Persimmon Regulatory News (PSN)

26 Feb 2008 07:01

Persimmon PLC26 February 2008 26 February 2008 RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 Excellent results during a challenging year Record pre-tax profits* up 1% to £585.1m (2006: £582.1m), 12th successive yearof profit increase Full year dividend increased by 10% to 51.2p (2006: 46.5p) Final dividend of32.7p per share, 11th successive year of dividend growthOperating margin* increased to 21.8% (2006: 20.8%) following tight cost controland synergy savings Average selling price increased by 1%, to £189,558 (2006: £188,129) withunderlying growth of 3%Full year synergy savings from the Westbury acquisition more than £50m Sales of partnership homes up c.40% to 1,962 unitsIncreasing success of strategic land pull-through (8,181 plots) Strong and flexible balance sheet with gearing of 31% (2006: 33%)Improved cancellation rates reduced to c. 20% from over 30% in Autumn 2007140 outlets to be opened in H1 2008 *Stated before goodwill impairment of £2.4m (2006 comparisons: stated beforereorganisation costs of £15.4m) John White, Group Chairman said: "Persimmon has once again delivered an excellent result during what has been avery challenging year. When confidence returns and sentiment improves weanticipate a return to a stronger market; in the meantime we remain cautious.However, with an experienced management team, strong balance sheet and excellentlandbank we remain confident for the future." For further information, please contact: Edward OrlebarJohn White, Group Chairman Charlotte McMullenMike Farley, Group Chief Executive Melanie BlewettMike Killoran, Group Finance Director M:Communications Persimmon plc Tel: +44 020 7153 1523Tel: +44 (0) 20 7153 1523 on 26 February 2008 Tel: +44 (0) 1904 642 199 thereafter A webcast of today's analyst presentation will be available onwww.persimmonhomes.com by 2pm today. CHAIRMAN'S STATEMENT Persimmon has once again delivered an excellent result during what has been avery challenging year. The results we announce today show a further improvementover the record results of the previous year. RESULTS Pre-tax profits for the year ended 31 December 2007 were £585.1 million (2006:£582.1 million). These results are stated before a goodwill impairment charge of£2.4 million (2006: stated before reorganisation costs of £15.4 million). Aftercharging goodwill, pre-tax profits were £582.7 million which is a 2.8% increaseon last year (2006: £566.7 million after charging reorganisation costs).Earnings per share (after all charges) increased to 137.5p (2006: 133.8p). As already reported, legal completions for 2007 were 15,905, a decrease of 4.8%on 2006, whilst average selling prices increased to £189,558 (2006: £188,129).Turnover for the year was £3.015 billion, down 4% on the prior year. Operating profit (after charging goodwill) increased to £654.9 million (2006:£637.3 million after reorganisation costs) and operating margins, already at anindustry high level, increased to 21.7% (2006: 20.3%). The increase in margins during the period reflects the strict disciplines weapply to all our costs. We also continued to benefit from the synergies achievedfollowing the acquisition of Westbury. During 2007 we delivered annual synergysavings of over £50 million which is above the target of £45 million savingspreviously stated. Another focus for our management continues to be strong cash control. We havegenerated net cash inflows from operations of £263 million, despite investing anadditional £427 million in stocks and work in progress. This was due to acombination of investments in good quality land opportunities, particularly inthe early part of the year, and an increase in work in progress as we increasedoutlets by c. 7%. Free cash inflow for the year before the payment of dividendsand buyback of Persimmon shares was £67 million. Net borrowings at the year end were £721 million representing a gearing level of31% (2006: 33%). We achieved a return on average capital employed of 21.6%(2006: 23.1% after reorganisation costs). Our landbank at 1 January 2008 consisted of 78,863 plots which were either ownedor under control. This land has been acquired over a number of years atattractive prices and provides a strong asset base for our business. In additionwe had a further 11,124 plots proceeding to contract. We remain focused on progressing planning on numerous strategic landopportunities, and during the year this accounted for more than 50% of the plotswe acquired. This successful strategy will allow us to continue to be veryselective with regard to new land acquisitions. As previously stated, we are proposing to increase the full year dividend by 10%this year to a total of 51.2p per share. This is the eleventh consecutive yearwe have grown the dividend. The interim dividend paid was 18.5p. Therefore thefinal dividend which will be payable on 25 April 2008 will be 32.7p per share.The full year dividend is well covered at 2.7 times. OUTLOOK We came into 2008 with a forward sales order book of £603 million. Since thenreservations have been lower than the same strong period of 2007. Visitor levelshave improved each week since the beginning of the year but conversion to salesratios have remained challenging. Understandably, potential purchasers are currently taking longer to makedecisions about the timing of their house purchase. There remains an underlyingdemand and desire for new homes but we have been experiencing a period of a"wait and see" approach. However, the negative customer reaction to the creditsqueeze during the autumn now appears to be easing a little following recentinterest rate reductions. Whilst mortgage lending has tightened, the newcriteria are now more clearly understood and our good long term relationshipswith all the major lenders continue to work well. Encouragingly, cancellationrates have reduced since last autumn, and are now at more normal levels whilstweekly sales volumes have been gradually improving. New house selling pricesacross the UK are holding firm, although we expect incentives to continue to beoffered and marketing costs to increase. We are confident that the underlying supply and demand fundamentals for thehouse building industry will once again produce an upturn in market conditions.As planned, we continue to increase the number of partnership homes we arebuilding in line with the Government's agenda. Our order book for 2008, including legal completions to date, is now at c. £1.05billion (2007: £1.30 billion). Whilst this is lower than the equivalent figurefor 2007 it nevertheless represents a healthy level of sales at this early stageof the year. Comparatives will become less pronounced through the summer andautumn months following the slow down of sales from August 2007. Against thecurrent backdrop we expect the timing of sales and completions this year to bemore weighted to the second half of the year than usual. During the autumn months we took the opportunity to review our build costs andoverhead efficiency. By working closely with our suppliers and sub-contractorswe have managed to reduce our input costs from the beginning of this year. Wealso announced in January the merger of some of our regional offices whichresulted in the closure of 3 offices and associated redundancies. This increasedoverhead efficiency and the reduction in some of our build costs will assist inmitigating the impact of a more difficult housing market whilst setting a clearcourse for the medium and long term. Traditionally the housing market has fluctuated as trading conditions, thegeneral economy and interest rates change. Our management teams have experiencedmany years of these changing markets and have been using this experience totackle the challenges and opportunities presented by the current marketconditions. When confidence returns and sentiment improves we anticipate areturn to a stronger market; in the meantime we remain cautious. However, withan experienced management team, strong balance sheet and excellent landbank weremain confident for the future. Finally, I once again thank each and every one of our dedicated staff, advisers,suppliers and contractors for their assistance and hard work in achieving theseresults. CHIEF EXECUTIVE'S REVIEW This has been another year of significant progress for the Persimmon Group.Despite difficult market conditions we have increased our pre-tax profit,improved our operating margins to 21.7% (post goodwill) and have been successfulin gaining planning consent on over 8,000 plots from our strategic landbank. The market has varied considerably this year. At the beginning of the year wesaw good reservation levels on our sites across the country. The rate of salesbegan to reduce following a number of interest rate rises in the first half. Wethen experienced the normal slower summer trading conditions. During September, due to the well publicised 'credit crunch', we saw a loss inpurchaser confidence and also experienced a change in the credit criteria set bythe mortgage lenders. These two factors led to higher than normal cancellationrates and a lower forward order book for 2008, although in line with the rest ofthe industry. Set against this background, the business achieved good results for the secondhalf of the year completing 7,903 homes with overall profitability in the secondhalf increasing. This was despite a reduction in the number of homes completedwhen compared to the first half completions of 8,002. Throughout the year we have seen underlying price growth of 3% for our privatesale housing. However, an increase in the proportion of the lower costpartnership homes, and a reduction in the number of Charles Church homes, hasresulted in the small increase of 1% in our average selling price to £189,558(2006: £188,129). We remained focused on the completion of competitively pricedfamily homes in all sectors of the market and we continue to have limitedexposure to high rise apartment schemes with only 2.5% of our completions in2007 from this type of development. The Government has set out a number of initiatives and targets for the industry,and the Callcutt Review has outlined a number of strategies to increaseproduction levels. Persimmon will work with the Government and otherstakeholders to help meet these ambitious targets. In order to achieve thesetargets the industry requires improvements to the current planning environmenttogether with a stable economic environment. Divisional Structure The three Divisions have performed well this year and we have ensured that ourbrands Persimmon, Charles Church and Westbury Partnerships have been fullyintegrated into each Division. Each individual Division has carried out a reviewin their businesses to establish a range of house types that retain the localcharacter for their areas of operation, thus gaining enhanced efficiencies forprocurement, professional fees and cost reduction. North Division This Division has completed 3,765 (2006: 4,069) homes, a slight reduction onlast year. This was mainly due to the Yorkshire region experiencing delays dueto planning and more challenging trading conditions. However, this was offset bya strong financial performance in the North East and Scottish regions. Price growth in Scotland was 4% due to strong purchaser demand and theavailability of traditional family accommodation. Our new Charles Churchbusiness in Scotland has been well received and we are gaining recognition inthis market for our premium product. In the North East the market continues to be challenging. However, with ouraverage selling price only increasing by 3% to £166,954 during the year ourhomes remain very affordable in this region. Due to the challenging market conditions and planning restrictions in theYorkshire region we have merged our Yorkshire and East Yorkshire operatingbusinesses which will give further operational efficiencies in 2008. We retainthree Persimmon operating businesses in the Yorkshire region which will ensurethat our coverage of this important market is comprehensive and provides astronger platform for future growth. Central Division The Division has seen an overall increase of 4% to its average selling price of£178,278 from 5,656 homes. In the North West, although the general market hasbeen competitive, underlying average selling prices rose 5%. The overall NorthWest average price of £183,013 has been assisted by an increased level ofcompletions at our high value apartment scheme at Leftbank in Manchester. Aspart of our review of operations we have merged two offices in the North West toreduce overheads in this area. In the Birmingham region prices have been more muted, however we achieved volumegrowth of 3% mainly due to the provision of more affordable homes. We haverecently commenced selling on our large Ironstone development at Lawley, Telfordwith English Partnerships. This scheme for 1,100 homes will sustain our businessin this area for a number of years. South Division The South Division has increased completions by 3% to 3,905 and our new SevernValley business delivered over 150 completions in its first six months ofoperation. Our two large strategic sites in Ashford, Kent for 1,020 homes andour scheme of 325 homes in Gillingham are now under construction and we havetaken our first completions this year. These sites will provide growth for bothour Persimmon and Charles Church businesses in this area. In our Wales business, one of the Group's largest operations, we completed 940homes. We have been particularly successful in taking a high level ofcompletions at our brownfield mixed use regeneration scheme at Swansea Point. Wewere very pleased that David Bullock our site manager at Wyncliffe Gardens,Cardiff was national runner up in the NHBC Pride in the Job Awards. Charles Church Our decision to reposition the Charles Church brand into the mid range markethas shown positive results. We have seen good demand for this premium productand with an average selling price of £257,009 we have seen underlying pricegrowth of 2% throughout the UK. It is clear that the market for property values in excess of £300,000 is stillmore challenging. Although volumes this year have reduced by 11% to 2,579 (2006:2,898), this is set against the previous year's growth of 125% and therefore webelieve that in the long term the Charles Church brand will continue to grow ona national basis. We have received positive recognition not only from our purchasers but also froma number of external bodies, including the Welsh Civic Society who gave us anaward for best local design for our traditional housing scheme at MaenolGlasfryn, Llanelli. We were also awarded the best marina development for ourscheme at Marinus, Cowes, Isle of Wight, by the Mail on Sunday. These awardsdemonstrate the diversity of excellent homes produced by the Charles Churchteams. Westbury Partnerships Westbury Partnerships continue to grow and this business has expanded by 50% inits second full year of operation. The combination of the use of our Space4product with the standard core range of Housing Corporation approved house typeshas delivered good efficiencies for this business. In return housingassociations have received high quality, energy efficient and sustainable homes.The team is developing a partnership with a number of housing associations andthis will deliver further opportunities in the future. The number of affordable homes built within the Persimmon Group has alsocontinued to grow and this year we completed 1,962 (2006: 1,402) partnershiphomes, an increase of 40%. These numbers will rise as we bring forward more ofour large strategic sites. We have completed the first homes to receive DirectGrant funding from the Housing Corporation and we have been invited to submit afurther bid for the period 2008-2011. Space4 This year we have seen a substantial increase in volumes manufactured at ourSpace4 factory to 2,629 units (2006: 1,475). The technical changes we have madehave simplified the onsite procedures, thereby reducing our build times onsiteto the benefit of both Westbury Partnerships and our operating businesses usingthis system. The Space4 system is well set to meet the Government's targetsregarding the building of sustainable homes and we are looking to furtherdevelop Space4 to meet the new zero carbon home challenge for 2016. Landbank In this challenging market we have remained cautious regarding land acquisitionand we have seen a slight reduction in the landbank that is owned and undercontrol to 78,863 plots (2006: 80,085 plots). This however represents 4.9 years'land supply at our current level of output. Within our total landbank only 1,700plots or c. 2% are for inner-city high rise apartments maintaining our strategyof developing traditional housing schemes. We remain focused on bringing forward our strategic land and in 2007 we haveobtained planning permission and acquired 8,181 plots (2006: 2,927 plots), asubstantial increase on the previous year. We have seen significant success inthe Central Division with consent on schemes in Peterborough (350 plots) and inBridgnorth (317 plots). In the South Division where land is more difficult toacquire we have enjoyed success in Bridgend, Wales (580 plots) and at Liskeard(465 plots). Charles Church has also brought forward some smaller schemes inTunbridge Wells and Burgess Hill totalling 140 plots. The ability to acquire over 50% of our replacement plots from our strategiclandbank means we can acquire land selectively in the open market given currentmarket conditions. We continue to focus on the delivery of 30,000 plots over athree year period from our strategic landbank and this will help support ouroperating margins in the long term. Corporate Responsibility The concept of sustainability is becoming an increasingly important part of ourbusiness and we take proper account of all the complex social and environmentalissues in our core operations. We continually seek to improve the sustainabilityand energy efficiency of the houses we build, and where practical incorporatemodern methods of construction and technologies. During 2007 we increased thenumber of properties which we built to EcoHomes standards to 1,539 units,representing just under 10% of our homes sold. We continue to monitor the amount of waste generated from each new home that webuild as one measure of our operating efficiency. During 2007 our totalhousebuilding waste was similar to the previous year, but we increased theamount of waste we recycled to 68% (2006: 66%). The introduction of new Construction Design and Management Regulations 2007resulted in a 61% increase in the number of training days we provided to ourconstruction staff. In conjunction with this additional training, the ReportableInjuries Disease and Dangerous Occurrences per thousand employees in ourworkforce notified to the Health and Safety Executive reduced to 12.2 (2006:12.9). Having made significant progress over recent years we are again resettingall our operating businesses performance targets for health and safety tofurther improve our performance in this vital area of our business. We continue to invest heavily in training our staff to improve both the qualityof our homes and our customer service. We have systems which allow us to monitorhow well we are performing, enabling us to identify particular trends and issuesupon which we can focus our efforts. Our internal Customer Care Questionnaireagain recorded that 86% of our customers would recommend Persimmon or CharlesChurch to a friend. In the NHBC Pride in the Job Awards we achieved 2 RegionalAward winners, 12 Seal of Excellence and 40 Quality Award winners for the Group,our highest number of Awards to date. Current Trading Outlook We have experienced a slower start to trading in the early part of this year.Although the number of visitors to our developments has increased since thestart of the year, they currently remain 13% lower when compared to a strongprior year comparative. We have seen cancellation rates return to more normallevels at c. 20%, compared to rates of over 30% at the time of the autumn'credit crunch'. Although visitor levels are lower the quality of the visitorsis good, but in this cautious environment they are taking longer to reserve.Prices remain firm for both the new and second hand market. We are continuing tobe selective in our use of incentives, with our Part Exchange scheme andmortgage assistance proving particularly popular. We have seen the mortgage lenders tighten their lending criteria and this has,and will, undoubtedly affect prospective purchasers who have a poorer credithistory. However, we have good relationships with the major lenders and we arenot currently experiencing problems with purchasers obtaining mortgages now thatthe new lending criteria are clearly understood. We currently have forward sales with a total value of £1.05 billion. We plan toopen a further 140 new outlets in the first six months of this year and thenumber of our overall sales outlets at the start of 2008 was 7% stronger year onyear. The market remains competitive but with our new outlets and committed managementteam we expect sales to continue to grow through the first half of this year. Summary This has been another successful year for the Persimmon Group in challengingmarket conditions. The business has delivered another record set of profits andwe have improved our operating margins. We have continued a concerted effort on reducing our cost base. We continue towork with our suppliers and sub-contractors to exercise good cost control andsome of the initiatives we have introduced in 2007 will bring benefits to thebusiness in 2008. Our new Severn Valley business has made a good start in thesecond half of 2007. However, the closure of three other offices at this timewill help retain our overall operational efficiency. This demonstrates theflexibility we retain in managing our business as planning and market conditionschange. We have also concentrated on improving our cash flow, culminating inyear end gearing of 31% while maintaining a strong landbank and a solid balancesheet. I take this opportunity to thank our staff for their skill, hard work and effortand for their dedication to our business. With our experienced management teamwe are well positioned to meet the challenges of the housing market in 2008. PERSIMMON PLC Consolidated Income Statement for the year ended 31 December 2007 ------------------------ -------- -------- -------- -------- Note 2007 2006 £m (Restated) £m------------------------ -------- -------- -------- -------- Revenue 3,014.9 3,141.9 Cost of sales (2,278.8) (2,404.2)------------------------ -------- -------- -------- -------- Gross profit 736.1 737.7 Other operating income 40.1 29.6Operating expenses (122.3) (130.7)Share of results of jointly 1.0 0.7controlled entities ------------------------ -------- -------- -------- -------- Profit from operations 654.9 637.3 Finance income 1.9 0.5Finance costs (74.1) (71.1)------------------------ -------- -------- -------- -------- Profit before tax 582.7 566.7 Income tax expense 3 (169.2) (170.3)------------------------ -------- -------- -------- -------- Profit after tax (all attributable toequity 413.5 396.4holders of the parent)------------------------ -------- -------- -------- -------- Earnings per shareBasic 5 137.5p 133.8pDiluted 5 136.8p 133.1p------------------------ -------- -------- -------- -------- PERSIMMON PLC Consolidated Balance Sheet at 31 December 2007 -------------------- ------ ---------- ---------- Note 2007 2006 £m (Restated) £m-------------------- ------ ---------- ---------- ASSETSNon-current assetsIntangible assets 467.8 470.4Property, plant and equipment 47.8 48.9Investments 3.2 2.8Other receivables 17.2 11.5Deferred tax assets 51.4 62.8-------------------- ------ ---------- ---------- 587.4 596.4-------------------- ------ ---------- ----------Current assetsInventories 3,386.6 2,959.9Trade and other receivables 180.2 178.7Cash and cash equivalents 7 2.1 18.9-------------------- ------ ---------- ---------- 3,568.9 3,157.5-------------------- ------ ---------- ----------Total assets 4,156.3 3,753.9-------------------- ------ ---------- ---------- LIABILITIESNon-current liabilitiesInterest bearing loans and borrowings 7 (527.5) (511.0)Forward currency swaps 7 (58.0) (94.8)Deferred tax liabilities (32.0) (25.9)Retirement benefit obligation (60.7) (103.7)Other liabilities (92.4) (96.8)-------------------- ------ ---------- ---------- (770.6) (832.2) -------------------- ------ ---------- ----------Current liabilitiesInterest bearing loans and borrowings 7 (130.9) (70.6)Forward currency swaps 7 (10.0) (6.7)Trade and other payables (749.0) (706.4)Current tax liabilities (150.4) (106.7)-------------------- ------ ---------- ---------- (1,040.3) (890.4)-------------------- ------ ---------- ----------Total liabilities (1,810.9) (1,722.6)-------------------- ------ ---------- ----------Net assets 2,345.4 2,031.3-------------------- ------ ---------- ---------- SHAREHOLDERS' EQUITYOrdinary share capital issued 30.3 29.9Share premium 233.6 233.4Own shares - (5.1)Hedge reserve 0.7 (4.3)Other non-distributable reserve 281.4 281.4Retained earnings 1,799.4 1,496.0-------------------- ------ ---------- ----------Total shareholders' equity 2,345.4 2,031.3-------------------- ------ ---------- ---------- PERSIMMON PLC Consolidated Cash Flow Statement for the year ended 31 December 2007 ----------------------------- ------- --------- --------- Note 2007 2006 £m (Restated) £m----------------------------- ------- --------- --------- Cash flows from operating activities:Profit for the year 413.5 396.4 Adjustments for:Income tax expense 169.2 170.3Finance income (1.9) (0.5)Finance costs 74.1 71.1Depreciation charge 9.8 9.6Amortisation of intangible assets 0.2 0.3Impairment of intangible assets 2.4 -Share of results of jointly controlled entities (1.0) (0.7)Profit on disposal of property, plant and (1.0) (0.7)equipmentShare-based payment charge 6.0 5.3Other non-cash items - (8.3)----------------------------- ------- --------- ---------Profit from operations before working capital 671.3 642.8movements Movements in working capital:(Increase)/decrease in inventories (426.7) 186.0(Increase)/decrease in trade and other (7.2) 32.0receivablesIncrease/(decrease) in trade and other payables 25.6 (67.8)----------------------------- ------- --------- ---------Net cash from operations 263.0 793.0 Interest paid (66.2) (57.6)Interest received 1.9 0.5Tax paid (126.3) (146.8)----------------------------- ------- --------- ---------Net cash from operating activities 72.4 589.1 Cash flows from investing activities:Acquisition of subsidiary - (508.5)Received from jointly controlled entities 0.6 1.0Purchase of property, plant and equipment (10.6) (9.6)Proceeds from sale of property, plant and 4.6 2.6equipment ----------------------------- ------- --------- ---------Net cash used in investing activities (5.4) (514.5) Cash flows from financing activities:Repayment of borrowings (68.0) (265.8)Drawdown of loan facilities 75.0 257.3Finance lease principal payments (1.4) (1.5)Own shares purchased (25.5) -Exercise of share options 2.3 3.2Dividends paid to Group shareholders (114.1) (59.6)----------------------------- ------- --------- ---------Net cash used in financing activities (131.7) (66.4)----------------------------- ------- --------- ---------(Decrease)/increase in net cash and cash 6 (64.7) 8.2equivalents ----------------------------- ------- --------- --------- Net cash and cash equivalents at beginning of 15.9 7.7year----------------------------- ------- --------- ---------Net cash and cash equivalents at end of year 7 (48.8) 15.9----------------------------- ------- --------- --------- PERSIMMON PLC Consolidated Statement of Recognised Income and Expense for the year ended 31December 2007 ----------------------------- -------- -------- 2007 2006 £m £m----------------------------- -------- -------- Effective portion of changes in fair value of cash flow 11.9 (7.0)hedgesNet actuarial gains/(losses) on defined benefit pensionschemes 36.1 (4.7)Taxation on items taken directly to equity (15.6) 3.5----------------------------- -------- --------Net income / (expense) recognised directly in equity 32.4 (8.2) Profit for the year 413.5 396.4----------------------------- -------- --------Total recognised income for the year 445.9 388.2(all attributable to equity holders of the parent)----------------------------- -------- -------- PERSIMMON PLC Notes 1. Accounting policies The financial information has been prepared by applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2006, except for the following changes: Other operating income Other operating income comprises profits from the sale of land holdings and ground rents, rent receivable, and other incidental sundry income. Deposits New property deposits and on account contract receipts are held within current trade and other payables until the legal completion of the related property or cancellation of the sale. Financial instruments The Group adopted IFRS 7 (Financial Instruments: Disclosures) on 1 January 2007. The standard serves to consolidate and expand upon existing disclosure requirements, further details of which will be presented in the financial statements for the year ended 31 December 2007. Adoption of IFRS 7 has had no impact on the income statement or balance sheet. 2. Restatement In order to enhance clarity for the readers of these financial statements a number of disclosure items have been restated, none of which have had an impact on gross profit, profit from operations or net assets. These changes comprise: Other operating income is separately disclosed from operating expenses on the face of the income statement. Other operating income for the year ended 31 December 2007 is £40.1m (2006: £29.6m). Land option payments of £77.5m (2006: £69.8m) are separately disclosed in trade and other receivables. New property deposits and on account contract receipts previously classified as a reduction in inventories are now disclosed within current trade and other payables following the principles applicable to deferred income. Deposits received and on account contract receipts at 31 December 2007 amounted to £45.0m (2006: £49.1m). The own share reserve of £5.1m at 31 December 2006 has been reclassified as a deduction against retained earnings. 3. Taxation Taxation has been calculated at an effective rate of 29.0% of profit after financing costs (2006: 30.0%). 4. Dividends It is proposed to pay a final dividend of 32.7p per share on 25 April 2008 to shareholders on the register at the close of business on 7 March 2008. In accordance with IAS 10, the liability for the payment of the dividend has not been included in the financial statements. During the year the 2006 final dividend of 32.7p per share and the 2007 interim dividend of 18.5p per share were paid to shareholders. 5. Earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding those: held in the Employee Share Ownership Trust, the Employee Benefit Trust, and Treasury shares all of which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares from the start of the accounting period. The Company has only one category of dilutive potential ordinary shares: those share options and awards granted to directors and employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. Diluted earnings per share is calculated by dividing earnings by the diluted weighted average number of shares. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below: --------------- ----------- ---------- ----------- --------- Earnings Weighted Earnings Weighted average number average number of ordinary of ordinary shares shares 31 December 31 December 31 December 31 December 2007 2006 2006 £m 2007 £m--------------- ----------- ---------- ----------- --------- For basicearnings pershare 413.5 300,673,519 396.4 296,155,856Options andawards - 1,539,446 - 1,762,783--------------- ----------- ---------- ----------- --------- For dilutedearnings pershare 413.5 302,212,965 396.4 297,918,639--------------- ----------- ---------- ----------- --------- 6. Reconciliation of net cash flow to net debt ---------------------------- ------ ---------- ---------- Note 2007 2006 £m £m---------------------------- ------ ---------- ---------- (Decrease)/increase in net cash and cash (64.7) 8.2equivalents(Increase)/decrease in debt and finance leaseobligations (5.6) 10.0---------------------------- ------ ---------- ----------(Increase)/decrease in net debt from cash flows (70.3) 18.2Net debt acquired - (394.9)New finance lease obligations (1.7) (1.9)Non-cash movements 11.9 (17.4)---------------------------- ------ ---------- ----------Increase in net debt (60.1) (396.0)Net debt at 1 January (664.2) (268.2)---------------------------- ------ ---------- ----------Net debt at 31 December 7 (724.3) (664.2)---------------------------- ------ ---------- ---------- 7. Analysis of net debt---------------------------- ------ ---------- ---------- Note 2007 2006 £m £m---------------------------- ------ ---------- ---------- Cash and cash equivalents 2.1 18.9Bank overdrafts (50.9) (3.0)---------------------------- ------ ---------- ----------Net cash and cash equivalents (48.8) 15.9Bank loans (75.0) -US and UK senior loan notes due within one (73.3) (48.8)yearUS, UK & EU senior loan notes due after morethan one (450.7) (509.1)yearOther loan notes due within one year (5.3) (17.8)Forward currency swaps (68.0) (101.5)Finance lease obligations (3.2) (2.9)---------------------------- ------ ---------- ----------Net debt at 31 December 6 (724.3) (664.2)---------------------------- ------ ---------- ---------- 8. Status of financial information The financial information set out above does not constitute the Company's consolidated statutory accounts for the years ended 31 December 2007 or 2006 but is derived from those accounts. Statutory accounts for the year ended 31 December 2006 have been delivered to the Registrar of Companies, and those for the year ended 31 December 2007 will be delivered following the Company's Annual General Meeting. The auditors have reported on these accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The annual report will be posted to shareholders on Wednesday 26 March 2008. Copies of the annual report will also be available from the Company Secretary, Persimmon plc, Persimmon House, Fulford, York, YO19 4FE. Further information about the Group can be found on the Persimmon website at: www.persimmonhomes.com This information is provided by RNS The company news service from the London Stock Exchange