PERSIMMON PLC

Persimmon Plc

Table of Contents

WHAT IS EXISTING LEVERAGE?3

CALCULATION OF LEVARAGE3

SOURCES OF FUNDS4

INCOME-STATEMENT ANALYSIS4

CASH-FLOW ANALYSIS8

BALANCE-SHEET ANALYSIS9

RATIO ANALYSIS12

CROSS-SECTION ANALYSIS17

CONCLUSION18

Persimmon Plc

What is existing leverage?

Persimmon plc (LSE: PSN) is a British housebuilding company, headquartered in York, England, at a building called Persimmon House. The Company is named after a horse which won the 1896 Derby and St. Leger for the Prince of Wales. It is listed on the London Stock Exchange, and is a constituent of the FTSE 250 Index as of 23 June 2008. Persimmon were formed in 1972 and contained the remnants of Ashtons and Northern Ideal Homes.

Persimmon Homes is the UK's third largest house builder by volume, after Barratt Developments and Taylor Wimpey. It builds homes under the Persimmon homes, Charles Church and Westbury Partnerships brands. Persimmon was founded by Duncan Davidson in 1972. It was first listed on the London Stock Exchange in 1985.

In 2001 it acquired Beazer Homes UK, for £537.5m, then the largest house builder in the UK. The deal came about after Beazer and Bryant announced a 'merger of equals' to create a new house builder called Domus. However, Taylor Woodrow stepped in with a £556m bid for Bryant, and Persimmon bought Beazer, a company named after its founder Brian Beazer, and originally started in Bath. The acquisition of Beazer brought with it Charles Church, a business founded by Charles and Sussana Church in 1965.

Sources of Funds

Time-series analysis, a mathematical statistic helps to make financial-forecasts by measuring the financial-performance of Persimmon Plc over time (from one year to another). We analyse the group's Income-Statement, Cash-Flow Statement and Balance-Sheet for the same, to later develop an applicable ratio-analysis.

Income-Statement Analysis

A first at the income statement and it is clearly evident that Persimmon Plc currently lives in its glory-period. Starting in 2005 through 2007, Persimmon Plc's gross-profit grew 37% from $4630million in 2005 to $5400million in 2006 and $7700million in 2007 while it's operating-income increased by 50% from $1400miilion in 2005 to $2400million in 2006 and to $3100million in 2007. Net-income also improved considerable by 70% from $700million in 2005 to $1130million in 2006 to $2100million in 2007.



Graph 1: Persimmon Plc's Gross-Profit Growth in $1000millions



Graph 2: Persimmon Plc's Operating-Income Growth in $1000millions



Graph 3: Persimmon Plc's Net-Income Growth in $1000millions



Graph 4: Persimmon Plc's Interest-Expense/Income Growth in $1000millions



Graph 5: Persimmon Plc's Operating-Expenses Growth in $1000millions

On deeper insight, it's noticed that both operating-expenses interest and taxes has significantly grown. This supports the idea that Persimmon Plc focuses its strategy around growth. Operating-expenses grew 37% from nearly $2700million in 2005 to $3070million in 2006 to $4600miilion in 2007. A possible reason for this can be derived from increasing depreciation, witnessed in the Balance-sheet.



Graph 6: Persimmon Plc's Tax-Payment Growth in $1000millions

Furthermore, interest-expenses increased by 49% from $8million in 2005 to $15million in 2006 to $16million in 2007. Tax also increased by 44% from $911million to $1600million in 2006 and finally to $1800million in 2007.

The income statement analysis supports the idea of continuous growth in.

Cash-Flow Analysis



Graph 7: Persimmon Plc's Total Cash-Flow from ...