TIDMPSN
RNS Number : 2885D
Persimmon PLC
02 March 2022
FULL YEAR RESULTS FOR THE YEARED 31 DECEMBER 2021
Persimmon Plc today announces Final Results for the year ended
31 December 2021.
Dean Finch, Group Chief Executive, commented:
"Persimmon's performance was strong in 2021 as we delivered more
homes, built better and strengthened our platform for future
growth. Maintaining build rates at pre-Covid levels, we delivered
almost 1,000 additional new homes, and improved customer service
such that we anticipate receiving a five-star rating in the annual
HBF survey later in March 2022, a first in the company's history,
whilst also improving our underlying operating margin.
"An agile approach across the business ensured we navigated the
supply chain challenges posed by the pandemic, with our Brickworks,
Tileworks and Space4 manufacturing facilities providing security of
supply for essential materials and helping us maintain our
operating efficiency. We will significantly expand production
capacity at our Brickworks and Tileworks facilities this year and
invest in a new Space4 timber frame facility.
"We are taking advantage of exciting opportunities in the land
market, bringing in over 20,750 plots into our business last year
at industry-leading embedded margins, and we expect to open around
75 new outlets in the first half of 2022.
"A year ago, we adopted an industry-leading position regarding
the remediation of all cladding and fire related defects on a small
number of buildings developed by Persimmon over the last 30 years,
which is consistent with the recent amendments to the Building
Safety Bill. We await further details including any widening in
scope of those developments brought within the Building Safety Levy
.
"The new year's trading has started well, with private sales
rates ahead by c. 2% in the opening weeks and a robust forward
sales position of GBP2.21bn. We expect to grow our outlet position
in 2022 and are targeting volume growth of 4-7% on 2021 levels,
whilst maintaining our industry-leading margins, although we are
mindful of the growing risk of an economic impact as a result of
the tragic conflict in Ukraine ."
Financial Highlights
2021 2020
New home completions 14,551 13,575
------------ ------------
New home average selling price GBP237,078 GBP230,534
------------ ------------
Total Group revenues GBP3.61bn GBP3.33bn
------------ ------------
New housing revenues GBP3.45bn GBP3.13bn
------------ ------------
Underlying new housing gross margin(1) 31.4% 31.0%
------------ ------------
Underlying profit before tax(2) GBP973.0m GBP863.1m
------------ ------------
Profit before tax GBP966.8m GBP783.8m
------------ ------------
Cash at 31 December GBP1,246.6m GBP1,234.1m
------------ ------------
Land holdings at 31 December -
plots owned and under control 88,043 84,174
------------ ------------
Current number of developments c. 290 c. 300
across the UK
------------ ------------
Current forward sales position GBP2.21bn GBP2.27bn
------------ ------------
Net assets per share 1,135.7p 1,102.7p
------------ ------------
Underlying return on average capital
employed(3) 35.8% 29.4%
------------ ------------
Customer satisfaction score(4) 92.0% 89.7%
------------ ------------
Trading performance
-- Strong demand throughout the year with the Group's average
private weekly sales rate being c. 9% higher than 2020,
a year significantly impacted by pent up demand brought
about by the pandemic, and c. 22% ahead of 2019.
-- Average selling prices increased by 2.8% since 2020 reflecting
a combination of the mix of homes sold in the year and
the increased proportion of homes sold to our housing
association partners.
-- Effective supply chain management, cost control and the
Group's vertical integration, together with strong selling
prices, mitigated build cost inflation of c. 5.0% and
delivered an industry-leading underlying operating margin(5)
of 28.0% (2020: 27.6%).
-- Strong net cash generation of GBP1,209.8m (2020: GBP1,066.8m)
before capital returns of GBP749.6m and net land spend
of GBP447.7m.
Strengthening our development pipeline
-- Added over 20,750 plots of land, both from on market purchases
and our strategic land holdings, with industry-leading
embedded margins.
-- High quality land holdings, with 88,043 plots owned and
under control at 31 December 2021 (2020: 84,174 plots).
-- Continued investment with gross land spend of GBP460m
in 2021.
Build quality - 'build right, first time, every time'
-- An unrelenting focus on 'build right, first time, every
time', further enhancing the Group's build quality and
customer service.
-- Achieved pre-Covid build rates throughout the year, whilst
building better quality homes in line with the 'Persimmon
Way', the Group's construction excellence programme, which
is fully operational across the business.
-- Build rates have further improved in the early part of
this year as we continue to see the benefit of the Persimmon
Way in our build programmes and the Group's vertical integration
facilities
-- All warranty provider scores have significantly improved
over the last year, with a 17% year on year improvement
in the number of NHBC Reportable Incidents(6) .
Customer service
-- Achieved a 92.0%(4) customer satisfaction score for the
survey year ending 30 September 2021. We believe we will
achieve a five-star rating when the HBF's annual results
are published later in March 2022 for the first time in
the company's history.
-- FibreNest, the Group's ultrafast, full fibre broadband
service, currently supports over 21,000 of our customers
across over 270 developments. (2020: over 12,500 customers
across 198 developments).
Supporting sustainable communities
-- Our private average selling price of GBP259,231 for the
year to 31 December 2021 is over 20%(7) lower than the
UK national average.
-- Investment of GBP490m in local communities in 2021, including
the delivery of 2,533 new homes for lower income families
to our housing association partners.
-- Over GBP1.8m donated to local charities and community
groups.
-- Challenging science-based carbon reduction targets - net
zero homes by 2030 and net zero operations by 2040 - now
set and independently accredited by the Science Based
Targets initiative.
-- Pilot projects, utilising innovative carbon reduction
technologies, are underway to determine the most effective
methods of delivering net zero carbon homes in use at
scale.
Legacy buildings provision
-- In February 2021 the Group announced its commitment that
no leaseholder living in buildings it developed, would
pay for cladding related defects or fire related safety
issues.
-- Persimmon set aside GBP75m to pay for rectification works
with 33 developments identified, including all those above
11m.
-- Four of the identified developments have secured successful
EWS1 forms, protecting leaseholders, and are working closely
with the Management Companies and building owners of the
rest.
-- Persimmon will not claim from the Government's Building
Safety Fund.
-- In line with Government's request, we have extended the
search back 30 years but do not expect the number of buildings
identified to change materially.
Current trading and outlook
-- Persimmon is in an excellent position with strong current
forward sales of GBP2.21bn, a c. 2% year on year increase
in the Group's average private weekly sales rate for the
first eight weeks of 2022 and strong weekly build rates.
-- High quality land holdings with industry-leading embedded
margins.
-- Diverse network of c. 290 active outlets (2020: c. 300)
across the UK with good visibility of c. 75 new outlets
coming through in the first half of 2022 providing a strong
platform for future disciplined growth.
-- Investment in new Space4 factory and output increases
at Brickworks (+25%) and Tileworks (+50%) planned for
2022, enhancing security of supply and driving further
quality and efficiency gains.
-- We expect to deliver volume growth of 4-7% for the full
year 2022 from 2021 levels whilst maintaining the Group's
industry-leading margins.
-- We anticipate a greater proportion of completions in the
second half of the year relative to the first reflecting
a return to more typical trading patterns and the growth
profile of our outlet network.
-- We currently anticipate increases in selling prices will
mitigate build cost inflation.
Shareholder returns
-- Dividends of 125p (GBP398.7m) and 110p (GBP350.9m) per
share paid on 26 March 2021 and 13 August 2021 respectively.
-- Payment of regular annual instalment of 125p per share
to be made on 1 April 2022 (brought forward from July
2022) with payment of 110p of surplus capital in July
2022, subject to continuous review, in line with the Group's
strategy.
Footnotes
1 Stated before legacy buildings provision (2021: GBPnil, 2020:
GBP75.0m) and based on new housing revenue (2021: GBP3,449.7m,
2020: GBP3,129.5m).
2 Stated before legacy buildings provision (2021: GBPnil, 2020:
GBP75.0m) and goodwill impairment (2021: GBP6.2m, 2020: GBP4.3m).
Profit before tax after legacy buildings provision and goodwill
impairment is GBP966.8m (2020: GBP783.8m).
3 12 month rolling average calculated on underlying operating
profit and total capital employed (including land creditors).
Underlying operating profit is stated before legacy buildings
provision of GBPnil (2020: GBP75.0m) and goodwill impairment (2021:
GBP6.2m, 2020: GBP4.3m).
4 The Group participates in a National New Homes Survey, run by
the Home Builders Federation. The rating system is based on the
number of customers who would recommend their builder to a
friend.
5 Based on new housing revenue (2021: GBP3,449.7m, 2020:
GBP3,129.5m) and underlying operating profit (2021: GBP966.7m,
2020: GBP862.8m) (stated before legacy buildings provision of
GBPnil (2020: GBP75.0m) and goodwill impairment (2021: GBP6.2m,
2020: GBP4.3m)).
6 A Reportable Incident is an area of non-compliance with NHBC
Standards. The item is rectified fully before completion of the
home.
7 National average selling price for newly built homes sourced
from the UK House Price Index as calculated by the Office for
National Statistics from data provided by HM Land registry. Group
average private selling price is GBP259,231.
For further information please contact:
Dean Finch, Group Chief Executive Kevin Smith
Persimmon Plc Jos Bieneman
Tel: +44 (0) 1904 642199 Ellen Wilton
Citigate Dewe Rogerson
Tel: +44 (0) 20 7638 9571
A presentation to analysts and investors will be available from
07.00 am on 2 March 2022. To view the presentation, please use the
webcast link below:
Webcast link: https://edge.media-server.com/mmc/p/bxvcypb6
There will also be a Q&A session with management, hosted by
Group Chief Executive, Dean Finch, Chief Commercial Officer, Martyn
Clark, Group Financial Controller, Mike Smith and Julia Nichols,
Group Strategy and Regulatory Director, via conference call at
9.00am. Analysts may join the call by using the details below:
Telephone number: +44 (0) 33 0551 0200
Passcode: Persimmon
An audiocast of the call will be available on
www.persimmonhomes.com/corporate from this afternoon.
Chairman's Statement
Introduction
I am pleased to report that Persimmon has had a strong year. The
Group has sold more homes and built them to a consistently higher
standard, while improving both profit and underlying operating
margin. In combining improvements in quality, customer service and
financial performance we are making the broader progress we set as
our objective.
Since I joined as Chairman I have been clear that there were
areas for improvement in customer care and build quality
especially. Dean Finch's appointment around 18 months ago
recognised the need to drive both our industry-leading financial
performance and enhance our capabilities in key areas to sustain
our success. I am therefore delighted to note that throughout the
year we have been consistently trending above five-star on the Home
Builders Federation (HBF) customer satisfaction score(1) and
anticipate our first ever annual five-star award will be confirmed
in the coming weeks.
This is a tangible demonstration of our progress but there is of
course further to go to sustain and improve on it. This remains the
clear focus of the Board and the senior management team .
Trading
The UK housing market remains supportive, with strong customer
demand, good mortgage availability and low interest rates. The
Group saw an increase in legal completions of nearly 1,000 homes to
14,551 last year (2020: 13,575). Average private sales rates per
site were around 9% ahead of 2020 and around 22% ahead of 2019.
Group total revenue increased by 8% to GBP3.61bn (2020: GBP3.33bn).
Our continued disciplined cost control, combined with a positive
pricing environment, drove underlying operating margin(2) up to
28.0% (2020: 27.6%) and our underlying pre-tax profit(3) increased
to GBP973.0m (2020: GBP863.1m). Cash generation remains strong at
GBP762.1m (pre-capital return).
This is a pleasing performance and a credit to our highly
experienced and agile teams right across our business. They have
expertly managed the challenges presented by the pandemic, material
and labour shortages, and cost inflation, to achieve it.
We have increased our land investment, bringing in over 20,750
plots into the business, whilst maintaining our industry-leading
margins. This strengthens our platform for future growth.
Over a year ago, in February 2021 we announced our
industry-leading commitment to protect leaseholders from having to
pay towards cladding removal or fire related safety issues on any
building we constructed and set aside GBP75m to fund this. Whilst
accounting for less than one percent of high rise buildings
constructed we wanted to protect our customers and remove
uncertainty for them. With 33 developments identified, including
four where successful EWS1 forms have now been secured, we are
already showing leadership and protecting leaseholders and will
continue to engage positively with government.
Persimmon was also the first major developer to agree voluntary
undertakings with the Competition and Markets Authority ("CMA") in
respect of leaseholds, extending our existing schemes to offer
leaseholders an even greater discount on the purchase of their
freeholds. We were also delighted to become a Living Wage
Foundation accredited employer and have our carbon targets
accredited by the blue ribbon Science Based Target initiative
during the year.
Long term strategy and Capital Return Programme
Persimmon has delivered an industry-leading performance over
many years with a well-executed strategy which recognises the
cyclical nature of the housing market. Over the last 20 years, the
Group's average return on capital has been c. 23% reflecting the
Group's long-term performance. With an experienced management team,
the Group's strong positioning in its markets, reflected in robust
forward sales of GBP2.21bn, and our high quality land holdings, we
are determined to sustain this for many years to come by delivering
on the five key priorities Dean Finch, our Group Chief Executive,
sets out in his statement. We are investing in our platform for
future growth, whilst maintaining our disciplined strategy around
land investment, improving the Group's operational efficiencies and
placing our customers at the heart of our business.
The Board continues to consider that, under normal
circumstances, cash holdings of c. GBP700m are appropriate for the
business, providing the right balance between ensuring appropriate
liquidity levels are maintained to cover the Group's annual working
capital requirements and providing sufficient funds to take
advantage of attractive investment opportunities. This cash
retention policy demonstrates that we intend to continue to
exercise caution through the cycle.
The Board remains committed to its well-established strategy of
returning capital that is surplus to the needs of the business to
its shareholders. Having assessed and concluded on the availability
of surplus capital for 2021, the Board is pleased to re-iterate its
intention to return 235p per share in 2022. The first payment of
125p per share will be made on 1 April 2022 (rather than July 2022
as was originally indicated) to shareholders on the register on 11
March 2022 as an interim dividend. The second payment of 110p per
share will be made in July 2022 (rather than March 2022 as was
originally indicated), subject to continuous assessment in line
with our strategy.
Board changes
Mike Killoran retired as Group Finance Director in January 2022
after more than 25 years with Persimmon. Mike has played a key part
in Persimmon's success and he leaves with our thanks and best
wishes. I am delighted that we have appointed Jason Windsor as
Chief Financial Officer and we expect him to join us in the
summer.
The Board also welcomed Shirine Khoury-Haq who joined as a
Non-Executive Director during the year. Rachel Kentleton decided to
stand down from the Board during the year given other commitments
and the Board thanks her for her contribution.
In what was again a very difficult year operationally, the Board
would like to thank our colleagues, sub-contractors and suppliers
for their hard work and determination to deliver for our
customers.
Footnotes
1 The Group participates in a National New Homes Survey, run by
the Home Builders Federation. The rating system is based on the
number of customers who would recommend their builder to a
friend.
2 Based on new housing revenue (2021: GBP3,449.7m, 2020:
GBP3,129.5m) and underlying operating profit (2021: GBP966.7m,
2020: GBP862.8m) (stated before legacy buildings provision of
GBPnil (2020: GBP75.0m) and goodwill impairment (2021: GBP6.2m,
2020: GBP4.3m)).
3 Stated before legacy buildings provision (2021: GBPnil, 2020:
GBP75.0m) and goodwill impairment (2021: GBP6.2m, 2020: GBP4.3m).
Profit before tax after legacy buildings provision and goodwill
impairment is GBP966.8m (2020: GBP783.8m).
Chief Executive Statement
Introduction
Persimmon has performed very strongly in 2021. I am delighted
that we have delivered nearly 1,000 more legal completions and
generated a 40 basis point increase in the Group's underlying
operating margin(1) year on year (2021: 28.0%, 2020: 27.6%) while
further improving our five-star HBF 8 week customer satisfaction
score to 92.0%(2) . We are preserving Persimmon's great strengths
and continuing to deliver an industry-leading performance whilst
making good progress in enhancing our build quality and customer
service on a consistent basis.
Trading
The Group delivered 14,551 new homes in 2021 (2020: 13,575)
underpinned by a supportive housing market. Total Group revenues
were GBP3.61bn, an 8% increase year on year (2020: GBP3.33bn). Our
new housing revenues increased to GBP3.45bn in 2021 from GBP3.13bn
in the prior year.
Demand was strong throughout 2021: the Group's average private
sales rate per site was c. 9% ahead of 2020 and c. 22% ahead of
2019 reflecting Persimmon's positive positioning within a healthy
housing market. This backdrop has supported positive pricing
conditions with increased average selling prices for private sales
seen across each of our regions. Our average selling price
increased by 2.8% to GBP237,078 (2020: GBP230,534) reflecting a
combination of the mix of homes sold in the year and the increased
proportion of homes sold to our housing association partners. The
Group's private average selling price increased by 3.3% to
GBP259,231 (2020: GBP250,897) reflecting the mix of developments
and house types sold in the year.
Our build rates were maintained at pre-Covid levels throughout
2021 as our highly experienced and responsive management teams
navigated through the challenges posed by the pandemic and the
supply chain restrictions experienced.
Our vertical integration, through our own Brickworks, Tileworks
and Space4 timber frame manufacturing facilities were key in
providing the business with security of supply of essential
materials. In addition, using timber frames in our build improves
on-site efficiencies and reduces our reliance on constrained
skills.
The Group continues to deliver industry-leading margins, a key
strength I am determined to build on. Our rigorous cost control
helped mitigate material and labour cost inflation, while a
disciplined approach to pricing helped more than offset its impact.
Underlying operating margin(1) increased to 28.0% (2020: 27.6%),
reflecting a benefit from the mix of legal completions achieved in
the second half of the year.
Underlying profit before tax(3) grew to GBP973.0m (2020:
GBP863.1m) and our cash generation to GBP762.1m (pre-capital
return) (2020: GBP740.9m). The Group's profit before tax increased
to GBP966.8m (2020: GBP783.8m).
Our increased investment in land opportunities is strengthening
our platform for disciplined future growth, with over 20,750 plots
brought into the business during the year, at a replacement rate of
143% of current consumption levels. Further, these opportunities
were secured with attractive embedded margins, enabling Persimmon
to continue to deliver leading financial performance. With this
strong pipeline we will increase our UK-wide outlet position
providing an excellent platform for the Group's future disciplined
growth.
This strong performance was delivered whilst continuing to make
good progress in bringing our customers into the heart of our
business, putting them before volume, and taking important steps in
recognising our role as a responsible developer. We were one of the
first developers to give leaseholders a commitment they would not
have to pay to remove cladding; led the industry in agreeing
voluntary undertakings with the CMA on leaseholders purchasing
their freeholds; and, became a Living Wage Foundation accredited
employer. A new Mission, Vision and Values has been launched
clearly setting out our ambitions and ways of working as a
business.
Persimmon has a unique balance of strengths and skill-sets:
-- Our market positioning, with an average private selling
price that is over 20%(4) lower than the UK national average
together with our role in developing communities in places
where people wish to live and work, uniquely positions
us to widen the opportunity of home ownership to our customers;
-- Our high quality land holdings with industry-leading embedded
margins - the Group increased its owned and under control
land holdings to 88,043 plots at 31 December 2021 supporting
our UK-wide outlet network and providing a strong platform
for disciplined growth;
-- Our strong and experienced management teams, a large number
of whom have been with the business for many years;
-- Our focus on all aspects of operational efficiency and
relentless pursuit of build cost efficiencies, including
our disciplined approach to land buying, our carefully
designed standardised house type range, rigorous master
planning and market mix analysis;
-- Our innovation and entrepreneurship resulting in us establishing,
for example, our own vertical integration capabilities,
with our Brickworks and Tileworks manufacturing facilities
that provide us with security of supply and our Space4
timber frame manufacturing facility that reduces our reliance
on constrained skills and increases on-site efficiencies.
In addition, FibreNest, our ultrafast full fibre to the
home broadband service, provides our customers with connection
from the point they move into their new home.
At every stage of the process we have teams diligently focused
on maximising value for customers and our business alike.
Placing customers at the heart of our business and our
continuing pursuit of improvements in build quality and customer
service is further strengthening our position. Our high quality
land holdings, effective operational management and diverse network
of sites across the UK provide an excellent platform to help
deliver the homes that the country needs. Our focus on our five key
priorities for the business will further enhance Persimmon's
strengths and continue to drive real improvements across the Group,
sustaining our industry-leading financial performance.
Delivery against our five key priorities
In short, during the year we delivered more homes, built better
and strengthened our platform for future growth. As our results
demonstrate, the five key priorities I set out last year are
driving important progress, building on Persimmon's great strengths
and enhancing our focus in certain key areas. These five key
priorities will underpin and sustain our future success:
-- Build quality: our ambition is to build right, first time,
every time;
-- Reinforce trust in the brand: we will be consistently
trusted to deliver a home to be proud of and a builder
customers would readily recommend to others;
-- Disciplined growth: through our improvements in build
quality and increased focus on customer care we will be
strengthening our capability to deliver more five-star
homes to meet the strong demand;
-- Maintaining an industry-leading financial performance:
sustaining our strong margins and returns and driving
healthy profit and cash generation;
-- Sustainable communities: we will play a full and active
role in the imperative of achieving a net zero carbon
economy, as well as setting new biodiversity and sustainable
community targets.
Quality
Our focus on build quality is summed up by our determination to
build right, first time, every time - the mantra of our Persimmon
Way construction excellence programme. As a responsible developer,
we recognise the importance of delivering high quality homes to our
customers and are aligned with government's aims of enhancing
quality across the industry. We welcome the introduction of the New
Homes Quality Board and our ambition to be an industry leader is
demonstrated by the fact we are an early signatory to the New Homes
Quality Code. The code is designed to drive build quality and
customer service improvements across the industry, in line with
Persimmon's renewed ambition.
Last year, I made build quality my first priority, as I want
Persimmon to be known for outstanding service as well as
outstanding value, further securing our strong market positioning
and increasing the value of the homes we build. Improving build
quality will also deliver further improvements in our build costs
as we increase on-site efficiencies and reduce the cost of
remediation.
We have made good progress. All warranty provider scores have
significantly improved over the last two years, with NHBC
Reportable Incidents(5) down over 33%. Our build quality score on
the HBF 8 week survey(6) has improved by 11% over the last two
survey years.
We have achieved this progress by strengthening our standards,
training, oversight and reward structures. To take each in turn. A
new build standards guide and more exacting build tolerances which
are set above prevailing industry norms have been published under
our Persimmon Way programme. These are being augmented by
construction excellence seminars, led by the Group Construction
Director and senior local leaders, to disseminate best practice.
They are already proving very popular.
Our sub-contract tendering process has been revised to emphasise
quality and customer service performance alongside cost efficiency
considerations. We are also seeking to become one of the first
Building a Safer Future Charter Champions, recognising our renewed
level of ambition for build quality and safety.
We have strengthened oversight to enhance the assurance of
consistent delivery. In the last year, we have more than doubled
our team of Independent Quality Controllers (IQCs) from 29 to 60.
We believe this is the largest independent team of inspectors in
the industry. Each key stage of development must be independently
verified as complete and at the required standard before further
work can continue. Our commitment to independent oversight is also
demonstrated by undertaking our first external audits of the
Persimmon Way's implementation both across our sites and within
each of our 31 operating businesses by a leading national quality
inspection consultancy. Alongside this, we are investing further in
digitised site inspection, including a site manager app that
provides a clear record of quality sign off and accountability as
well as prompting tasking and completion of any necessary work.
To reinforce this renewed focus, our senior management bonus
scheme was restructured last year to incorporate build quality and
customer service targets. In the current year, this approach is
being extended across the organisation, including to our site
management teams. We will shortly announce the first national
winner of our Construction Excellence Awards, with 31 local and
five divisional winners already recognised for their build quality
standards. I was also delighted to see our first NHBC Pride in the
Job Awards winners in two years, recognising excellent site
management practice. I look forward to many more awards in the
years to come.
Reinforcing trust
Focusing on consistently delivering quality is the foundation of
our renewed approach. As I said last year, Persimmon is known for
outstanding value; I want us to equally be known for outstanding
quality and service. Our recent progress on our HBF 8 week customer
satisfaction score is therefore welcome and encouraging. From
closing the 2019/2020 survey year at 89.7%, we are reporting a
score of 92.0%(2) for the 2020/2021 survey year. We believe, for
the first time in Persimmon's history, we will achieve a five-star
rating when the results are published shortly.
I am determined to build even further on this progress. To
reinforce trust we will continue to seek further improvement to
both our 8 week and 9 month scores. We continue to invest in
training to embed the new priorities further. For example, we have
rolled out a Persimmon Site Manager Essentials course and c. 90% of
our site managers have now gained an NVQ, up from 21% last January.
Our Persimmon Pathway provides tailored programmes for staff and in
the last year over 21,000 hours of training was delivered by our
in-house team alone. We were also the first homebuilder to offer
sales advisors a route to professional accreditation through a
partnership with the Institute of Sales Professionals.
FibreNest continues to be a real strength for the Group, with
over 21,000 customers across more than 270 developments now
connected to our national ultrafast broadband network. Created to
address persistent customer frustration that established internet
providers were not connecting their homes from the day they moved
in, FibreNest has seen a sustained improvement in day one
connection rates, so they averaged over 85% during 2021, with the
start of 2022 showing a further notable improvement. Customers
increasingly view broadband as a key utility and FibreNest's
gigabit ready, ultrafast network is therefore an important part of
our service. Indeed, last year FibreNest launched a new Wholesale
Services division to encourage other retail service providers to
use our network and meet our ambition of expanding customer
choice.
Acting as a responsible developer, over a year ago, we led the
industry in making a commitment to leaseholders that they would not
have to pay to remove any cladding or correct fire related safety
issues on any buildings we constructed. We created a GBP75m fund to
pay for this work and set up a Special Projects Team to complete
the programme as quickly as possible. This team wrote proactively
to the Management Companies and owners of all potentially affected
buildings going back 22 years and identified 33 developments where
work is required. Of the 33 developments identified, 3 are below 11
metres, 16 are between 11m and 18m and 10 are taller than 18m. The
remaining four developments have already secured successful EWS1
forms. We are working with Management Companies and building owners
to help expedite their programmes to provide reassurance to
leaseholders as soon as possible.
In response to the Government's request we have extended the
search back to 30 years but do not expect the number to change
materially. We will not claim from the Government's Building Safety
Fund to complete the works on these buildings and will reimburse
any funding already claimed by the Management Companies involved.
We hope these actions will lead to us becoming a member of the
government's new Building Industry Scheme and continue to engage in
positive discussions with officials.
Disciplined growth
Alongside the focus on consistent delivery of quality and
service, we are determined to drive disciplined growth in the
business and sustain our industry-leading performance. We have
highly experienced land and planning teams in our operating
businesses with in depth knowledge of their local communities'
needs. In combining this with expert design and place making skills
we create communities that meet our customers' needs.
In the second half of 2021 we operated from an average of 285
outlets reflecting the high sales rates achieved and some planning
delays experienced. We have clear visibility on our pipeline of new
outlets and, subject to planning consents, are forecasting to open
around 75 new outlets in the first half of 2022. We have had some
success in gaining planning consents in the early part of this
year, however, the process continues to move at a slow pace. We aim
to continue to grow our UK-wide outlet network to c. 320 building
on this momentum through 2023 and beyond providing an excellent
platform for disciplined growth.
In 2021 we invested GBP460m in land payments (including around
GBP180m of deferred land creditor payments). We brought in over
20,750 plots across 101 sites into the business. This represents a
land replacement rate of 143% compared to our current output level.
I am delighted that we have achieved this while maintaining our
industry-leading embedded margins. This investment is strengthening
our platform for growth.
Industry-leading financial performance
We seek to combine our very strong platform of experienced and
skilled teams and high quality land holdings with a focus on
quality and re-enforcing trust in our brand to further enhance our
industry-leading financial performance. I have set out above how
the quality and build right, first time, every time focus helps
here.
Our Space4, Brickworks and Tileworks factories have also proven
crucial tools in both maintaining security and consistency of
supply and securing build efficiencies, especially in a period of
material and labour cost inflation. Through the bulk buying of raw
materials and stable labour costs within our factories, we have
been able to maintain a price advantage compared to the open
market. Further, our use of Space4 timber frames in 33% of our
homes built in the year, reduces our reliance on bricklayers, where
labour shortages have been most pronounced.
These factories will play an increasingly crucial role in our
security of supply, quality control and drive to secure
cost-efficiencies. We are already looking to expand production -
through increased shifts and product lines - across our Brickwork
and Tilework factories. We anticipate increasing output at
Brickworks by 25% and at Tileworks by over 50% this year. We also
plan to start building a new Space4 factory in 2022, updating the
technology and techniques to drive enhanced quality and further
efficiency gains. We anticipate - for example - that the new
factory's product will improve our speed of build by up to five
days per house.
This focus on cost efficiency is demonstrated in our underlying
operating margin(1) , which grew to 28.0% (2020: 27.6%) and further
progress on the Group's underlying return on average capital
employed(7) , increasing to 35.8% (2020: 29.4%).
The Group has generated net cash of GBP1,209.8m (2020:
GBP1,066.8m) before capital returns of GBP749.6m and net land spend
of GBP447.7m supporting investment in the future disciplined growth
of the business and the sustainable delivery of our Capital Return
Programme. The Board is pleased to re-iterate its intention to
return 235p per share in 2022.
Sustainable communities
Persimmon is proud of the important role it plays in communities
across the country. With our average selling price over 20%(4)
lower than the industry average and the recent addition of smaller
house types to our core product range, we are opening up the
opportunity of homeownership to thousands of families who otherwise
might not be able to achieve it. We provide well-paid, skilled
employment across the country and have been reviewing our
apprenticeship programmes to enhance our routes into employment for
those who might otherwise either not consider or struggle to access
construction jobs. A new innovative partnership with Bridgend
College, where we have installed classroom facilities on one of our
sites so the college can deliver courses to students directly, is a
good example of our work in this area.
Our Community Champions and Building Futures programmes donated
over GBP1.8m to local communities and good causes in 2021. Through
our planning contributions we have paid GBP127m for new
educational, medical and community facilities that benefit all
local residents near our developments.
We recognise our important role in helping the UK achieve its
climate change targets and ambitions. That is why we set stretching
targets, accredited by the blue-ribbon Science Based Targets
initiative. As part of a broader suite of commitments we have made
pledges to have net zero carbon homes in use from 2030 and net zero
operations from 2040. We have already taken action, switching all
our offices and manufacturing facilities to 100% renewable energy
last year. We have also introduced electric vehicle options into
our car fleet and are investigating options to reduce our diesel
use, including through alternative fuels trials for our
construction plant and equipment.
Our new homes are already 30% more energy efficient than the
second hand housing stock. We are determined to meet the demanding
targets set for new build homes through the building regulations
and Future Homes Standard in a cost efficient way and are running
technology trials to assess options for innovation. On our Germany
Beck site in York, our zero carbon home will shortly be welcoming
its tenants who will live in the house as part of a joint project
with the University of Salford to assess the effectiveness of its
zero carbon technologies and build techniques and to discover what
it is like to live in a zero carbon home.
Renewed focus and further opportunity
We have made important headway but I am determined to drive even
further progress and have taken steps to achieve it.
We have recently launched our Mission, Vision and Values. They
build on Persimmon's many strengths and our recent progress to
strive even higher, to be Britain's leading homebuilder, with core
values that demonstrate how we will achieve it. The new Mission,
Vision and Values further embeds the five key priorities into how
we operate as a business.
Our Mission is simple: to build homes with quality our customers
can rely on at a price they can afford.
Our Vision is to be Britain's leading homebuilder, with quality
and customer service at its heart, building the best value homes on
the market in sustainable and inclusive communities. We will invest
in innovation and technology to extend our low cost strengths and
enhance our five-star capabilities to enable as many people as
possible to buy the homes we build.
To achieve this we will live by our five core values: customer
focused, value driven, team work, social impact and excellence
always.
I am delighted that these values have been warmly embraced
across the business and look forward to delivering on the ambition
they set out.
Our experienced management teams
We have highly experienced management teams and are proud to
provide our colleagues with rewarding career opportunities. We
continue to build on our track record of promoting from within,
with 177 colleagues promoted during the year.
A new senior management structure has been established to
combine an even greater focus on consistent build quality and
customer service with an even sharper commercial approach. These
changes draw on internal experience and expertise to provide a
structure that supports and challenges local teams to meet their
targets and explore new opportunities for growth.
Paul Hurst (UK Managing Director), John Eynon (Deputy UK
Managing Director) and Andy Fuller (Group Construction Director)
together provide an operational senior management team with over
100 years of industry experience. Our regional teams will report
into Paul and John, with Andy working closely alongside them, to
ensure we deliver the improved consistency of standards the
Persimmon Way demands throughout the business, while meeting our
growth ambitions. Both Paul (Space4) and John (Brickworks and
Tileworks) are also chairmen of our own factories leading our drive
to deliver both enhanced products and greater efficiency.
Martyn Clark has become our Chief Commercial Officer, leading on
all commercial aspects, including new business development and
enhancing our relationships with key external partners. With a
number of Group functions reporting to him, Martyn will ensure we
co-ordinate our approach, so that the operational teams have the
best possible opportunity to meet our targets. A key aspect of the
role is to ensure that we maintain the recent progress in land
buying, bringing in assets to the business at industry-leading
margins, while also seeking to work with local authorities to
secure faster planning permissions. Martyn will also lead our
further innovation and value creation opportunities.
With this highly experienced team in place, we will continue to
enhance our capability to deliver five-star performance
consistently and maintain our industry-leading financial
performance. Persimmon has many opportunities ahead of it and I
look forward to securing the growth, quality and efficiency
opportunities necessary to drive our continued industry-leading
performance.
Outlook
The UK housing market remains supportive with demand continuing
to exceed supply, favourable interest rates and good levels of
mortgage availability. The business is in a strong position. We are
leading the industry as a responsible developer; we were one of the
first developers to agree voluntary undertakings with the CMA on
leaseholders purchasing their freeholds and to give leaseholders a
commitment they would not have to pay to remove cladding. We
identified 33 developments where work is required, have already
contacted relevant Management Companies and building owners to help
expedite their programmes and have successfully secured EWS1 forms
on four of the 33 developments.
With a new senior management structure, comprising colleagues
from within the business, supporting an experienced and agile team,
a growing outlet network and high quality land holdings, I expect
to deliver further growth this year and through the medium term.
For 2022, we are targeting 4-7% volume growth whilst maintaining
our industry-leading margins. We currently anticipate increases in
selling prices will mitigate build cost inflation.
We have already made a strong start to the year with GBP2.21bn
of forward sales. Our private average weekly sales rate per site
for the first eight weeks of 2022 is c. 2% ahead of the prior year.
We anticipate a greater proportion of completions in our second
half relative to our first reflecting more typical trading patterns
and the growth profile of our outlet network. Group margin is
expected to reflect the increased proportion of homes sold to our
housing association partners. Our build rates, which were at
pre-Covid levels throughout 2021, have improved in the early weeks
of this year.
Some short term uncertainties remain, particularly regarding
cost inflation, potentially rising interest rates and the impact of
the current geo-political environment on the UK economy. The speed
of achieving planning consents remains an issue and the withdrawal
of the Government's Help to Buy scheme is still planned for March
2023. In addition, the recent Building Safety Bill amendments
include the potential significant widening of those developments
brought within the Building Safety Levy's scope.
Given our unique market positioning with attractively priced
homes, our high quality land holdings and strong cash position, our
focus on customers and quality, building on our existing strengths
and driving further operational efficiencies (including the
investment in a new Space4 factory and our Brickworks and Tileworks
facilities securing build programme and cost efficiencies) the
Board is confident of the Group's future success.
Footnotes
1 Based on new housing revenue (2021: GBP3,449.7m, 2020:
GBP3,129.5m) and underlying operating profit (2021: GBP966.7m,
2020: GBP862.8m) (stated before legacy buildings provision of
GBPnil (2020: GBP75.0m) and goodwill impairment (2021: GBP6.2m,
2020: GBP4.3m)).
2 The Group participates in a National New Homes Survey, run by
the Home Builders Federation. The rating system is based on the
number of customers who would recommend their builder to a
friend.
3 Stated before legacy buildings provision (2021: GBPnil, 2020:
GBP75.0m) and goodwill impairment (2021: GBP6.2m, 2020: GBP4.3m).
Profit before tax after legacy buildings provision and goodwill
impairment is GBP966.8m (2020: GBP783.8m).
4 National average selling price for newly built homes sourced
from the UK House Price Index as calculated by the Office for
National Statistics from data provided by HM Land registry. Group
average private selling price is GBP259,231.
5 A Reportable Incident is an area of non-compliance with NHBC
Standards. The item is rectified fully before completion of the
home.
6 The Group participates in a National New Homes Survey, run by
the Home Builders Federation. The build quality score is based on
how satisfied customers are with the quality of their home.
7 12 month rolling average calculated on underlying operating
profit and total capital employed (including land creditors).
Underlying operating profit is stated before legacy buildings
provision of GBPnil (2020: GBP75.0m) and goodwill impairment (2021:
GBP6.2m, 2020: GBP4.3m).
FINANCIAL REVIEW
Trading
The Group entered 2021 in a resilient position with forward
sales at c. GBP1.69bn and work in progress including c. 5,600 new
homes under construction. Trading through the year was strong with
increased selling prices across our regions and healthy levels of
customer demand, the Group's average private sales rate per site
being c. 9% ahead of 2020 and c. 22% ahead of 2019.
For 2021, the Group generated total revenues of GBP3.61bn (2020:
GBP3.33bn), with new housing revenue of GBP3.45bn (2020:
GBP3.13bn). The Group delivered 14,551 new homes (2020: 13,575) at
an average selling price of GBP237,078 (2020: GBP230,534), 2.8%
higher than the prior year.
The Group delivered 12,018 new homes to private owner occupiers
(2020: 11,363) at an average selling price of GBP259,231 (2020:
GBP250,897). This 3.3% year on year increase largely reflecting
improvements in achieved selling prices and the mix of new homes
sold. The Group delivered a further 2,533 new homes to our housing
association partners (2020: 2,212) at an average selling price of
GBP131,976 (2020: GBP125,930).
The Group's underlying gross profit(1) for the year was
GBP1,083.8m (2020: GBP969.4m) generating a new housing gross margin
of 31.4%(2) (2020: 31.0%). The Group's well established land
replacement strategy, the improved selling prices achieved and good
management of the cost inflation we have experienced during the
year continues to deliver industry-leading margins.
Underlying operating profit(3) for the Group was GBP966.7m
(2020: GBP862.8m), generating an underlying new housing operating
margin(4) of 28.0% (2020: 27.6%) as the second half benefitted from
the particular mix of legal completions achieved.
The Group generated a profit before tax of GBP966.8m in the year
(2020: GBP783.8m).
Taxation
The Group has an overall tax charge of GBP179.6m for the year
(2020: GBP145.4m) and an effective tax rate of 18.6% (2020: 18.6%),
marginally lower than the mainstream rate of 19.0%. Factors that
may affect the Group's taxation charge include changes in tax
legislation and the closure of certain open matters in the ordinary
course of business in relation to prior year's tax
computations.
Balance sheet strength
Net assets of GBP3,625.2m at 31 December 2021 (2020:
GBP3,518.4m), including retained earnings of GBP3,055.1m (2020:
GBP2,950.9m), underpin the Group's balance sheet strength. After
returning GBP749.6m of surplus capital to shareholders during the
year, the Group's reported net assets per share was 1,135.7p, an
increase of 3% compared with the prior year (2020: 1,102.7p).
Underlying return on average capital employed(5) as at 31 December
2021 was 35.8% (2020: 29.4%), further demonstrating the resilience
of the business. Underlying basic earnings per share(3) for the
year was 248.7p, a 12.7% increase on the prior year (2020:
220.7p).
The Group's defined benefit pension asset has increased to
GBP148.8m at 31 December 2021 (2020: GBP50.6m). The increase is
largely due to the recovery in markets and good asset performance
combined with the actuarial benefit from the increase in discount
rates through the year.
In February 2021 we pledged to support leaseholders in
multi-storey developments we built that required cladding removal
and in obtaining the EWS1 form they need to sell their home. As
part of this pledge we created a GBP75.0m fund and have been in
contact with management companies and building owners to ensure the
required progress is being made. During the year works have been
undertaken across a number of affected developments resulting in
total spend of GBP2.3m. At 31 December 2021, the provision stands
at GBP72.7m and is management's best estimate of the costs of
completing works to ensure fire safety on the remaining affected
buildings under direct ownership and on those under third party
ownership we have developed.
The Group's land holdings
At 31 December 2021, the carrying value of the Group's land
asset was GBP1,798.2m (2020: GBP1,722.1m), reflecting the Group's
disciplined land replacement strategy and the strong sales
performance the Group has experienced during the year. The high
quality of the Group's land holdings are reflected in the Group's
land cost recoveries for the year of 13.2% of new housing revenue
(2020: 14.2%).
The Group increased its owned and under control land holdings to
88,043 plots at 31 December 2021 (2020: 84,174 plots) to facilitate
future output growth and to support the Group's national outlet
network. 67,089 plots are owned of which 39,079 have detailed
implementable planning consents. A further 20,954 plots are under
the Group's control, being plots where the Group has exchanged
contracts to acquire the site but have yet to complete the contract
due to outstanding planning conditions remaining unfulfilled.
During the year the Group's experienced land and planning teams
successfully progressed c. 14,400 under control plots through the
planning system, transferring them into the Group's owned land
holdings. The Group's owned land holding provides excellent
visibility of the near to medium term with 4.6 years of forward
supply at 2021 volumes, an overall pro-forma gross margin of c. 33
% and a cost to revenue ratio of 11.4% (2020: 11.9%).
The Group continued to pursue its disciplined land replacement
strategy of identifying new land in areas where people wish to live
and work, providing new housing in areas where there is the most
need. The Group brought over 20,750 plots into its owned and under
control land holdings across 101 locations, with 10,220 of these
plots converted from our strategic land portfolio. In line with our
expectations, we have incurred land spend of GBP460.0m in the year,
including GBP178.5m of payments in satisfaction of deferred land
commitments.
During 2021, the Group acquired interests in a further 480 acres
of strategic land, securing a total of c. 13,700 acres at 31
December 2021 (2020: c. 15,500 acres). This provides a long-term
supply of forward plots for future development by the Group.
Work in progress
Against the backdrop of a reduced number of sales outlets, the
delivery of increased volume of new homes, material and labour
resource shortages we have successfully maintained our build rates
at pre-Covid levels. This has resulted in our work in progress
investment at 31 December 2021 of GBP1,054.1m being only c. 3%
lower than the level of investment we entered 2021 (2020:
GBP1,091.6m). The Group's level of work in progress of c. 4,100
equivalent units of new homes construction at the end of 2021
provides a robust opening position that will support the Group's
build programmes for the first half of 2022 and deliver the new
homes the country needs.
We are focused on driving strong levels of build throughout
2022, managing the continuing operational challenges we face and
securing the availability of key build components through our
in-house manufactured bricks, roof tiles, closed panel timber frame
kits and pre-manufactured roof cassettes, whilst delivering high
levels of customer satisfaction and build quality.
Cash generation and liquidity
The Group had a cash balance of GBP1,246.6m at 31 December 2021
(2020: GBP1,234.1m). During the year the Group generated
GBP1,209.8m (2020: GBP1,066.8m) of cash before returning GBP749.6m
of surplus capital to shareholders and net land spend of GBP447.7m.
The Group's deferred land commitments have increased by GBP78.3m to
GBP407.6m from GBP329.3m at 31 December 2020 reflecting the Group's
increased activity in the land market throughout 2021. The Group's
healthy liquidity position will provide further opportunity to
support the future growth of the business. Cash generated from
operations was GBP972.8m (2020: GBP993.3m).
In addition, the Group has an undrawn GBP300m Revolving Credit
Facility which extends out to 31 March 2026.
The Group's shared equity loans have generated GBP18.9m of cash
in the year (2020: GBP16.4m). The carrying value of these
outstanding shared equity loans, reported as "Shared equity loan
receivables", is GBP45.6m at 31 December 2021 (2020: GBP56.2m). The
Board has reviewed the carrying value of these receivables and has
concluded that the value is appropriate.
Net finance income for the year was GBP6.3m (2020: GBP0.3m) and
includes GBP7.9m of gains generated on the Group's shared equity
loan receivables (2020: GBP4.0m) and GBP1.8m of imputed interest
payable on land creditors (2020: GBP5.4m).
Shareholders' equity, treasury policy and related risks
The Group's strategy of minimising financial risk and retaining
flexibility reflects the cyclical nature of the housing market. The
return of any capital that is deemed surplus to the needs of the
business through the Group's Capital Return Programme remains a key
element of this strategy. The Programme is continually reviewed and
assessed by the Directors having regard to the progress and trading
position of the business, existing economic and market conditions,
the Group's current land holdings and other investment
opportunities. The total value paid of the Capital Return Programme
to 2021 was GBP13.00 per share, compared to the GBP6.20 per share
initial commitment made by the Board in 2012.
The business maintains a robust balance sheet with an efficient
capital structure and stringent controls around its working capital
management. The Group's GBP300m Revolving Credit Facility provides
an important element in the Group's working capital resource and
flexibility. These facilities will only be used to support
short-term working capital needs of the business.
The Group will continue to effectively manage its liquidity and
working capital investment needs, whilst ensuring they are aligned
with the Group's focus on work in progress investment to support an
increase in the equivalent units of new home construction that will
support good levels of stock availability and the high levels of
build quality and customer service we currently deliver. The Group
will continue to ensure it maintains flexibility when considering
the generation of after tax earnings, and the management of the
Group's equity, debt and cash management facilities. This approach
will mitigate the financial risks the Group faces and maintain the
Group's robust balance sheet and strong liquidity levels, securing
a resilient position for the future.
Footnotes
1 Stated before legacy buildings provision of GBPnil (2020:
GBP75.0m)
2 Based on new housing revenues of GBP3,449.7m (2020:
GBP3,129.5m) and underlying gross profits of GBP1,083.8m (2020:
GBP969.4m) (stated before legacy buildings provision of GBPnil
(2020: GBP75.0m)).
3 Stated before legacy buildings provision of GBPnil (2020:
GBP75.0m) and goodwill impairment (2021: GBP6.2m, 2020:
GBP4.3m).
4 Based on new housing revenue (2021: GBP3,449.7m, 2020:
GBP3,129.5m) and underlying operating profit (2021: GBP966.7m,
2020: GBP862.8m) (stated before legacy buildings provision of
GBPnil (2020: GBP75.0m) and goodwill impairment (2021: GBP6.2m,
2020: GBP4.3m)).
5 12 month rolling average calculated on underlying operating
profit and total capital employed (including land creditors).
Underlying operating profit is stated before legacy buildings
provision (2021: GBPnil, 2020: GBP75.0m) and goodwill impairment
(2021: GBP6.2m, 2020: GBP4.3m).
6 Estimated weighted average gross margin based on assumed
revenues and costs at 31 December 2021 and normalised output
levels
7 Land cost value for the plot divided by the anticipated future
revenue of the new home sold.
PERSIMMON PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
Note Total Total
GBPm GBPm
----------------------------------------- ----- ---------- -----------
Revenue 3 3,610.5 3,328.3
Cost of sales (2,526.7) (2,433.9)
----------------------------------------- ----- ---------- -----------
Gross profit 1,083.8 894.4
Analysed as:
Underlying gross profit 1,083.8 969.4
Legacy buildings provision 9 - (75.0)
----------------------------------------- ----- ---------- -----------
Other operating income 6.4 5.4
Operating expenses (129.7) (116.3)
----------------------------------------- ----- ---------- -----------
Profit from operations 960.5 783.5
Analysed as:
Underlying operating profit 966.7 862.8
Legacy buildings provision - (75.0)
Impairment of intangible assets (6.2) (4.3)
----------------------------------------- ----- ---------- -----------
Finance income 9.9 8.9
Finance costs (3.6) (8.6)
----------------------------------------- ----- ---------- -----------
Profit before tax 966.8 783.8
Analysed as:
Underlying profit before tax 973.0 863.1
Legacy buildings provision - (75.0)
Impairment of intangible assets (6.2) (4.3)
----------------------------------------- ----- ---------- -----------
Tax 4 (179.6) (145.4)
----------------------------------------- ----- ---------- -----------
Profit after tax (all attributable
to equity holders of the parent) 787.2 638.4
----------------------------------------- ----- ---------- -----------
Other comprehensive income/(expense)
Items that will not be reclassified
to profit:
Remeasurement gain/(loss) on
defined benefit pension schemes 12 83.3 (42.5)
Tax 4 (24.8) 6.5
----------------------------------------- ----- ---------- -----------
Other comprehensive income/(expense)
for the year, net of tax 58.5 (36.0)
----------------------------------------- ----- ---------- -----------
Total recognised income for the
year 845.7 602.4
----------------------------------------- ----- ---------- -----------
Earnings per share
Basic 6 246.8p 200.3p
Diluted 6 245.6p 199.6p
----------------------------------------- ----- ---------- -----------
PERSIMMON PLC
Consolidated Balance Sheet
As at 31 December 2021
2021 2020
Note GBPm GBPm
--------------------------------- ----- ---------- ----------
Assets
Non-current assets
Intangible assets 175.6 181.8
Property, plant and equipment 99.0 90.4
Investments accounted for using
the equity method 0.3 2.1
Shared equity loan receivables 8 35.7 41.7
Trade and other receivables 0.6 4.0
Deferred tax assets 9.7 7.7
Retirement benefit assets 12 148.8 50.6
--------------------------------- ----- ---------- ----------
469.7 378.3
--------------------------------- ----- ---------- ----------
Current assets
Inventories 7 2,920.7 2,901.3
Shared equity loan receivables 8 9.9 14.5
Trade and other receivables 123.9 86.6
Current tax assets 21.4 8.3
Cash and cash equivalents 11 1,246.6 1,234.1
--------------------------------- ----- ---------- ----------
4,322.5 4,244.8
--------------------------------- ----- ---------- ----------
Total assets 4,792.2 4,623.1
--------------------------------- ----- ---------- ----------
Liabilities
Non-current liabilities
Trade and other payables (203.4) (179.3)
Deferred tax liabilities (54.6) (22.9)
Partnership liability (23.8) (27.8)
--------------------------------- ----- ---------- ----------
(281.8) (230.0)
--------------------------------- ----- ---------- ----------
Current liabilities
Trade and other payables (807.0) (794.2)
Partnership liability (5.5) (5.5)
Legacy buildings provision 9 (72.7) (75.0)
(885.2) (874.7)
--------------------------------- ----- ---------- ----------
Total liabilities (1,167.0) (1,104.7)
--------------------------------- ----- ---------- ----------
Net assets 3,625.2 3,518.4
--------------------------------- ----- ---------- ----------
Equity
Ordinary share capital issued 31.9 31.9
Share premium 24.9 22.3
Capital redemption reserve 236.5 236.5
Other non-distributable reserve 276.8 276.8
Retained earnings 3,055.1 2,950.9
--------------------------------- ----- ---------- ----------
Total equity 3,625.2 3,518.4
--------------------------------- ----- ---------- ----------
PERSIMMON PLC
Consolidated Statement of Changes in Shareholders' Equity
For the year ended 31 December 2021
Share Share Capital Other non-distributable Retained Total
capital premium redemption reserve earnings
reserve
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Balance at 1 January
2020 31.9 19.2 236.5 276.8 2,693.9 3,258.3
Profit for the year - - - - 638.4 638.4
Other comprehensive
expense - - - - (36.0) (36.0)
Transactions with owners:
Dividends on equity
shares - - - - (350.7) (350.7)
Issue of new shares - 3.1 - - - 3.1
Exercise of share options/share
awards - - - - (0.2) (0.2)
Share-based payments - - - - 7.7 7.7
Net settlement of share-based
payments - - - - (2.4) (2.4)
Satisfaction of share
options from own shares
held - - - - 0.2 0.2
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Balance at 31 December
2020 31.9 22.3 236.5 276.8 2,950.9 3,518.4
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Profit for the year - - - - 787.2 787.2
Other comprehensive
income - - - - 58.5 58.5
Transactions with owners:
Dividends on equity
shares - - - - (749.6) (749.6)
Issue of new shares - 2.6 - - - 2.6
Share-based payments - - - - 8.1 8.1
Balance at 31 December
2021 31.9 24.9 236.5 276.8 3,055.1 3,625.2
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
The other non-distributable reserve arose prior to transition to
IFRSs and relates to the issue of ordinary shares to acquire the
shares of Beazer Group Plc in 2001.
PERSIMMON PLC
Consolidated Cash Flow Statement
For the year ended 31 December 2021
2021 2020
Note GBPm GBPm
--------------------------------------- ----- -------- --------
Cash flows from operating activities:
Profit for the year 787.2 638.4
Tax charge 4 179.6 145.4
Finance income (9.9) (8.9)
Finance costs 3.6 8.6
Depreciation charge 14.5 14.1
Impairment of intangible assets 6.2 4.3
Legacy buildings provision 9 - 75.0
Share-based payment charge 6.4 6.4
Net imputed interest income/(expense) 6.1 (1.4)
Other non-cash items (7.9) (7.3)
--------------------------------------- ----- -------- --------
Cash inflow from operating
activities 985.8 874.6
Movements in working capital:
(Increase)/decrease in inventories (9.8) 265.0
Increase in trade and other
receivables (59.5) (45.8)
Increase/(decrease) in trade
and other payables 37.4 (116.9)
Decrease in shared equity loan
receivables 18.9 16.4
--------------------------------------- ----- -------- --------
Cash generated from operations 972.8 993.3
Interest paid (3.7) (4.1)
Interest received 1.9 4.7
Tax paid (186.2) (228.4)
--------------------------------------- ----- -------- --------
Net cash inflow from operating
activities 784.8 765.5
--------------------------------------- ----- -------- --------
Cash flows from investing activities:
Joint venture net funding movement 1.8 -
Purchase of property, plant
and equipment (20.9) (18.9)
Proceeds from sale of property,
plant and equipment 0.9 0.8
--------------------------------------- ----- -------- --------
Net cash outflow from investing
activities (18.2) (18.1)
--------------------------------------- ----- -------- --------
Cash flows from financing activities:
Lease capital payments (3.3) (3.6)
Payment of Partnership liability (3.8) (3.6)
Net settlement of share-based
payments - (2.4)
Share options consideration 2.6 3.1
Dividends paid 5 (749.6) (350.7)
--------------------------------------- ----- -------- --------
Net cash outflow from financing
activities (754.1) (357.2)
--------------------------------------- ----- -------- --------
Increase in net cash and cash
equivalents 11 12.5 390.2
--------------------------------------- ----- -------- --------
Cash and cash equivalents at
the beginning of the year 1,234.1 843.9
--------------------------------------- ----- -------- --------
Cash and cash equivalents at
the end of the year 11 1,246.6 1,234.1
--------------------------------------- ----- -------- --------
Notes
1. Basis of preparation
The results for the year have been prepared on a basis
consistent with the accounting policies set out in the Persimmon
Plc Annual Report for the year ended 31 December 2021.
The preparation of the financial statements in conformity with
the Group's accounting policies requires the Directors to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and
liabilities at the balance sheet date and the reported amounts of
revenue and expenses during the reported period. Whilst these
estimates and assumptions are based on the Directors' best
knowledge of the amount, events or actions, actual results may
differ from those estimates.
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 31 December 2021 or
2020, but is derived from those accounts. Statutory accounts for
2020 have been delivered to the Registrar of Companies, and those
for 2021 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) did not
include reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain statements under Section 498(2) or (3) of the
Companies Act 2006.
Whilst the financial information included in this announcement
has been computed with international accounting standards in
conformity with the requirements of the Companies Act 2006 and UK
adopted International Accounting Standards , this announcement does
not itself contain sufficient information to comply with IFRS. The
Company expects to send its Annual Report 2021 to shareholders on
21 March 2022.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report in the Annual Report and the
financial statements and notes. The Directors believe that the
Group is well placed to manage its business risks successfully. The
principal risks that may impact the Group's performance and their
mitigation are outlined in Note 13. After making enquiries, the
Directors have a reasonable expectation that the Group has adequate
resources to fund its operations for the foreseeable future. For
this reason, they continue to adopt the going concern basis in
preparing the annual financial statements.
Adoption of new and revised International Financial Reporting
Standards (IFRSs) and Interpretations (IFRICs)
The following relevant UK endorsed new amendments to standards
are mandatory for the first time for the financial year beginning 1
January 2021:
-- Amendments to IFRS 4 Insurance Contracts
-- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest
Rate Benchmark Reform - phase 2
-- Amendments to IFRS 16 Leases: Covid-19 Related Rent Concessions
beyond 30 June 2021
The effects of the implementation of these amendments have been
limited to disclosure amendments where applicable.
The Group has not applied the following new amendments to
standards which are not yet effective:
-- Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant
and Equipment; IAS 37 Provisions,
Contingent Liabilities and Contingent Assets; and Annual Improvements
2018-2020
-- IFRS 17 Insurance Contracts; including Amendments to IFRS 17
The Group is currently considering the implication of these
amendments with the expected impact upon the Group being limited to
disclosures if applicable.
Going concern
The Group has performed well in the twelve months ended 31
December 2021. Persimmon's long-term strategy, which recognises the
risks associated with the housing cycle by maintaining operational
flexibility, investing in high quality land, minimising financial
risk and deploying capital at the right time in the cycle, has
equipped the business with strong liquidity and a robust balance
sheet.
The Group delivered a strong trading performance in the twelve
months to 31 December 2021, completing the sale of 14,551 new homes
(2020: 13,575; 2019: 15,855) and generating a profit before tax of
GBP966.8m (2020: GBP783.8m; 2019: GBP1,040.8m). At 31 December
2021, the Group's strong financial position included GBP1,246.6m of
cash (2020: GBP1,234.1m; 2019: GBP843.9m), high quality land
holdings and land creditors of GBP407.6m (2020: GBP329.3m; 2019:
GBP435.2m). In addition, the Group has an undrawn Revolving Credit
Facility of GBP300m, which extends out to 31 March 2026.
The Group's forward order book, including legal completions
taken so far in 2022, is 3% weaker year on year with new home
forward sales of c. GBP2.2bn. We have over 6,200 new homes sold
forward into the private owner occupier market with an average
selling price of over GBP259,350. The cumulative average private
sales reservation rate for the first 8 weeks of the year is c. 2%
ahead of last year.
The Directors have carried out a robust assessment of the
principal risks facing the Group, as described in note 13. The
Group has considered the impact of these risks on the going concern
of the business by performing a range of sensitivity analyses,
covering the period to 30 June 2023, including severe but plausible
scenarios materialising together with the likely effectiveness of
mitigating actions that would be executed by the Directors. For
further detail regarding the approach and process the Directors
follow in assessing the long-term viability of the business, please
see the Viability Statement in note 13.
The scenarios emphasise the potential impact of severe market
disruption, for example including the effect of a pandemic, on
short to medium term demand for new homes. The scenarios' emphasis
on the impact on the cash inflows of the Group through reduced new
home sales is designed to allow the examination of the extreme cash
flow consequences of such circumstances occurring. The Group's cash
flows are less sensitive to supply side disruption given the
Group's sustainable business model, flexible operations, agile
management team and off-site manufacturing facilities.
In the first scenario modelled, the combined impact is assumed
to cause a c. 45% reduction in volumes and a c. 11% reduction in
average selling prices through to 30 June 2023. The combined impact
results in a c. 57% fall in the Group's housing revenues. The
assumptions used in this scenario reflect the experience management
gained during the Global Financial Crisis ('GFC') from 2007 to
2010, it being the worst recession seen in the housing market since
World War Two.
A second, even more extreme, scenario assumes a significant and
enduring depression of the UK economy and housing market causing a
reduction of c. 47% in new home sales volumes and a c. 37% fall in
average selling prices through to 30 June 2023. As a result of
these factors, the Group's housing revenues were assumed to fall by
c. 67% during this period.
In addition, the Directors have assessed the impact of a
complete shutdown of the housing market from the date of this
announcement to 30 June 2023 on the resilience of the Group. This
scenario assumes that the Group does not receive any further sales
receipts for the period whilst maintaining its current level of
fixed costs.
Throughout this scenario, the Group maintains substantial
liquidity with a positive cash balance and no requirement to access
the Group's GBP300m Revolving Credit Facility.
The Group has been increasingly assessing climate related risk
and opportunities that may present to the Group. During the period
assessed for going concern no significant risk has been identified
that would materially impact the Group's ability to generate
sufficient cash and continue as a going concern.
Having considered the continuing strength of the UK housing
market, the sales rates being achieved by the Group, the resilience
of the Group's average selling prices, the Group's scenario
analysis as detailed above and significant financial headroom, 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 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. Revenue
2021 2020
GBPm GBPm
----------------------------------------------------------- ------------------- -------------------
Revenue from the sale of new housing 3,449.7 3,129.5
Revenue from the sale of part exchange
properties 155.4 196.2
Revenue from the provision of internet
services 5.4 2.6
Revenue from the sale of goods and services
as reported in the statement of comprehensive
income 3,610.5 3,328.3
----------------------------------------------------------- ------------------- -------------------
4. Tax
Analysis of the tax charge for the year
2021 2020
GBPm GBPm
------------------------------------------------------------ ----------------- -----------------
Tax charge comprises:
UK corporation tax in respect of the current
year 181.2 148.5
Adjustments in respect of prior years (8.3) (6.4)
------------------------------------------------------------ ----------------- -----------------
172.9 142.1
------------------------------------------------------------ ----------------- -----------------
Deferred tax relating to origination and
reversal of temporary differences 5.4 2.6
Adjustments recognised in the current year
in respect of prior years deferred tax 1.3 0.7
------------------------------------------------------------ ----------------- -----------------
6.7 3.3
------------------------------------------------------------ ----------------- -----------------
Tax charge for the year recognised in Statement
of Comprehensive Income 179.6 145.4
------------------------------------------------------------ ----------------- -----------------
The tax charge for the year can be reconciled to the accounting
profit as follows:
2021 2020
GBPm GBPm
------------------------------------------------------------ ----------------- -----------------
Profit from continuing operations 966.8 783.8
------------------------------------------------------------ ----------------- -----------------
Tax calculated at UK corporation tax rate
of 19% (2020: 19%) 183.7 148.9
Accounting base cost not deductible for
tax purposes 0.2 0.3
Goodwill impairment losses that are not
deductible 1.2 0.8
Expenditure not allowable for tax purposes 0.2 0.2
Effect of change in rate of corporation
tax 2.7 0.9
Enhanced tax reliefs (1.3) -
Adjustments in respect of prior years (7.1) (5.7)
------------------------------------------------------------ ----------------- -----------------
Tax charge for the year recognised in Statement
of Comprehensive Income 179.6 145.4
------------------------------------------------------------ ----------------- -----------------
The Group's overall effective tax rate of 18.6% has been reduced
from the mainstream rate of 19.0% by a prior year tax credit
arising from the removal of some uncertainties regarding the
Group's prior year tax computations.
The applicable corporation tax rate remains at 19% in line with
corporation tax rates effective from 1 April 2017. On 10 June 2021,
the Finance Act 2021 was enacted into law, introducing a new higher
rate of corporation tax of 25% coming into effect from 1 April
2023. Consequently, the expected tax rate for the full year
includes the effect of revaluing deferred tax assets and
liabilities at this higher rate where these are expected to be
realised or settled on or after 1 April 2023.
Following consultation by HM Treasury to implement a Residential
Property Developer Tax ("RPDT") on profits arising from residential
property activity, on 27 October 2021, the Chancellor of the
Exchequer announced new legislation and an RPDT rate of 4% on all
annual residential property profits in excess of GBP25m, effective
from 1 April 2022. This additional rate once enacted will add to
the standard rate of corporation tax of 25% effective from 1 April
2023, as noted above.
As the RPDT was not substantively enacted prior to 31 December
2021, the additional 4% tax rate is not reflected in the valuation
of the Group's deferred tax assets and liabilities at that date.
The estimated impact on the Group's deferred tax balances as at 31
December 2021 would be to increase the net deferred tax liability
by GBP7m with a corresponding charge to the Statement of
Comprehensive Income/Statement of Shareholders Equity.
Deferred tax recognised in other comprehensive income
2021 2020
GBPm GBPm
---------------------------------------------------- ---------------- -----------------
Recognised on remeasurement gain/(loss)
on pension schemes 24.8 (6.5)
---------------------------------------------------- ---------------- -----------------
Tax recognised directly in equity
2021 2020
GBPm GBPm
--------------------------------------------------------------- ----------------- -----------------
Arising on transactions with equity participants
Current tax related to equity settled transactions 0.1 (1.1)
Deferred tax related to equity settled
transactions (1.8) (0.2)
--------------------------------------------------------------- ----------------- -----------------
(1.7) (1.3)
--------------------------------------------------------------- ----------------- -----------------
5. Dividends/Return of capital
2021 2020
GBPm GBPm
----------------------------------------------------------- ----------------- -----------------
Amounts recognised as distributions to capital
holders in the period:
2019 dividend to all shareholders of 40p
per share paid 2020 - 127.5
2019 dividend to all shareholders of 70p
per share paid 2020 - 223.2
2020 dividend to all shareholders of 125p 398.7 -
per share paid 2021
2020 dividend to all shareholders of 110p 350.9 -
per share paid 2021
Total capital return to shareholders 749.6 350.7
----------------------------------------------------------- ----------------- -----------------
The Directors propose to return 125p of surplus capital to
shareholders for each ordinary share held on the register on 11
March 2022 with payment made on 1 April 2022 as an interim dividend
in respect of the financial year ended 31 December 2021. The
Directors intend to return surplus capital of 110p per ordinary
share as an interim dividend with respect to the financial year
ended 31 December 2021. This distribution to shareholders is
anticipated to be made in July 2022 subject to continuous Board
assessment in line with the Group's strategy. The total anticipated
distributions to shareholders is 235p per share (2020: 235p per
share) in respect of the financial year ended 31 December 2021.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the year attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the year of
319.0m shares (2020: 318.8m) which excludes those held in the
employee benefit trust and any treasury shares, all of which are
treated as cancelled.
Diluted earnings per share is calculated by dividing the profit
for the year 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 year, giving a figure of 320.2m shares (2020:
319.9m).
Underlying earnings per share excludes the legacy buildings
provision charge and goodwill impairment. The earnings per share
from continuing operations were as follows:
2021 2020
--------------------------------------- ------- -------
Basic earnings per share 246.8p 200.3p
Underlying basic earnings per share 248.7p 220.7p
Diluted earnings per share 245.6p 199.6p
Underlying diluted earnings per share 247.6p 219.9p
--------------------------------------- ------- -------
The calculation of the basic and diluted earnings per share is
based upon the following data:
2021 2020
GBPm GBPm
------------------------------------------------------------- ----------------- ------------------
Underlying earnings attributable to shareholders 793.4 703.5
Legacy buildings provision (net of tax) - (60.8)
Goodwill impairment (6.2) (4.3)
------------------------------------------------------------- ----------------- ------------------
Earnings attributable to shareholders 787.2 638.4
------------------------------------------------------------- ----------------- ------------------
At 31 December 2021 the issued share capital of the Company was
319,206,474 ordinary shares (2020: 319,071,261 ordinary
shares).
7. Inventories
2021 2020
GBPm GBPm
------------------------------------- ------------------- -------------------
Land 1,798.2 1,722.1
Work in progress 1,054.1 1,091.6
Part exchange properties 24.8 40.9
Showhouses 43.6 46.7
------------------------------------- ------------------- -------------------
Inventories 2,920.7 2,901.3
------------------------------------- ------------------- -------------------
The Group has conducted a further review of the net realisable
value of its land and work in progress portfolio at 31 December
2021. Our approach to this review has been consistent with that
conducted at 31 December 2020 and was fully disclosed in the
financial statements for the year ended on that date. The key
judgements and estimates in determining the future net realisable
value of the Group's land and work in progress portfolio are future
sales prices, house types and costs to complete the developments.
Sales prices and costs to complete were estimated on a site by site
basis. There is currently no evidence or experience in the market
to inform management that expected selling prices used in the
valuations are materially incorrect.
Net realisable value provisions held against inventories at 31
December 2021 were GBP18.6m (2020: GBP25.4m). Following the review,
GBP4.1m of inventories are valued at net realisable value rather
than historical cost (2020: GBP5.9m).
8. Shared equity loan receivables
2021 2020
GBPm GBPm
---------------------------------------------------------- ------------------ ------------------
Shared equity loan receivables at 1 January 56.2 68.6
Settlements (18.9) (16.4)
Gains 8.3 4.0
---------------------------------------------------------- ------------------ ------------------
Shared equity loan receivables at 31 December 45.6 56.2
---------------------------------------------------------- ------------------ ------------------
All gains/losses have been recognised in the statement of
comprehensive income. Of the gains recognised in finance income for
the period, GBP4.2m (2020: GBP1.5m) was unrealised.
9. Legacy buildings provision
2021 2020
GBPm GBPm
------------------------------------------- ------ -----
Legacy buildings provision at 1 January 75.0 -
Additions to provision in the year - 75.0
Provision utilised in the year (2.3) -
------------------------------------------- ------ -----
Legacy buildings provision at 31 December 72.7 75.0
------------------------------------------- ------ -----
In the prior year we made a commitment that no leaseholder
living in a building we had developed, including all those above 11
metres, should have to cover the cost of cladding removal. As part
of this commitment, we created a GBP75.0m provision to cover the
cost of any necessary works. Work has been ongoing throughout 2021
at a cost of GBP2.3m. The provision at 31 December 2021 remains
management's best estimate of the costs of completing works to
ensure fire safety on the remaining affected buildings under direct
ownership and on those under third party ownership we have
developed. As a result no further charge to the Statement of
Comprehensive Income has been made in the year. These estimates may
change over time as further information is assessed, remedial works
progress and the interpretation of fire safety regulations further
evolves. This is a highly complex area with judgements and
estimates in respect of the cost of the remedial works and the
scope of the properties requiring remedial works may change should
regulation further evolve.
10. 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:
2021 2020
-------------------------------- ------ ------
Level Level
3 3
GBPm GBPm
-------------------------------- ------ ------
Shared equity loan receivables 45.6 56.2
-------------------------------- ------ ------
Shared equity loan receivables
Shared equity loan receivables represent loans advanced to
customers and secured by way of a second charge on their new home.
They 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 loans. 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 of the
loans from inception to settlement of ten years (2020: ten years)
and discount rate 5% (2020: 5%) based on current observed market
interest rates offered to private individuals on secured second
loans.
The discounted forecast cash flow calculation is dependent upon
the estimated future value of the properties on which the shared
equity loans 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 loan. Furthermore,
whilst not easily accessible in advance, the resulting change in
security value may affect the credit risk associated with the
counterparty, influencing fair value further.
11. Reconciliation of net cash flow to net cash and analysis of
net cash
2021 2020
GBPm GBPm
------------------------------------------------------ ------------------- -------------------
Cash and cash equivalents at 1 January 1,234.1 843.9
Increase in net cash and cash equivalents
in cash flow 12.5 390.2
------------------------------------------------------ ------------------- -------------------
Cash and cash equivalents at 31 December 1,246.6 1,234.1
IFRS 16 lease liability (8.8) (9.6)
------------------------------------------------------ ------------------- -------------------
Net cash at 31 December 1,237.8 1,224.5
------------------------------------------------------ ------------------- -------------------
Net cash is defined as cash and cash equivalents, bank
overdrafts, lease obligations and interest bearing borrowings.
12. Retirement benefit assets
As at 31 December 2021 the Group operated four employee pension
schemes, being two Group personal pension schemes and two defined
benefit pension schemes. Remeasurement gains and losses in the
defined benefit schemes are recognised in full as other
comprehensive income within the consolidated statement of
comprehensive income. All other pension scheme costs are reported
in profit or loss.
The amounts recognised in the consolidated statement of
comprehensive income are as follows:
2021 2020
GBPm GBPm
----------------------------------------------- ------- -------
Current service cost 2.0 1.9
Past service cost - 0.5
Administrative expense 0.6 0.6
----------------------------------------------- ------- -------
Pension cost recognised as operating expense 2.6 3.0
----------------------------------------------- ------- -------
Interest cost 8.9 11.7
Return on assets recorded as interest (9.6) (13.4)
----------------------------------------------- ------- -------
Pension cost recognised as net finance credit (0.7) (1.7)
----------------------------------------------- ------- -------
Total defined benefit pension cost recognised
in profit or loss 1.9 1.3
Remeasurement (gain)/loss recognised in other
comprehensive income (83.3) 42.5
----------------------------------------------- ------- -------
Total defined benefit scheme (gain)/loss
recognised (81.4) 43.8
----------------------------------------------- ------- -------
The amounts included in the balance sheet arising from the
Group's obligations in respect of the Pension Scheme are as
follows:
2021 2020
GBPm GBPm
------------------------------------- -------- --------
Fair value of Pension Scheme assets 751.9 694.4
Present value of funded obligations (603.1) (643.8)
------------------------------------- -------- --------
Net pension asset 148.8 50.6
------------------------------------- -------- --------
The increase in the net pension asset to GBP148.8m (2020:
GBP50.6m) is largely due to an increase in long-term corporate bond
yields increasing the discount rate assumption applied to scheme
obligations to 1.9% (2020: 1.4%).
13. Principal Risks and Viability Statement
In line with the UK Corporate Governance Code, the Group defines
its principal risks as those considered to have a potentially
material impact on its strategy and business model, including its
future performance, solvency, liquidity and reputation. The Group's
strategy focuses on minimising financial risk and deploying capital
at the right time in the housing market cycle, recognising the
inherent risks and cyclical nature of the housing market. This,
together with an agile, experienced and responsive management team,
and robust risk management framework, has established a highly
resilient business able to address a range of future economic
scenarios.
1. Pandemic risk
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
The potential for The Group Whilst the
Residual risk increased rates maintains industry
rating: High of transmission, business continued
further variants continuity to face ongoing
Risk trend of Covid-19 or a plans and can operational
assessment new pandemic occurring draw and economic
Overall: No in the UK, could upon extensive challenges
change have significant Board from the
Impact: No impacts across the and management pandemic,
change Group's operations. experience particularly
Likelihood: No These could include: from the response as the Omicron
Change * Increased health and safety risk to our workforce, to the initial outbreak
our customers and the wider public. Covid-19 unfolded late in
outbreak. the
year, the Group
* Disruption to build programmes and delays in sales, Robust and continued
due to staff absences and material and labour supply comprehensive to manage these
issues. policies and ongoing
procedures challenges
have been effectively.
* Economic downturn, with reduced consumer confidence, developed
demand and pricing for new homes, thereby affecting under the The
revenues, margins, profits and cash flows and supervision comprehensive
impairment of asset values. of the Health, suite
Safety of measures
and Environment established
Department. These at the start of
procedures allow the pandemic,
for safe including our
continuity robust
of operations Covid-19
under policies and
various pandemic procedures, have
conditions. been
continually
Remote working adapted to
capabilities reflect all
are in place, government
facilitated and industry
through enhanced guidance
use of and good
technology. practice, and
This supports have enabled a
continuity strong
of operations in degree of
the event of continuity
ongoing in our
or future operations. We
pandemic continue to
conditions. The maintain
risks associated the two-metre
with increased social
use distancing
of remote working protocols
are mitigated across our
through sites.
a combination of
IT controls and The Group's
user awareness strong balance
training. sheet, high
liquidity
Potential and robust
disruption financial
of supply is disciplines
mitigated ensure we
through are well placed
centralised to manage
procurement and the ongoing
management of key challenges
materials. The of the pandemic.
vertical
integration
afforded
by use of our own
Brickworks,
Space4
and Tileworks
production
provides further
mitigation for
some
critical
materials.
----------------------------------------------------------- ------------------ -----------------
2. Strategy
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
The Group's strategy The Group's Our
Residual risk has been developed strategy well-established
rating: Low by the Board as is agreed by the strategy
the most appropriate Board at an continues to
Risk trend approach to successfully annual reflect a firm
assessment deliver the Group's strategy meeting. understanding
Overall: No purpose and ambition The strategy of the risks
change and generate optimal undergoes associated
Impact: No sustainable value a continuous and with the
change for all stakeholders. iterative process economic cycle
Likelihood: No As political, economic of review and and the housing
change and other conditions adaptation market.
evolve, the strategy at Board meetings Through
currently being and in response minimising
pursued may cease to the evolution associated
to be the most appropriate of conditions in financial risk
approach. which the Group and judging
If the Group's strategy operates. the deployment
is not effectively The Board engages of capital
communicated to with all at the right
our workforce and stakeholders time in
/ or engagement to ensure the the cycle, the
and incentive measures strategy Group
are inappropriate, is understood and has safeguarded
operational activities effectively its strong
may not successfully communicated. balance sheet
deliver the Group's For example, an and maintained
strategic objectives. Employee its positioning
Engagement for continued
Panel, Diversity future success.
and Inclusion
Council
and employee
engagement
surveys are in
place
to monitor the
cultural
health of the
organisation
and ensure
strategy
is understood and
implemented.
----------------------------------------------------------- ------------------ -----------------
3. National and regional economic conditions
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
The housebuilding As noted above, The Board and
Residual risk industry is sensitive the Group's our operational
rating: High to changes in the long-term management teams
economic environment, strategy is have
Risk trend including unemployment focused continued to
assessment levels, interest on the cyclical monitor
Overall: No rates and consumer nature of the the economic
change confidence. housing environment
Impact: No market and closely
change Deterioration in minimising throughout the
Likelihood: No economic conditions, financial risk, year, with
change resulting from the maintaining particular
ongoing Covid-19 operational focus on the
pandemic or continued and financial impact of
impact of the UK's flexibility the disruption
withdrawal from and judging the caused
the EU for example, timing of capital by the pandemic
could affect demand deployment and the
and pricing for through UK's exit from
new homes, with the cycle. the EU.
resultant effects Despite these
on our revenues, Lead indicators challenges,
margins, profits on the future market
and cash flows and direction conditions
potential impairment of the UK housing remained
of asset values. market are positive, with
monitored strong
Economic conditions to enable demand for
in the land market informed housing and
may adversely affect management of continued
the availability exposure resilience
of a sustainable to potential of selling
supply of land at market prices.
appropriate levels disruption.
of return. Pricing
structures are
regularly
reviewed to
reflect
local market
conditions.
The Group's
geographical
spread is
continuously
monitored to help
mitigate the
effects
of regional
economic
fluctuations.
In line with the
Group's strategy,
levels of build
on site are
closely
monitored and
land
investment
decisions
are subject to
comprehensive
due diligence
processes
to ensure
effective
deployment of
capital.
----------------------------------------------------------- ------------------ -----------------
4. Government policy
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
Changes to government Government policy Our assessment
Residual risk policy have the in relation to has identified
rating: High potential to impact the an overall
on several aspects housing market is increase in
Risk trend of our strategy monitored risk likelihood,
assessment and operational closely. reflecting
Overall: No performance. For Consistency of recent
change example, the forthcoming policy government
Impact: No withdrawal of the formulation and actions
change Help to Buy scheme application affecting the
Likelihood: in 2023, amendments remains industry,
Increase to planning regulations supportive of the such as the
and the recent government housebuilding introduction
requirement to pay industry of the
a contribution to as a whole, Residential
a fund to cover encouraging Property
the cost of fire continued Developer Tax,
safety remediation substantial the potential
works, could have investment in introduction of
an adverse effect land, the Building
on revenues, margins, work in progress Industry Scheme,
tax charges and and skills to changes
asset values. support to the stamp
output growth. duty regime
The Department for Our and the
Levelling Up, Housing mission to build forthcoming
and Communities homes with withdrawal
(DLUHC) has demanded quality of the Help to
that residential our customers can Buy Scheme
property developers rely on at a in 2023.
take a lead in the price Government
funding and rectification they can afford continues
of unsafe cladding and our strategic to recognise the
and fire safety objectives, are need
issues on buildings aligned with for increased
over 11 metres in government construction
height constructed priorities to of new homes,
in the last 30 years. increase however,
The government want housing stock. providing a
developers to pay broadly
for all the necessary Land investment supportive
remediation on buildings decisions and environment for
they constructed levels the industry.
as well as make of work in
additional contributions progress
to an industry-wide are tightly
scheme that protects controlled
all leaseholders in order to
from paying towards mitigate
any works. exposure to
external
To reinforce this influences.
demand, the government
has introduced amendments Persimmon is
into the Building taking
Safety Bill, which, part in ongoing
if passed, will discussions with
require membership government to
of a 'Building Industry identify
Scheme'. Membership an effective
of this scheme will solution
be determined by to the funding
the government, and
based on the developer's rectification of
commitments and unsafe cladding
actions to rectify and fire safety
cladding and fire issues on
safety related issues buildings
on buildings it over 11 metres
has developed. The and
government has indicated ensure
they would use the leaseholders
powers conferred are protected.
through the amendments Persimmon
to block planning led the industry
and building control in committing
permissions for that
developers that leaseholders
are not members should
of the scheme. not have to pay
for such works on
any buildings we
constructed. Last
year, a GBP75m
legacy
buildings
provision
was created to
fund
necessary work on
these buildings.
In light of
DLUHCs
request, we are
reviewing
buildings
we constructed
over
the last 30 years
but do not
believe
that this will
result
in a material
increase
to the 33
developments
already
identified.
In addition,
Persimmon
will not claim
from
the Government's
Building Safety
Fund. We hope
these
actions will lead
to us becoming a
member of the
government's
new Building
Industry
Scheme and
continue
to engage in
positive
discussions with
officials.
----------------------------------------------------------- ------------------ -----------------
5. Health, safety and environment
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
In addition to the The Board retains The effective
Residual risk human impacts of a very strong management
rating: High any accident, there commitment of health,
is the potential to health and safety and
Risk trend for reputational safety environmental
assessment damage, construction and managing the risks has
Overall: No delays and financial risks in this remained a
change penalties as a result area critical area
Impact: No of any health, safety effectively. This of focus for the
change or environmental is implemented by Board
Likelihood: No incident. comprehensive and our
change management management teams
systems and throughout the
controls, year.
managed by our
highly As noted above,
experienced our
Health, comprehensive
Safety and suite of
Environment Covid-19
Department, which mitigation
includes detailed measures,
training and including our
inspection robust policies
programmes to and procedures,
minimise have been
the likelihood continually
and adapted to
impact of reflect
accidents government
on our sites. and industry
While guidance
all reasonable and good
steps practice, and
are taken to have enabled a
reduce strong
the likelihood of degree of
an incident, the continuity
potential human, in our
reputational and operations.
financial impacts
of any such Environmental
incident management
are considered has been an area
high. of particular
focus in the
year, with
senior
appointments
made
to support
ongoing
development
in this area.
----------------------------------------------------------- ------------------ -----------------
6. Skilled workforce, retention and succession
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
Shortages of skilled Access to an The demand for
Residual risk labour, driven in appropriately labour
rating: High part through the skilled workforce within the
effects of the UK's and experienced construction
Risk trend exit from the EU management team sector has
assessment and from increased is essential in remained high
Overall: UK housebuilding maintaining throughout the
Increase activities, create operational year,
Impact: No risks of increased performance and driven by a
change costs and delays ensuring the number of
Likelihood: and disruption to successful factors. This is
Increase build programmes. delivery of the reflected
Group's strategy. in an overall
increase
The Group in our
operates assessment of
a range of this risk.
apprenticeships
and in-house The Group has
training continued
programmes, under to invest in its
the supervision people
of the Group and processes to
Training mitigate
department, in this risk.
order Notable
to support an developments
adequate within the year
supply of skilled include
labour. In an expansion of
addition, the resource
the Group is within our Group
committed Training
to supporting department and
industry the further
initiatives to development of
address the 'Persimmon
the skills gap. Pathway', a
The Group's structured
Space4 training
manufacturing programme and
facility, career pathway
which produces for key
timber disciplines.
frames, highly
insulated
wall panels and
roof cassettes,
improves build
efficiency
and requires less
on-site labour
than
a traditionally
built home,
mitigating
some labour
shortage
risk.
A range of
measures
have been
deployed
to ensure high
levels
of retention
across
the workforce.
These
include increased
focus on employee
engagement,
further
development of
performance
management
frameworks,
career
management,
and financial
incentives.
At the most
senior
level, the
Nomination
Committee
oversees
these processes
and promotes
effective
succession
planning.
----------------------------------------------------------- ------------------ -----------------
7. Materials and land purchasing
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
Materials availability Materials Sustained growth
Residual risk Ensuring access availability in UK
rating: High to the right quantity Our build housebuilding
and specification programmes activities,
Risk trend of materials is and our supply and supply chain
assessment critical in delivering chain disruption
Overall: high quality homes. are closely caused by a
Increase monitored combination
Impact: Increase Heightened levels to allow us to of the Covid-19
Likelihood: of demand for materials manage pandemic
Increase may cause availability and react to any and issues
constraints and supply chain associated
increase cost pressures. issues with the UK's
Furthermore, build and to help exit from
quality may be compromised ensure the EU, has
if unsuitable materials consistent high increased
are procured leading quality pressure on the
to damage to the standards. supply
Group's reputation We build strong chain. This has
and customer experience. relationships resulted
with in increased
Land Purchasing key suppliers lead times
Land may be purchased over and inflationary
at too high a price, the long term to pressures
in the wrong location ensure in some
and at the wrong consistency materials.
time in the housing of supply and
market cycle. cost These pressures
efficiency. Our have
Group Procurement been reflected
team works with in an
our operating increased
businesses overall risk
to ensure the rating. However,
Group's the
suppliers provide Group continues
materials to the to benefit
expected from its
specification vertical
and quantities. integration
through our
The Group's Brickworks,
off-site Tileworks and
manufacturing hub Space4
at Harworth, near manufacturing
Doncaster, facilities,
provides and the current
a significant positive
proportion sales pricing
of the bricks and conditions
roof tiles used continue to
across our sites, mitigate
providing effects of cost
security inflation.
of supply. This
complements our In respect of
existing off-site land, we
manufacturing have maintained
facility our
at Space4, which well-established
produces timber disciplined
frames, highly approach
insulated to replacement
wall panels and whilst
roof cassettes. continuing to
take advantage
Land Purchasing of exciting
The Group opportunities
maintains in the market.
strong land During
holdings. the year, our
All land land replacement
purchases has exceeded
undergo current
comprehensive consumption.
viability
assessments
and must meet
specific
levels of
projected
returns, taking
into account
anticipated
market conditions
and sales rates.
----------------------------------------------------------- ------------------ -----------------
8. Climate change
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
The effects of climate The Group takes The likelihood
Residual risk change and the UK's a range of assessment
rating: Medium transition to a measures of this risk has
lower carbon economy to monitor and increased
Risk trend could lead to increasing improve compared to the
assessment levels of regulation its operational prior
Overall: No and legislation, efficiency and year as
change as seen with the direct increasing
Impact: No Future Homes Standard. environmental awareness
change These may in turn impact, and desire for
Likelihood: result in planning including action,
Increase delays, increased measuring in part
costs and competition CO(2) emissions following COP26,
for some materials. and the amount of is likely to
waste we generate result in
Changes in weather for each home we a more urgent
patterns and the sell. transition
frequency of extreme to a lower
weather events, The Group carbon economy.
particularly storms maintains
and flooding, may a detailed Within the year,
increase the likelihood climate the
of disruption to change risk Group has set
the construction register, science
process. The availability which ensures based carbon
of mortgages and that reduction
property insurance the management targets, in line
may reduce in response and with
to financial institutions mitigation of the the Paris
considering the risk is embedded Agreement,
possible impacts within the which were fully
relating to climate Group's accredited
change. risk management by the Science
process. Based
Targets
We systematically Initiative. We
consider the have set
potential ambitious 'net
impacts of zero' targets,
climate aiming
change throughout to deliver 'net
the land zero'
acquisition, homes in use to
planning and our customers
build by 2030 and
processes and become 'net
work zero' in our
closely with operations
planning by 2040.
authorities and
other statutory The Group has
bodies to manage already
and mitigate made good
these progress on
risks. its carbon
reduction
The government's roadmap with a
'Future Homes number
Standard' of projects to
will be research
introduced the most
by 2025. To plan effective method
for and manage of delivering a
the 'net
transition to low zero' home in
carbon homes, a use and
low carbon homes engaging a third
working group party
(consisting expert to
of members from measure the
across the embodied carbon
Group's of our
various homes. Our homes
disciplines) are
has been already
established. significantly
The Group engages more energy
proactively with efficient
the housebuilding than existing
industry and the housing
Government to stock and our
develop pathway
industry wide to 'net zero'
solutions homes in
to meet the use by 2030 has
requirements clear
of the Future interim
Homes milestones.
Standard.
Operationally,
We continually the Group
seek has introduced
to strengthen our electric
supply chain, for vehicle options
example, our into
off-site its fleet, is
manufacturing now purchasing
facilities 100% renewable
provide us with energy
greater assurance for its offices
of quality and and
supply, manufacturing
and use modern facilities and
methods continues
of construction to investigate
and technology to methods
assist the of reducing the
mitigation Group's
of climate change red diesel
related risks. consumption
The and increasing
Group Procurement the use
team maintain of alternative
strong fuels.
links with our
suppliers
delivering value
through our
supply
chain by regular
engagement and
robust
tendering
processes.
----------------------------------------------------------- ------------------ -----------------
9. Reputation
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
Damage to the Group's Management The Persimmon
Residual risk reputation could Supervision Way, our
rating: Medium adversely affect The Group is end-to-end
its ability to deliver committed consolidated
Risk trend its strategic objectives. to ensuring an construction
assessment If governance, build appropriate process,
Overall: No quality, customer culture and is now in
change experiences, operational maintaining operation across
Impact: Increase performance, management the high quality the business,
Likelihood: No of health and safety of its and supporting
change or local planning operations. our desire to
concerns fall short This is subject 'build
of our usual high to oversight from right, first
standards, this the Board. time, every
may result in damage time'.
to customer, commercial Build quality and
and investor relationships re-enforcing Persimmon
and have a detrimental trust formally
impact on financial in the brand are commenced
performance. key priorities the registration
for process
the Group. for the New
Significant Homes Quality
investment has Code (NHQC) on
been 14 January
made in these 2022, one of the
areas, first
for example housebuilders to
through do so.
the Persimmon We welcome the
Way, introduction
including of the NHQC,
expanding which aims
the Group's team to drive up
of Independent quality and
Quality customer service
Controllers across
(IQCs) the industry
and addressing together
the with the
Group's legacy appointment
quality of a New Homes
issues. Ombudsman
Service.
Senior
appointments The Group
have been made at continues to
Group level to invest in its
promote people
and enforce and processes,
compliance driving
with policies and operational
procedures as improvements.
well These
as to provide the enhancements
Board with reduce
assurance the probability
on their of operational
effective issues and the
implementation. consequent
reputational
Stakeholder damage they
Relationships can cause.
We take actions
to maintain
positive
relationships
with
all of our
stakeholders
to minimise the
risks of
reputational
damage and aim to
comply with best
practice in
corporate
governance.
We actively
support
local communities
in addressing
housing
needs, in
creating
attractive
neighbourhoods
and employing
local
people, both on
our sites and in
the supply chain.
Significant
contributions
are made to local
infrastructure
and
good causes
within
the communities
in which the
Group
operates.
----------------------------------------------------------- ------------------ -----------------
10. Regulatory compliance
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
The housebuilding Comprehensive The assessment
Residual risk industry is subject management of the
rating: Medium to extensive and systems are in likelihood of
complex laws and place this risk
Risk trend regulations, particularly to ensure has increased
assessment in areas such as regulatory within
Overall: No land acquisition, and legal the year. This
change planning, building compliance, reflects
Impact: No regulations and including a suite the continuing
change the environment. of policies and increase
Likelihood: Ensuring compliance procedures in the volume
Increase in these areas can covering and complexity
result in delays key areas of of regulatory
in securing the legislation requirements,
land required for and regulation. and the
development and Additional financial and
in construction. oversight reputation risks
Any failure to comply is in place associated
with regulations through with any
could result in the Group-level failures to
damage to the Group's functions and manage
reputation and potential cross-functional regulatory
imposition of financial steering groups compliance
penalties. for key areas, effectively.
such
as GDPR Key regulatory
compliance. areas
Where these of focus within
systems the year
identify have included
inconsistencies planning
in adherence to conditions, with
agreed processes, the
corrective Group, in common
actions with
are swiftly the wider
taken. industry,
continuing
We engage to experience
extensively delays
with planning to outlet
authorities openings due
and other to the delays
stakeholders within
to reduce the the planning
likelihood system.
and impact of any
delays or Persimmon
disruption. formally
In respect of commenced
land, the registration
the Group process
controls for the NHQC on
sufficient 14 January
holdings 2022. The aims
to provide of the
security Code and its
of supply for supporting
medium process are
term trading consistent
requirements. with the Group's
Our land needs own
and focus on further
potential improving
acquisitions build quality
are subject to and customer
extensive service
due diligence to standards.
manage planning
risks and
uncertainties
and maintain an
effective
pipeline.
----------------------------------------------------------- ------------------ -----------------
11. Cyber and data risk
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
The Group relies The Group Within the year,
Residual risk on its IT systems operates the
rating: Medium being consistently centrally assessment of
available and secure. maintained the risk
Risk trend Failure of any of IT systems with impact and
assessment the Group's core a fully tested likelihood
Overall: No IT systems, particularly disaster remain
change those in relation recovery unchanged.
Impact: No to customer information programme. However,
change and customer service All cyber and data
Likelihood: No could result in infrastructure risks
change significant financial is highly continue to be
costs, reputational resilient, an area
damage and business with of growing focus
disruption. geographically for
diverse the Group,
datacentres reflecting
and a series of the increase in
backup the use
arrangements. of technology in
supporting
The Group the Group's
maintains operations.
dedicated cyber
security resource The Group has
to manage and continued
oversee to strengthen
security its mitigation
controls, measures in
benchmarked to respect of
external cyber risk,
sources of good under the
practice such as supervision of
the NCSC's 'Ten the Information
Steps to Cyber Security
Security'. Steering Group
Periodic (ISSG) and
penetration through the
testing is work of the
carried Group IT
out through department.
external
security partners To develop
to test the controls
security further,
of our perimeter an externally
network. In the led review
event of an of the Group's
incident, cyber
the Group has a security
defined Cyber measures has
Incident been
Response Plan. commissioned.
This
Training and will build on an
regular earlier
communications assessment by
are the same
delivered to all external partner
users to increase in 2020,
awareness of and will ensure
cyber-risks, the Group's
with particular approach to
focus on risks cyber risk
associated remains
with remote and appropriate and
hybrid working. reflects best
practice.
----------------------------------------------------------- ------------------ -----------------
12. Mortgage availability
Risk assessment Risk description Approach to risk Developments in
mitigation 2021
----------------------------------------------------------- ------------------ -----------------
Reduced availability We monitor Bank The fundamentals
Residual risk or affordability of England of the
rating: High of mortgages for commentary UK housing
customers could on credit market remain
Risk trend reduce demand for conditions strong, with
assessment new homes and affect including the robust consumer
Overall: No sales prices, revenues, monthly demand and
change profits, cash flows, approvals for confidence.
Impact: Decrease and asset values. house We continue to
Likelihood: purchases, see good
Increase reports levels of
from UK Finance, mortgage
and lenders' availability
announcements and continued
for trends in low interest
lending. rates,
We ensure that encouraging
our affordability
investment in for new homes.
land
and work in
progress
is appropriate
for
our level of
sales
and our
expectations
of the current
market
conditions. The
government's Help
to Buy scheme,
which
is scheduled to
remain in place
until 2023,
supports
customers to gain
access to the
housing
market across the
UK with
competitive
mortgage rates.
----------------------------------------------------------- ------------------ -----------------
VIABILITY STATEMENT
Persimmon's prospects and viability
The long-term prospects and viability of the business are a
consistent focus of the Board when determining and monitoring the
Group's strategy. The identification and mitigation of the
principal risks facing the business, which have been updated to
reflect current UK economic conditions and uncertainties (including
the ongoing impacts of the Covid-19 pandemic and the UK's exit from
the European Union), also form part of the Board's assessment of
long-term prospects and viability*.
Assessing Persimmon's long-term prospects
Persimmon has built a strong position in the UK's house building
market over many years, recognising the potential for long-term
growth across regional housing markets. The Board recognises that
the long-term demographic fundamentals of continued positive
population growth and new household formation, together with the
requirement to replace and improve the quality of the country's
housing stock, provide a long-term supportive backdrop for the
industry. However, the Board and the Group's strategy recognises
the inherent cyclical nature of the UK housing market. The Group
has therefore been able to maintain a position of strength with
good liquidity, high quality land holdings and a strong balance
sheet throughout the disruption of the Covid-19 pandemic. The
future impacts of the pandemic, and other factors creating
uncertainty within the UK economy and the Group's sales and
construction programmes, remain uncertain. The Board has considered
these potential impacts in depth when assessing the long-term
prospects of the Group.
Whilst this uncertainty remains, Persimmon possesses the sound
fundamentals required to realise the Group's purpose and ambitions
and deliver sustainable success:
-- talented teams focused on consistently delivering good quality homes
for our customers;
-- high quality land holdings that allow us to create attractive places
in areas where people wish to live and work;
-- strong customer and local community relationships;
-- continued investment in the training and development of our teams;
-- market knowledge, expertise and industry know-how; and,
-- long-term healthy supplier engagement.
By continuing to build on these solid foundations through, for
example, the Persimmon Way and our ongoing investments in the
customer experience, the Group aims to help create sustainable and
inclusive communities through continued investment in its people,
its land, and its development sites and in its supply chain,
creating enduring value for the communities we serve. The Group's
materiality assessment, ensures that a thorough review of
stakeholder interests are incorporated within the assessment of the
Group's long-term prospects.
The Group adopts a disciplined annual business planning regime,
which is consistently applied and involves the management teams of
the Group's 31 house building businesses and senior management,
with input and oversight by the Board. The Group combines detailed
five-year business plans generated by each house building business
from the "bottom up", with ten year projections constructed from
the "top down" to properly inform the Group's business planning
over these longer-term horizons. Zero-based annual budgets are
established for each business twice a year.
This planning process provides a valuable platform, which
facilitates the Board's assessment of the Group's short and
long-term prospects. Consideration of the Group's purpose, current
market position, its strategic objectives and business model, and
the risks that may challenge them are all included in the Board's
assessment of the prospects of the Group.
Key Factors in assessing the long-term prospects of the
Group:
1. The Group's current market positioning
-- Strong sales network from active developments across the UK providing geographic diversification
of
revenue generation
-- Three distinct brands providing diversified products and pricing deliver further diversification
of sales
-- Imaginative and comprehensive master planning of development schemes with high amenity value
to support sustainable, inclusive neighbourhoods which generate long-term value to the community
-- Disciplined land replacement reflecting the extent and location of housing needs across the
UK
provides a high quality land bank in the most sustainable locations supporting future operations
-- Long-term supplier and subcontractor relationships providing healthy and sustainable supply
chains
-- Sustained investment to support higher levels of construction quality and customer service
through the implementation of initiatives such as the Persimmon Way
-- Strong financial position with considerable cash reserves and with additional substantial
working capital credit facilities maturing March 2026
2. Strategy and business model
-- Strategy focuses on the risks associated with the housing cycle and on minimising financial
risk and maintaining financial flexibility
-- Focusing on constructing new homes for our customers to the high quality standards that they
expect and helping to create attractive neighbourhoods
-- Strategy recognises the Group's ability to generate surplus capital beyond the reinvestment
needs
of the business
-- Substantial investment in staff engagement, training and support to sustain operations over
the
long-term
-- Approach to land investment and development activity provides the opportunity to successfully
deliver much needed new housing supply and create value over the long-term
-- Differentiation through vertical integration, achieving security of supply of key materials
and
complementary modern methods of construction to support sustainable growth
-- Simple capital structure maintained with no structural gearing
3. Principal risks associated with the Group's strategy and
business model include:
-- Disruption to the UK economy, including the impacts arising from the Covid-19 pandemic and
the
UK's exit from the EU, adversely impacting demand for new homes and construction
programmes, or contributing to inflationary pressures
-- Changes in government policy affecting the housebuilding sector, such as withdrawal of the
Help
to Buy scheme, and the recent government requirement to pay a contribution to a fund to cover
the cost of fire safety remediation works
-- Market impacts related to reduced consumer confidence due to regional economic uncertainties
-- Reduction in mortgage funding availability and/or affordability due to reduced lender risk
appetite
and/or regulatory change
-- Response required to mitigate the impact of climate change
-- Team, skills and talent related risks regarding retention and change management
See above for the full list of principal risks together with
detailed descriptions.
Disciplined strategic planning process
The prospects for the Group are principally assessed through the
annual strategic planning review process conducted towards the end
of each year. The management team from each of the Group's house
building businesses produce a five-year business plan with specific
objectives and actions in line with the Group's strategy and
business model. These detailed plans reflect the development skill
base of the local teams, the region's housing market, strategic and
on market land holdings and investments required to support their
objectives. Special attention is paid to construction programmes
and capital management through the period to ensure the appropriate
level of investment is made at the appropriate time to support
delivery of the plan. Emerging risks and opportunities in their
markets are also assessed at this local level.
Senior Group management review these plans and balance the
competing requirements of each of the Group's businesses,
allocating capital with the aim of achieving the long-term
strategic objectives of the Group. The five-year plans provide the
context for setting the annual budgets for each business for the
start of the new financial year in January, which are consolidated
to provide the Group's detailed budgets. These budgets are updated
after six months, for the following twelve months, which are then
replaced by the new strategic planning and budget setting cycle.
The Board review and agree both the long-term plans and the
shorter-term budgets for the Group.
The outputs from the business planning process are used to
support development construction planning, impairment reviews, for
funding projections, for reviews of the Group's liquidity and
capital structure, and identification of surplus capital available
for return to shareholders via the Group's Capital Return Plan,
resulting in the payment of dividends to shareholders.
Assessing Persimmon's viability
The Directors have assessed the viability of the Group over a
five-year period, taking into account the Group's current position
and the potential impact of the principal risks facing the
Group.
The use of a five-year period for the purpose of assessing the
viability of the Group is considered the most appropriate time
horizon, as it reflects the business model of the Group, with new
land investments generally taking at least five years to build and
sell through, and for the development infrastructure to be adopted
by local authorities. This is already in alignment with anticipated
evolutions in corporate reporting from the BEIS consultation on
'restoring trust in audit and corporate governance', such as the
resilience statement requirement.
A key feature of the Group's strategy documented in the
Strategic Report is the Group's commitment to maintain capital
discipline over the long-term through the housing cycle. This
commitment is reinforced by the Group's Capital Return Programme
("CRP"). The CRP initially committed to return GBP1.9bn of surplus
capital over the following ten financial years to 2021, or GBP6.20
per share. The Group has exceeded this initial commitment and has
paid GBP13.00 per share, or GBP4.1bn back to shareholders over this
period. On 2 March 2022, the Directors announced the scheduled
Capital Return Programme payments in respect of the financial year
ended 31 December 2021, to be paid in 2022. Further details can be
found in the Chairman's statement earlier in this announcement.
On an annual basis, the Directors review financial forecasts
used for this Viability Statement as explained in the disciplined
strategic planning processes outlined earlier. These forecasts
incorporate assumptions on issues such as the timing of legal
completions of new homes sold, average selling prices achieved,
profitability, working capital requirements and cash flows. They
also include the CRP. The Directors have made the assumption that
the Group's revolving credit facility is renewed during the period
having again extended the maturity of the facility out to 31 March
2026.
The Directors have also carried out a robust assessment of the
principal and emerging risks facing the Group and how the Group
manages those risks, including those risks that would threaten its
strategy, business model, future operational and financial
performance, solvency and liquidity. This risk assessment was also
informed by the performance of the Group's materiality assessment,
incorporating views from the Group's key stakeholders. The
Directors have considered the impact of these risks on the
viability of the business by performing a range of sensitivity
analyses to a Base Case, including severe but plausible scenarios
materialising together with the likely effectiveness of mitigating
actions that would be executed by the Directors.
The scenarios emphasise the potential impact of severe market
disruption including, for example, the ongoing effect of economic
disruption from the Covid-19 pandemic on the short to medium-term
demand for new homes. The scenarios' emphasis on the impact on the
cash inflows of the Group through reduced new home sales is
designed to allow the examination of the extreme cash flow
consequences of such circumstances occurring. The Group's cash
flows are less sensitive to supply side disruption given the
Group's sustainable business model, flexible operations, agile
management team and off-site manufacturing facilities.
In the first scenario modelled, the combined impact is assumed
to cause a 44% reduction in volumes and a c.14% reduction in
average selling prices through to 2023. As a result of these
factors, the Group's housing revenues were assumed to fall by c.
51% during this period. The assumptions used in this scenario
reflect the experience management gained during the Global
Financial Crisis ('GFC') from 2007 to 2010, it being the worst
recession seen in the housing market since World War Two. The
scenario assumes a subsequent recovery occurs over a similar
extended period as in the GFC.
A second, even more extreme, scenario assumes a significant and
enduring depression of the UK economy and housing market over the
next five years causing a reduction of c. 45% in new home sales
volumes and a c. 40% fall in average selling prices through to
2023. As a result of these factors, the Group's housing revenues
were assumed to fall by c. 67% during this period. It assumes that
neither volumes nor average selling prices recover from this point
through to 2026.
In each of these scenarios, cash flows were assumed to be
managed consistently, ensuring all relevant land, work in progress
and operational investments were made in the business at the
appropriate time to deliver the projected new home legal
completions. The Directors assumed they would continue to make
well-judged decisions in respect of capital return payments,
ensuring that they maintained financial flexibility throughout.
Based on this assessment, the Directors confirm that they have
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period
to the end of 31 December 2026.
* The Directors have assessed the longer-term prospects of the
Group in accordance with provision 31 of the UK Corporate
Governance Code 2018.
Statement of Directors' Responsibilities
The Statement of Directors' Responsibilities is made in respect
of the full Annual Report and the Financial Statements not the
extracts from the financial statements required to be set out in
the Announcement.
The 2021 Annual Report and Accounts comply with the United
Kingdom's Financial Conduct Authority Disclosure Guidance and
Transparency Rules in respect of the requirement to produce an
annual financial report.
We confirm that to the best of our knowledge:
-- the Group and Parent Company financial statements, contained in the 2021 Annual Report and
Accounts, prepared in accordance with the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation taken as a whole; and
-- the Strategic Report includes a fair review of the development and performance of the business
and the position of the issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and uncertainties that they face.
We consider the Annual Report and Accounts taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy.
The Directors of Persimmon Plc and their function are listed
below:
Roger Devlin Chairman
Dean Finch Group Chief Executive
Nigel Mills Senior Independent Director
Simon Litherland Non-Executive Director
Joanna Place Non-Executive Director
Annemarie Durbin Non-Executive Director
Andrew Wyllie Non-Executive Director
Shirine Khoury-Haq Non-Executive Director
By order of the Board
Dean Finch
Group Chief Executive
1 March 2022
The Group's Annual financial reports, half year reports and
trading updates are available from the Group's website at
www.persimmonhomes.com/corporate.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR JBMLTMTBMBAT
(END) Dow Jones Newswires
March 02, 2022 02:00 ET (07:00 GMT)
Persimmon (LSE:PSN)
Graphique Historique de l'Action
De Fév 2024 à Mar 2024
Persimmon (LSE:PSN)
Graphique Historique de l'Action
De Mar 2023 à Mar 2024