


But didn’t you “happen to be in the right place at the right time” too?
Have you voluntarily given up your windfall?

In this situation the shareholders and management have both made substantial gains and good luck to all. Incidentally your point that the shareholders approved the LTIP scheme is well made, now wanting to unpick it for Management but not shareholders is what would be egregious, in my opinion.

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Re: Persimmon Plc Final Results

#120759

Postby Breelander » February 27th, 2018, 1:46 pm

daveh wrote:...with another 580 planned to the end of 2021 to take the total payout to 1300p more than double what was originally announced in 2012. :D

However we don't know what happens beyond 2021..


Even if there are no further extra interims, by the planned June 2019 payment PSN will have paid me more than my purchase costs, rising to 125% of the price I paid by the end of the plan (probably more if there are additional interims).

If dividends then cease I'd still be able to redeploy the capital (it's currently over three times what I invested) but that's a decision that will have to wait for 2021.

Not a bad position to be in - one of my luckier choices :)

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Re: Persimmon Plc Final Results

#120763

Postby daveh » February 27th, 2018, 1:50 pm

Minesadouble wrote:


In this situation the shareholders and management have both made substantial gains and good luck to all. Incidentally your point that the shareholders approved the LTIP scheme is well made, now wanting to unpick it for Management but not shareholders is what would be egregious, in my opinion.


But it didn't get the usual 98%+ vote most resolutions get - the remuneration package and LTIP only got 88% or so, a small, but significant vote against and the LTIP probably didn't look quite so generous when announced as the company has performed remarkably well since. However what it probably shows is that house prices are too high compared to new build costs as the margins the housebuilders are making are outrageous (and I'm a shareholder). The problem is that demand Is outstripping supply and part of the problem is gaining planning permission on land in a timely manner.

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Re: Persimmon Plc Final Results

#120781

Postby Bouleversee » February 27th, 2018, 2:45 pm

Minesadouble -

Up to a point, Lord Copper, but it's a question of degree and since I lost over £l6,500 on Carillion and am likely to lose a similar amount with IRV, not to mention massive losses on Centrica and other utilities, the supermarkets, Next and other retailers, Cobham, etc. etc., this is just one shining light in an otherwise for the most part sea of darkness, so I certainly won't be handing any back (to whom?) other than what the taxman takes in due course, though I am quite generous to certain charities. And I think you will find that the small shareholders who voted voted against the LTIP and it was the institutional ones, who were on similar deals, who voted it through. I suspect that many small shareholders didn't vote at all as their shares are held in nominee accounts and it requires too much effort to get hold of the information and instruct the platform staff and how can you be sure they actually do the necessary on your behalf?

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Re: Persimmon Plc Final Results

#120786

Postby Dod101 » February 27th, 2018, 2:52 pm

I am bemused by the fact that no doubt some shareholders in Persimmon would not touch an IT if the charges were unreasonable, say over 1%, but will happily give away tens of millions of pounds, amounting to about 9% of their company, to a few executives as long as they get a large payout (peanuts in comparison) as well.

A serious question though. Since housebuilding is not exactly rocket science why is that Persimmon can do this but other housebuilders cannot? Were they vastly overcapitalised before they started? (and if so the executives deserve their rich rewards even less). If not then how come they can afford these huge returns to shareholders and other housebuilders cannot?

Dod

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Re: Persimmon Plc Final Results

#120979

Postby Dod101 » February 28th, 2018, 10:13 am

Bouleversee wrote:Why anyone doesn't hold this company, I don't know. I first bought 1325 in 2002 @ 443.98 and added 123 in April 2017 @ 2111.3. My total cost was £8608.62 and when I looked this morning they are now worth £39,985.36. I don't actually recall the dividend being cut and haven't checked back but there have been some very generous returns of capital, which I think could be taken as dividends, in years when no dividends are shown in fundamentals. The dividend just declared will give me £3,402.80, not a bad yield on my original investment. It is one of the few shares which have given me both excellent growth and a good income. I agree that the LTIP was ill advised but those responsible have paid the price. I also think it is regrettable that the CEO and other directors, who just happened to be in the right place at the right time, did not voluntarily give up the egregious bonuses the scheme awarded them and had to be forced into giving up some of them by major shareholders. What a pity those same shareholders didn't veto the LTIP when it was proposed instead of voting it through. Nevertheless, egregious salaries and bonuses are not exclusive to Persimmon and at least their shareholders have had a decent share of the profits. Persimmon is a good company, builds good quality properties, doesn't sell dodgy leaseholds and operates largely in a part of the country where prices are more likely to go up than down. The only obvious things that I can think of that could adversely affect them would be government policy/interference and increases in interest rates.


That's a great story Bouleversee. Well done and it will help offset some of the horror stories that you have also recounted!

I must say I have looked through the Persimmon accounts and there is nothing untoward in them that I can see. How do they do it? Maybe just as they would have us believe, efficient management of capital and being in the right segment of the market to take full advantage of the Help to Buy scheme. It would also suggest that most other housebuilders are just not very good.

Pity about the LTIP.

Dod


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