TIDMPSN
RNS Number : 2430W
Persimmon PLC
17 August 2022
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2022
Building an even stronger business whilst sustaining
industry-leading performance
Persimmon Plc today announces its half year results for the six
months ended 30 June 2022.
-- Strong demand - average private sales rate for the period c.1% ahead
year on year, with robust forward sales position and re-iterate guidance
of 14,500 -15,000 legal completions this year;
-- 6,652 new home completions (2021: 7,406) as Group rebuilds its outlet
position;
-- Robust financial performance delivering industry-leading margins and
ROCE;
-- Strong customer service, build quality and efficiency;
-- On track to achieve c.10% increase in active outlets by the end of
the current year with 60 outlets opened in the period;
-- 8,829 plots brought into the business across 37 locations - a replacement
rate of over 130%;
-- Returned GBP750m to shareholders by July 2022.
Highlights
H1 2022 H1 2021
New home completions 6,652 7,406
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New home average selling price GBP245,597 GBP236,199
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Total Group revenues(1) GBP1.69bn GBP1.84bn
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New housing gross margin(2) 31.0% 30.9%
------------------ ------------------
Profit before tax GBP439.7m GBP480.1m
------------------ ------------------
Cash at 30 June GBP0.78bn GBP1.32bn
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Owned and under control land holdings 89,052 plots 85,771 plots
at 30 June
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Current forward sales position GBP2.32bn GBP2.23bn
------------------ ------------------
Capital return (per share) 125p (April 2022) 125p (March 2021)
110p (July 2022) 110p (August
2021)
------------------ ------------------
Dean Finch, Group Chief Executive, said:
"Persimmon continues to perform well. We are making important
progress in quality, service, land investment opportunities and
efficiencies to build an even stronger business, while continuing
to deliver the strong financial returns that Persimmon is renowned
for. Demand for our attractively priced, high quality homes has
remained robust, with our average private sales rates for the
period being c.1% ahead year on year. Our customer satisfaction
score(3) is currently 92%. We have some exciting new sites coming
into the business at industry-leading margins, with a land
replacement rate for the period of over 130% and expanded
production in our own brick, tile and timber frame factories, is
further enhancing our supply resilience and cost efficiency,
enabling us to re-iterate our guidance of 14,500 - 15,000 legal
completions for the full year.
"We are on track to achieve a c.10% increase in our active
outlets by the end of the current year as we work to rebuild our
outlet position after a land buying pause three years ago and are
tackling the on-going challenges in the planning system. We are
stepping up proactive engagement with local authorities, enhancing
our approach to developing attractive communities and raising the
bar on design to help mitigate planning challenges. We continue to
expect our volume delivery to be significantly higher in the second
half of the year.
"Our combination of compelling affordability and high levels of
service and build quality, coupled with our well-located sites
provides a uniquely strong and sustainable customer proposition. It
is by strengthening this proposition further that we will achieve
our ambition of becoming Britain's best homebuilder for both
customers and shareholders, consistently delivering high quality
homes, excellent customer service and industry-leading financial
returns."
Building an even stronger business
Robust first half performance
-- Robust first half performance against strong comparator - profit before
tax of GBP439.7m (2021: GBP480.1m);
-- Managing the balance of inflationary pressures effectively - housing
gross margin(2) up on same period last year (31.0% vs 30.9%);
-- Average private sales rate for the period was c.1% ahead year on year;
-- Underlying return on average capital employed4 of 30.9% (December
2021: 35.8%) - over the last 3 years the Group's underlying return
on average capital employed has been 34.2% reflecting the sustained
success of the business;
-- 235p per share paid in respect of the year ended 31 December 2021.
Placing customers at the heart of our business
-- Persimmon Way fully embedded across the business and operating well;
-- HBF 8-week customer satisfaction score(3) currently 92%;
-- Trustpilot score(5) improved by 30% since the start of the year;
-- NHBC Reportable Items(6) improved by 25% since December 2020;
-- Largest team of independent quality inspectors in the industry providing
quality assurance on each of our homes;
-- New product range, marketing rebrand and service enhancements are
strengthening our offer to customers to meet their aspirations and
earn their trust and loyalty;
-- Our average private selling price of GBP267,325 is c.20% below the
UK's national average selling price(7) , demonstrating the enduring
strength of our value offer to customers.
Building a strong platform for success
-- High quality land holdings, with 89,052 plots owned and under control
at 30 June 2022 (December 2021: 88,043), with a land cost to anticipated
revenue ratio(8) of 12.2% (December 2021: 11.9%);
-- Disciplined land replacement - 8,829 plots brought into the business
across 37 locations at industry-leading margins;
-- On track to achieve a c.10% increase in our active outlets by the
end of the year, with 60 opened in the first half and around 70 forecast
to open in the second half of the year, although on-going planning
delays continue to present risk;
-- Build rates improved by c.10% compared with pre-Covid levels;
-- Continuing to invest in our people - around 90% of our site colleagues
have achieved a relevant NVQ qualification (December 2020: 21%) and
we have been recognised as a Top 100 Apprentice Employer.
Driving value
-- BrickWorks, TileWorks and Space4 factories all increasing output,
providing supply resilience and efficiency;
-- Enhanced data and management tools introduced to drive greater consistency
in build times and quality;
-- Strengthened centralised procurement driving efficiencies and pooling
shared resource to manage supply challenges.
Our communities
-- Delivering homes around 30% more energy efficient than existing housing
stock making them more cost efficient to run for our customers;
-- Invested over GBP610m in local communities over the last 18 months,
delivering 3,632 homes to our housing association partners
-- Continuing to protect leaseholders from the cost of cladding removal;
five of our developments have secured EWS1 certificates. Proactively
engaging with Management Companies and their agents on works required
on all other identified developments built by Persimmon.
Outlook
-- Demand is strong with the Group's average private sales rate in the
period around 1% ahead year on year and a robust forward order book
of GBP2.32bn;
-- Robust start to the second half; average private sales rates for the
first seven weeks 11% down year on year against a strong comparator
and as we return to a more normal seasonal pattern, and up 8% on 2019
being the most recent, more typical trading year;
-- Currently over 90% forward sold for the current year;
-- Sales price inflation currently mitigating the cost inflation the
industry is experiencing;
-- Continue to target around 10% growth in outlets by the end of the
current year, with enhanced placemaking and design approach and proactive
local authority engagement expected to mitigate on-going planning
challenges;
-- Re-iterate our guidance of 14,500-15,000 completions for the full
year;
-- While near term uncertainties continue the longer-term fundamentals
remain strong. Our work to become Britain's best homebuilder will
build an even stronger and sustainable business delivering for customers
and shareholders alike.
Footnotes
1 The Group's total revenues include the fair value of
consideration received or receivable on the sale of part exchange
properties and income from the provision of broadband internet
services. Housing revenues are the revenues generated on the sale
of newly built residential properties only.
2 Stated on new housing revenues of GBP1,633.7m (2021:
GBP1,749.3m) and gross profits of GBP506.2m (2021: GBP540.5m).
3 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.
4 12 month rolling average calculated on underlying operating
profit and total capital employed (including land creditors).
Underlying operating profit is stated before goodwill impairment of
GBP5.5m (December 2021: GBP6.2m).
5 Trustpilot is a digital review platform open to the public.
Scores are based on all of the service reviews received on the
platform.
6 A Reportable Item 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 new build homes sourced
from the UK House Price Index as calculated by the Office for
National Statistics from data provided by HM Land Registry.
8 Land cost value for the plot divided by the anticipated future
revenue of the new home sold.
For further information please
contact:
Dean Finch, Group Chief Executive Kevin Smith
Jason Windsor, Chief Financial Jos Bieneman
Officer
Persimmon Plc Ellen Wilton
Tel: +44 (0) 1904 642199 Tel: +44 (0) 20 7638 9571
There will be an analyst and investor presentation at 09.00
today, hosted by Group Chief Executive, Dean Finch and Chief
Financial Officer, Jason Windsor.
Analysts unable to attend in person may listen live via
conference call by registering using the link below:
https://register.vevent.com/register/BIeec490705a9148279d0424360eec3206
The presentation can be viewed via the webcast using the link
below:
https://edge.media-server.com/mmc/p/x3tot3oz
An archived webcast of today's analyst presentation will be
available on www.persimmonhomes.com/corporate from this
afternoon.
CHIEF EXECUTIVE'S REVIEW
Building an even stronger business
Overview
The business has performed well in the period. Demand has been
strong, with the Group's average private weekly sales rate running
at around 1% ahead year on year. In the period, we delivered 6,652
homes (2021: 7,406 homes) as we build up our outlet position whilst
maintaining our disciplined approach to land investment
opportunities. The Group's average selling price of GBP245,597
(2021: GBP236,199) has increased by 4% year on year resulting in
housing revenue of GBP1.63bn (2021: GBP1.75bn). The Group's housing
gross margin(1) was ahead of last year (31.0% vs 30.9%) as we
managed the cost inflationary pressures impacting our industry
effectively and underlying housing operating margin(2) was 27.0%
(2021: 27.6%) reflecting the lower first half volumes on the rate
of overhead recovery. The Group generated a profit before tax of
GBP439.7m (2021: GBP480.1m) in the period.
We are continuing to deliver an industry-leading financial
performance whilst building an even stronger business for the
future. During the period, we delivered higher quality homes at
improved levels of build efficiency. The Group's average build
rates per site were around 10% higher than pre-Covid levels and our
customer satisfaction survey score(3) continues to achieve a
five-star rating. We are identifying exciting land investment
opportunities whilst maintaining our disciplined approach. Our
active outlet position is growing and the business remains on track
to achieve a c.10% improvement in outlet numbers by the end of the
year, despite the significant delays the industry is facing in
achieving planning consents. Our off-site manufacturing facilities
continue to provide both efficiency and resilience in supply,
augmented by a strengthened and enhanced group procurement
function.
We are building an even stronger business that will sustainably
deliver the high quality homes our customers and stakeholders
expect, while maintaining the industry-leading financial
performance that underpins our superior shareholder returns.
Building sustained success
Earlier this year we launched a new Mission, Vision and Values
statement to guide the next stage of our development. Our Mission
is to build homes customers can rely on at prices they can afford.
To achieve this 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.
Our five Values provide the behaviours that will help us achieve
this Mission and Vision: customer focused; value driven; team work;
social impact; and excellence always.
We have a clear strategy to build an even stronger business
while protecting Persimmon's great strengths. Reflecting the
progress we have already made, I have refreshed and renewed the
five priorities for the business that I launched shortly after I
joined:
-- Build quality: our ambition has grown from "build right, first time,
every time" to trusted to deliver five-star homes consistently;
-- Reinforcing trust: in seeking to build a compelling brand we will
place customers at the heart of our business, trusted to deliver the
best value homes customers can be proud of;
-- Disciplined growth: maintain our stringent appraisal, investing in
high quality land in the right areas;
-- Industry-leading financial performance: sustain our industry-leading
margins and returns and drive healthy profit and cash;
-- Supporting sustainable communities: actively part of the net zero
carbon economy transition, the communities we operate in and efforts
to widen opportunity.
These enhanced ambitions and renewed priorities are not ends in
themselves. They recognise that Persimmon has an important role to
play in society, including as a responsible company and employer.
It is by strengthening our ability to consistently deliver high
quality and service that we will sustain Persimmon's
industry-leading financial performance. In the next section I will
explain the progress we have made and the further opportunities
ahead.
Building an even stronger business
There are five key features of the business that will continue
to drive our industry-leading performance and returns. First,
quality and service remain our priorities and reflect our
determination to bring the customer into the heart of the business.
Second, a relentless focus on driving value helps underpin both our
unique value proposition and strong returns. Third, our experienced
management teams across the business are driving our new ambitions
across the country. Fourth, our disciplined land replacement
strategy is being augmented by site planning and design standards
that deliver attractive communities and engagement with local
authorities to drive timely outlet openings. And, fifth,
maintaining the Group's strong financial position is crucial.
Customers at the heart of our business - quality and service
We are placing customers at the heart of our business and I am
determined to continue to drive improvements in build quality and
customer service. This is key to our continued success and will
deliver efficiencies across the Group.
The Persimmon Way, the Group's construction excellence programme
is fully embedded within the business and driving real results for
our customers. We were delighted to be awarded a five-star rating
in the annual HBF survey for the first time in Persimmon's history
and have continued to track ahead of the five-star threshold for
this survey year (current score: 92%(3) ). Further encouraging
evidence of our progress is provided by our 9 month HBF customer
satisfaction score(3) currently indicating a 25% improvement over
the last two survey years. Our Trustpilot score(4) has also
improved markedly, increasing by 30% since the start of the
year.
Our team of 62 independent inspectors, which we believe to be
the largest of its type in the industry, provides quality assurance
at key stages of the build process for each home that we deliver.
Working with the local management teams as an independent challenge
they are helping to drive real improvement, with NHBC Reportable
Items(5) improving by 25% over the last eighteen months. We are
embedding our new approach through independent assurance and
analysis to help drive improved standards. Construction Quality
Reviews (CQR) are now conducted by the NHBC, analysing the root
cause of any quality issues. Our CQR score is currently running
nearly 3% ahead of last year's average. We are conducting an
external audit of the Persimmon Way's implementation across all of
our businesses to identify key learnings and share best practice
across the Group. Our 'Building a Safer Future Charter Champion'
accreditation involves thorough reviews of our approach across all
of our businesses and is progressing well. Three of our site
managers recently achieved the NHBC's coveted Pride in the Job
Awards.
Our average private selling price of GBP267,325 is currently c.
20%(6) below the market average. In striving to consistently
deliver high build quality and service excellence, we are seeking
to offer customers best value they can trust. Our new product
range, enhanced service and improved marketing is seeking to
deliver options that meet customers' aspirations at whatever stage
of home buying they are at. We want to earn customers' trust and
then keep it through repeat sales for them and those they recommend
us to.
FibreNest, our ultrafast full fibre broadband provider,
continues to provide our customers with an important service. It
currently has c.25,000 customers across over 310 sites.
Driving value
Alongside continually striving to build at a better quality more
consistently, we are always seeking to drive value. The Group's
build rates are around 10% higher than pre-Covid levels. As
planned, we are expanding our vertical integration capabilities and
driving efficiencies. The Group's Space4 factory provides us with
an excellent advantage as timber frame homes can be built over 20%
faster than traditionally built houses, and help mitigate
challenges around the availability of some trades. In the period,
35% of the homes we delivered used timber frames. We have been
actively reviewing where we can expand the use of timber frame
construction. It is pleasing therefore that our Space4 factory has
seen a 20% increase in its forward order book at the end of June,
compared to the same time last year. We have recently submitted our
pre-application plans to the local authority for our new Space4
factory and are targeting a full planning submission by the end of
the year, to further increase production in the coming years.
In addition, through new analytical approaches and data-based
management tools we are identifying areas for focus and
opportunities for sharing best practice in build programmes across
the business to continue to secure improvements.
Each of our off-site manufacturing facilities, BrickWorks,
TileWorks and Space4, provide a resilience of supply alongside good
cost efficiency. We are on track to expand production within
BrickWorks by nearly 20% this year, with around 10% of further
growth to come next year. Our TileWorks factory is projected to
increase output by around 40% this year alone.
Our strengthened central procurement team has helped use our
Group-wide purchasing power to secure enhanced deals with key
suppliers and supported regions experiencing specific material
issues by sharing available resources, including from
centrally-held contingency stock on key at-risk items.
Land a nd planning
Our well-established strategy of disciplined land investment,
acquiring sites with embedded industry-leading margins in areas of
high demand, has continued. In the first six months of the year we
brought 8,829 plots into the business, across 37 locations. Since 1
January 2021, we have brought around 30,000 plots across c.140
sites into our already strong land holdings, a replacement rate of
around 140%. At 30 June 2022, the Group had 89,052 owned and under
control plots (December 2021: 88,043), with a land cost to
anticipated revenue ratio(7) of 12.2% (December 2021: 11.9%).
While we have been strengthening our land pipeline, the
combination of strong demand in 2020 and 2021, with lower land
additions in 2019 and 2020, meant we were operating from a
relatively low number of outlets at the start of the year. We
remain on track to open around 70 outlets in the second half of the
year, growing our position by around 10% over the course of the
year, providing a robust platform for the future.
It remains the case, however, that the delays and increasing
complexity in the planning system are impacting our ability to open
new outlets as promptly as we would like. We previously highlighted
the impact of Natural England's nutrient neutrality guidance across
the industry, with c.120,000 plots currently stalled in England.
The Government's recent statement on the issue does not appear to
offer the short-term clarity the industry hoped for, so we continue
to see around 1,500 of our plots affected, a number that is likely
to grow until a resolution is found. Around 90% of the Group's 2023
volume delivery has planning consent, with around 75% with detailed
planning permission. Our operational teams are working hard to
secure the remaining consents required and this will be an
important factor in determining our 2023 volume delivery.
We have stepped-up our approach to working with local
authorities and communities to secure planning consents as quickly
as possible. Our new housing range and 'Placemaking Framework',
which sets out planning and design techniques to develop attractive
communities, provide local teams with enhanced tools to meet
customer needs and local planning authority requirements. A new
stakeholder engagement team is proactively engaging local
authorities across the country to identify how we can help them
deliver their key objectives. We are offering support on nutrient
neutrality to help interested local authorities identify solutions
and deal with the challenge and unlock permissions.
Strong financial position
Whilst building an even stronger business, we have continued to
deliver an industry-leading performance and maintained Persimmon's
high quality land holdings and healthy liquidity. After returning
GBP399m to shareholders and investing GBP416m in high quality land
opportunities, the Group held GBP0.78bn of cash at 30 June 2022
(December 2021: GBP1.25bn) with deferred land commitments of
GBP135m to the end of the current year, providing a robust balance
sheet to support resilient shareholder returns and provide a
platform for disciplined growth. Underlying return on average
capital employed(8) was 30.9% (December 2021: 35.8%), further
demonstrating the strength of the business.
Experienced teams
Persimmon has highly experienced teams across the Group and the
new management structure introduced at the beginning of the year is
working well. We are determined to become an employer of choice and
attract more of the best talent from across the industry. It is
pleasing, therefore, that our recent Employee Survey's engagement
score was 83%, up 5 points from last year and 11 points above our
benchmark group. Our annual July pay reviews saw awards reflecting
the unique cost of living challenges, with those on lower incomes
receiving proportionately the highest increases.
We continue to increase our investment in training with a
Learning Management System in place for all colleagues, as well as
enhanced tailored training for specific areas. Around 90% of site
management colleagues have received an NVQ qualification
appropriate to their role (December 2020: 21%); 127 sales
colleagues have completed the Sales Excellence programme in
conjunction with the Institute of Sales Professionals. We were
delighted to recently be recognised as a Top 100 Apprentice
Employer and have invested in an academy in Bridgend alongside the
local college to provide on-site classrooms for brickwork and
joinery apprentices. This is a model we are looking to extend
further.
I would also like to welcome Jason Windsor, our new Chief
Financial Officer. Jason joined us from Aviva in mid-July. His
wealth of experience from other industries complements the deep
knowledge in the existing management team, further strengthening
our operational leadership. I look forward to working with Jason in
the years ahead.
Our communities
We recognise that as a responsible company we have an important
role to play in society. We remain proud of our leadership in
pledging 18 months ago to protect leaseholders from the cost of
cladding removal and five of our developments have already secured
successful EWS1 certificates. While we are in active discussions
with the HBF and government to convert the commitments made in
April's Developer Pledge into a legal document and resolve areas of
current uncertainty, we continue to proactively engage with
Management Companies and their agents on works required on all
other identified developments built by Persimmon.
Building on our Germany Beck project, we have recently secured
planning permission for a second Zero Carbon home at a site in
Malmesbury. This is an example of our determination to develop
building techniques and technology that meets the sustainability
challenge in a way that is cost effective for customers. Our Priory
Green and Moorland Grove sites are heated through the use of air
source heat pumps demonstrating our drive to improve sustainability
across our business. In addition, our homes are already around 30%
more energy efficient than the existing housing stock, a gap that
is likely to only increase and become even more important as cost
of living pressures become ever more pressing.
Outlook
The UK housing market is strong with demand exceeding supply,
relatively low interest rates (despite the recent rises) and good
levels of mortgage availability. The Group's average private sales
rates for the period were strong, c.1% ahead of last year. We have
made a robust start to the second half; whilst the Group's average
private sales rate for the first seven weeks is 11% down year on
year as we return to more normal seasonal trading patterns, it is
8% up on 2019 being the most recent, more typical trading year and
our cancellation levels remain low. Sales price inflation is
currently mitigating the cost inflation the industry is
experiencing. The current value of our forward sales is GBP2.32bn,
with 10,542 homes (2021: 11,140), 5,992 of which are sold into the
private market (2021: 6,471). The Group is over 90% forward sold
for the full year. The average selling price of new homes forward
sold to owner occupiers was c.GBP284,000, c.12% ahead of the prior
year (2021: c.GBP253,000).
We re-iterate our year end volume expectations of delivering
14,500 to 15,000 units with forecast full year profit in line with
our expectations. While risks remain, we expect to continue to grow
our outlet position, opening around 70 outlets in the next six
months, providing a robust platform for the future.
We are mindful of the scope for further interest rate raises as
well as the broader economic challenges recently set out by the
Governor of the Bank of England, alongside the wider industry
challenges including the withdrawal of Help to Buy. The longer-term
fundamentals of the UK housing market, however, remain strong. We
will continue to focus on consistently delivering high quality
homes and high standards of service, earning our customers' trust
and loyalty in meeting their aspirations. Through the work we are
doing in building an even stronger business, we are confident in
our continued success, protecting and enhancing Persimmon's great
strengths and driving sustainable industry-leading returns for
shareholders.
Dean Finch
Group Chief Executive
16 August 2022
Footnotes
1 Stated on new housing revenues of GBP1,633.7m (2021:
GBP1,749.3m) and gross profits of GBP506.2m (2021: GBP540.5m).
2 Stated on new housing revenue of GBP1,633.7m (2021:
GBP1,749.3m) and underlying profit from operations of GBP440.7m
(2021: GBP483.0m) calculated before goodwill impairment of GBP3.2m
(2021: GBP3.9m).
3 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.
4 Trustpilot is a digital review platform open to the public.
Scores are based on all of the service reviews received on the
platform.
5 A Reportable Item is an area of non-compliance with NHBC
standards. The item is rectified fully before completion of the
home.
6 National average selling price for new build homes sourced
from the UK House Price Index as calculated by the Office for
National Statistics from data provided by HM Land Registry.
7 Land cost value for the plot divided by the anticipated future
revenue of the new home sold.
8 12 month rolling average calculated on underlying operating
profit and total capital employed (including land creditors).
Underlying operating profit is stated before goodwill impairment of
GBP5.5m (December 2021: GBP6.2m).
FINANCIAL REVIEW
Strong trading
Trading has been strong in the period with good levels of
customer demand and cancellation rates remaining at historic lows
throughout. The Group generated total revenues(1) of GBP1.69bn
(2021: GBP1.84bn), with new housing revenue of GBP1.63bn (2021:
GBP1.75bn).
Legal completions, as anticipated, were lower than the prior
year and reflect delays in achieving planning consents on our new
outlet openings. The Group delivered 6,652 new homes (2021: 7,406)
at an average selling price of GBP245,597 (2021: GBP236,199) which
is 4% higher year on year, reflecting the underlying strength of
demand in the UK housing market.
The Group delivered 5,553 new homes to its private owner
occupier customers (2021: 6,104) at an average selling price 3.5%
higher than a year ago (2022: GBP267,325; 2021: GBP258,220),
reflecting both improvement in selling prices achieved and the mix
of homes sold in the period. To supplement this, the Group
delivered 1,099 homes to our housing association partners (2021:
1,302) at an average selling price of GBP135,813 (2021:
GBP132,959).
The increased prices achieved in the period have mitigated the
impact of cost inflation of around 8 - 10%, with an increase in the
Group's housing gross margin(2) compared with 2021 (2022: 31.0%;
2021: 30.9%). The Group's gross profit delivery for the period of
GBP506.2m (2021: GBP540.5m) continues to be supported by the
Group's well established land replacement strategy, with land cost
recoveries(3) of 11.9% of new housing revenue for the period (2021:
14.1%).
Underlying housing operating margin(4) of 27.0% has been
impacted by operating deleverage due to the reduced levels of
completions (2021: 27.6%). Underlying operating profit(5) for the
Group was GBP440.7m (2021: 483.0m).
The Group generated a profit before tax of GBP439.7m in the
period (2021: GBP480.1m).
Robust balance sheet
The Group has a robust balance sheet with high quality land
holdings, strong levels of work in progress investment and healthy
levels of liquidity. The Group remains committed to investing in
its future with, since 31 December 2021, land investment increasing
by GBP304.6m to over GBP2.10bn and work in progress investment
increasing by GBP172.0m to GBP1.23bn at 30 June 2022.
At 30 June 2022, the Group had work in progress of c.4,400
equivalent units of new home construction (December 2021: c.4,100),
reflecting our c.10% increase in build rates compared with
pre-Covid levels and with a focus on improving our stock position
to increase availability and choice for our customers. The Group
remains in a strong position to deliver a resilient closing stock
position at the end of 2022 whilst achieving its targeted growth in
output.
The Group's defined benefit net pension asset has increased to
GBP209.4m at 30 June 2022 (December 2021: GBP148.8m) mainly
reflecting gains through changes in assumptions to discount and
inflation rates that have decreased the value placed on the schemes
liabilities offset in part by falling asset values. Total equity
decreased to GBP3,613.8m from GBP3,625.2m at 31 December 2021.
Reported net assets per share of 1,131.7p represents a 0.4%
decrease from 1,135.7p at 31 December 2021. Underlying return on
average capital employed(6) as at 30 June was 30.9% (December 2021:
35.8%), demonstrating the resilience of the business and the
investment made to support future growth and returns. Underlying
basic earnings per share(5) for the first six months of 2022 was
107.5p, a 13.2% decrease compared to the prior period (2021:
123.8p).
High quality land holdings
The Group has continued to maintain its disciplined approach to
land investment, identifying opportunities to acquire land in areas
where new housing is most needed and in areas where people wish to
live and work.
During the period the Group increased its owned and under
control land holdings to 89,052, from 88,043 plots at 31 December
2021, with 37,771 of these plots benefitting from a detailed
planning consents and are under development.
The Group brought 8,829 plots into the business across 37
locations throughout the UK with 3,626 of these plots converted
from our strategic land portfolio. At 30 June 2022, Persimmon's
owned land holdings of 72,036 plots (2021: 66,708 plots) have an
overall proforma gross margin(7) of c.33% and a cost to revenue
ratio of 11.8% (8) (2021: 11.4%).
To supplement these land holdings, the Group has c.13,300 acres
of strategic land in its portfolio with the potential to deliver up
to 100,000 new homes. This includes excellent visibility over
c.30,500 plots of which c.21,050 being plots held under option that
are proceeding through planning. The remaining c.9,450 plots are
controlled and allocated in local plans.
During the period the Group incurred land spend of GBP415.9m,
including GBP137.4m of payments in satisfaction of deferred land
commitments.
Healthy liquidity
The Group had a cash balance of GBP0.78bn at 30 June 2022
(December 2021: GBP1.25bn) with land creditors of GBP493.8m
(December 2021: GBP407.6m), of which GBP135.2m is expected to be
paid by the end of the year. The Group generated GBP451.1m of cash
from operating activities in the period (2021: GBP491.8m), before
returning GBP399.0m surplus capital to shareholders and investing
GBP387.7m in working capital (being principally c.GBP215m in net
land and GBP172.0m in net work in progress). This investment in
land and work in progress along with the Group's healthy liquidity
will provide further opportunity to continue to support the future
growth of the business.
In addition, the Group has an undrawn Revolving Credit Facility
of GBP300m which has a 4 year term out to 31 March 2026.
Footnotes
1 The Group's total revenues include the fair value of
consideration received or receivable on the sale of part exchange
properties and income from the provision of broadband internet
services. New housing revenues are the revenues generated on the
sale of newly built residential properties only.
2 Stated on new housing revenues of GBP1,633.7m (2021:
GBP1,749.3m) and gross profits of GBP506.2m (2021: GBP540.5m).
3 Land cost value for the plot divided by the revenue of the new
home sold.
4 Stated on new housing revenue of GBP1,633.7m (2021:
GBP1,749.3m) and underlying profit from operations of GBP440.7m
(2021: GBP483.0m) calculated before goodwill impairment of GBP3.2m
(2021: GBP3.9m).
5 Stated before goodwill impairment of GBP3.2m (2021:
GBP3.9m).
6 12 month rolling average calculated on underlying operating
profit and total capital employed (including land creditors).
Underlying operating profit is stated before goodwill impairment of
GBP5.5m (December 2021: GBP6.2m).
7 Estimated weighted average gross margin based on assumed
revenues and costs at 30 June 2022 and normalised output
levels.
8 Land cost value for the plot divided by the anticipated future
revenue of the new home sold.
PERSIMMON PLC
Condensed Consolidated Statement of Comprehensive Income
For the six months to 30 June 2022 (unaudited)
Six months Six months Year to 31
to 30 June to 30 June December 2021
2022 2021
Note Total Total Total
GBPm GBPm GBPm
------------------------------------- ----- ------------ ------------ ---------------
Total revenue 3 1,688.6 1,840.8 3,610.5
Cost of sales (1,182.4) (1,300.3) (2,526.7)
------------------------------------- ----- ------------ ------------ ---------------
Gross profit 506.2 540.5 1,083.8
Other operating income 6.2 4.8 6.4
Operating expenses (74.9) (66.2) (129.7)
------------------------------------- ----- ------------ ------------ ---------------
Profit from operations 437.5 479.1 960.5
Analysed as:
Underlying operating profit 440.7 483.0 966.7
Impairment of intangible assets (3.2) (3.9) (6.2)
------------------------------------- ----- ------------ ------------ ---------------
Finance income 4.6 3.4 9.9
Finance costs (2.4) (2.4) (3.6)
------------------------------------- ----- ------------ ------------ ---------------
Profit before tax 439.7 480.1 966.8
Analysed as:
Underlying profit before tax 442.9 484.0 973.0
Impairment of intangible assets (3.2) (3.9) (6.2)
------------------------------------- ----- ------------ ------------ ---------------
Tax 4 (99.9) (88.9) (179.6)
------------------------------------- ----- ------------ ------------ ---------------
Profit after tax (all attributable
to equity holders of the parent) 339.8 391.2 787.2
------------------------------------- ----- ------------ ------------ ---------------
Other comprehensive income
Items that will not be reclassified
to profit:
Remeasurement gains on defined
benefit pension schemes 12 59.4 65.8 83.3
Tax 4 (16.7) (16.0) (24.8)
------------------------------------- ----- ------------ ------------ ---------------
Other comprehensive income for
the period, net of tax 42.7 49.8 58.5
------------------------------------- ----- ------------ ------------ ---------------
Total recognised income for
the period 382.5 441.0 845.7
------------------------------------- ----- ------------ ------------ ---------------
Earnings per share
Basic 5 106.5p 122.6p 246.8p
Diluted 5 105.9p 122.1p 245.6p
------------------------------------- ----- ------------ ------------ ---------------
PERSIMMON PLC
Condensed Consolidated Balance Sheet
As at 30 June 2022 (unaudited)
30 June 30 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
--------------------------------- ----- ---------- ---------- ------------
Assets
Non-current assets
Intangible assets 176.2 177.9 175.6
Property, plant and equipment 107.6 93.4 99.0
Investments accounted for using
the equity method 0.3 0.3 0.3
Shared equity loan receivables 8 32.4 35.9 35.7
Trade and other receivables 0.6 3.0 0.6
Deferred tax assets 9.7 10.7 9.7
Retirement benefit assets 12 209.4 116.7 148.8
--------------------------------- ----- ---------- ---------- ------------
536.2 437.9 469.7
--------------------------------- ----- ---------- ---------- ------------
Current assets
Inventories 7 3,402.7 2,815.6 2,920.7
Shared equity loan receivables 8 7.9 13.1 9.9
Trade and other receivables 151.5 139.2 123.9
Current tax assets 32.5 12.8 21.4
Cash and cash equivalents 11 782.0 1,315.2 1,246.6
--------------------------------- ----- ---------- ---------- ------------
4,376.6 4,295.9 4,322.5
--------------------------------- ----- ---------- ---------- ------------
Total assets 4,912.8 4,733.8 4,792.2
--------------------------------- ----- ---------- ---------- ------------
Liabilities
Non-current liabilities
Trade and other payables (267.6) (190.5) (203.4)
Deferred tax liabilities (74.0) (41.5) (54.6)
Partnership liability (18.9) (23.1) (23.8)
--------------------------------- ----- ---------- ---------- ------------
(360.5) (255.1) (281.8)
--------------------------------- ----- ---------- ---------- ------------
Current liabilities
Trade and other payables (863.6) (830.8) (807.0)
Partnership liability (5.6) (5.5) (5.5)
Legacy buildings provision 9 (69.3) (75.0) (72.7)
(938.5) (911.3) (885.2)
--------------------------------- ----- ---------- ---------- ------------
Total liabilities (1,299.0) (1,166.4) (1,167.0)
--------------------------------- ----- ---------- ---------- ------------
Net assets 3,613.8 3,567.4 3,625.2
--------------------------------- ----- ---------- ---------- ------------
Equity
Ordinary share capital issued 31.9 31.9 31.9
Share premium 25.6 22.9 24.9
Capital redemption reserve 236.5 236.5 236.5
Other non-distributable reserve 276.8 276.8 276.8
Retained earnings 3,043.0 2,999.3 3,055.1
--------------------------------- ----- ---------- ---------- ------------
Total equity 3,613.8 3,567.4 3,625.2
--------------------------------- ----- ---------- ---------- ------------
PERSIMMON PLC
Condensed Consolidated Statement of Changes in Shareholders'
Equity
For the six months to 30 June 2022 (unaudited)
Share Share Capital Other non-distributable Retained Total
capital premium redemption reserve earnings
reserve
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------- --------- ------------ ------------------------ ---------- --------
Six months ended 30
June 2022:
Balance at 1 January
2022 31.9 24.9 236.5 276.8 3,055.1 3,625.2
Profit for the period - - - - 339.8 339.8
Other comprehensive
income - - - - 42.7 42.7
Transactions with
owners:
Dividends on equity
shares - - - - (399.0) (399.0)
Issue of new shares - 0.7 - - - 0.7
Share-based payments - - - - 4.4 4.4
Balance at 30 June
2022 31.9 25.6 236.5 276.8 3,043.0 3,613.8
------------------------ --------- --------- ------------ ------------------------ ---------- --------
Six months ended 30
June 2021:
Balance at 1 January
2021 31.9 22.3 236.5 276.8 2,950.9 3,518.4
Profit for the period - - - - 391.2 391.2
Other comprehensive
income - - - - 49.8 49.8
Transactions with
owners:
Dividends on equity
shares - - - - (398.7) (398.7)
Issue of new shares - 0.6 - - - 0.6
Share-based payments - - - - 6.1 6.1
Balance at 30 June
2021 31.9 22.9 236.5 276.8 2,999.3 3,567.4
------------------------ --------- --------- ------------ ------------------------ ---------- --------
Year ended 31 December
2021:
Balance at 1 January
2021 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
------------------------ --------- --------- ------------ ------------------------ ---------- --------
PERSIMMON PLC
Condensed Consolidated Cash Flow Statement
For the six months to 30 June 2022 (unaudited)
Six months Six months Year to 31
to 30 June to 30 June December 2021
2022 2021
Note GBPm GBPm GBPm
----------------------------------------- ----- ------------ ------------------ ------------------
Cash flows from operating activities:
Profit for the period 339.8 391.2 787.2
Tax charge 4 99.9 88.9 179.6
Finance income (4.6) (3.4) (9.9)
Finance costs 2.4 2.4 3.6
Depreciation charge 7.5 7.2 14.5
Impairment of intangible assets 3.2 3.9 6.2
Share-based payment charge 5.9 4.7 6.4
Net imputed interest income 1.2 1.1 6.1
Other non-cash items (4.2) (4.2) (7.9)
----------------------------------------- ----- ------------ ------------------ ------------------
Cash inflow from operating activities 451.1 491.8 985.8
Movement in working capital:
(Increase)/decrease in inventories (477.2) 90.5 (9.8)
Increase in trade and other receivables (31.2) (55.3) (59.5)
Increase in trade and other payables 113.3 49.1 37.4
Decrease in shared equity loan
receivables 7.4 9.2 18.9
----------------------------------------- ----- ------------ ------------------ ------------------
Cash generated from operations 63.4 585.3 972.8
Interest paid (2.6) (2.6) (3.7)
Interest received 1.4 1.3 1.9
Tax paid (109.5) (92.2) (186.2)
----------------------------------------- ----- ------------ ------------------ ------------------
Net cash (outflow)/inflow from
operating activities (47.3) 491.8 784.8
----------------------------------------- ----- ------------ ------------------ ------------------
Cash flows from investing activities:
Joint venture net funding movement - 1.8 1.8
Acquisition of a subsidiary (0.2) - -
Purchase of property, plant and
equipment (13.7) (9.3) (20.9)
Proceeds from sale of property,
plant and equipment 0.7 0.5 0.9
----------------------------------------- ----- ------------ ------------------ ------------------
Net cash outflow from investing
activities (13.2) (7.0) (18.2)
----------------------------------------- ----- ------------ ------------------ ------------------
Cash flows from financing activities:
Lease capital payments (1.8) (1.8) (3.3)
Payment of Partnership liability (4.0) (3.8) (3.8)
Share options consideration 0.7 0.6 2.6
Dividends paid 6 (399.0) (398.7) (749.6)
----------------------------------------- ----- ------------ ------------------ ------------------
Net cash outflow from financing
activities (404.1) (403.7) (754.1)
----------------------------------------- ----- ------------ ------------------ ------------------
(Decrease)/increase in net cash
and cash equivalents 11 (464.6) 81.1 12.5
----------------------------------------- ----- ------------ ------------------ ------------------
Cash and cash equivalents at the
beginning of the period 1,246.6 1,234.1 1,234.1
----------------------------------------- ----- ------------ ------------------ ------------------
Cash and cash equivalents at
the end of the period 11 782.0 1,315.2 1,246.6
----------------------------------------- ----- ------------ ------------------ ------------------
Notes
1. Basis of preparation
The half year condensed financial statements for the six months
to 30 June 2022 have been prepared in accordance with the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority and with UK adopted International Accounting Standard
("IAS") 34 Interim Financial Reporting. The half year financial
statements are unaudited, but have been reviewed by the auditors
whose report is set out at the end of this report. This report
should be read in conjunction with the Group's annual financial
statements for the year ended 31 December 2021, which have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and UK
adopted IFRS.
The comparative figures for the financial year ended 31 December
2021 are not the company's statutory accounts for that financial
year. Those accounts have been reported on by the company's
auditors and delivered to the Registrar of Companies. The report of
the auditors was (i) unqualified, (ii) did not include a reference
to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and (iii) did not contain
a statement under section 498 (2) or (3) of the Companies Act
2006.
Except as described below, the accounting policies applied are
consistent with those of the annual financial statements for the
year ended 31 December 2021, as described in those financial
statements.
The following relevant UK endorsed new amendments to standards
are mandatory for the first time for the financial year beginning 1
January 2022:
-- Amendments to IFRS 1 First-time Adoption of IFRS; IFRS 9 Financial
Instruments; IAS 41 Agriculture; and Annual Improvements to IFRS
2018 - 2020
-- Amendments to IAS 37 Onerous Contracts
-- Amendments to IAS 16 Property, Plant and Equipment
-- Amendments to IFRS 3 Reference to the Conceptual Framework
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 endorsed but not yet effective:
-- IFRS 17 Insurance Contracts, including Amendments to IFRS 17
and Initial Application of IFRS 17 and IFRS 9 - Comparative Information
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 six months ended 30 June
2022. 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 6,652 new homes (2021: 7,406) and generated
profit before tax of GBP439.7m (2021: GBP480.1m) in the period. At
30 June 2022, the Group had a strong balance sheet with GBP782.0m
of cash (2021: GBP1,315.2m), high quality land holdings and land
creditors of GBP493.8m (December 2021: GBP407.6m). In addition, the
Group has an undrawn Revolving Credit Facility of GBP300m, which
has a four year term out to 31 March 2026.
The Group's forward order book, including legal completions
taken in the second half, is c.4% stronger than 2021.
The Directors have reviewed the Group's principal risks, see
note 13 of this announcement, and determined that there are no new
principal risks facing the business to those disclosed in the
financial statements for the year ended 31 December 2021. The
Directors considered the impact of these risks on the going concern
of the business when approving these full year financial statements
for the Group.
Given the Group's trading performance during the first six
months of the year, together with its strong sales rates and
forward sales position, the Directors believe that the
comprehensive review performed for the viability statement included
in the Group's Annual Report 2021 remains relevant and valid.
In addition, the Directors have assessed the impact of a severe
but plausible downside scenario for the housing market, from the
date of this announcement to 31 December 2023, on the resilience of
the Group. This scenario assumes a c.44% reduction in volumes and a
c.14% reduction in average selling prices through to 31 December
2023 along with the likely effectiveness of mitigating actions that
would be executed by the Directors. The combined impact results in
a c.51% fall in the Group's housing revenues. The assumption used
in this scenario reflects the experience management gained during
the Global Financial Crisis from 2007 to 2010, it being the worst
recession seen in the housing market since World War Two.
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.
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 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 condensed consolidated half year financial
statements.
Estimates and judgements
The preparation of these half year condensed financial
statements requires management to make judgements and estimations
of uncertainty at the balance sheet date. The key areas where
judgements and estimates are significant to the financial
statements are land and work in progress (see note 7), shared
equity loan receivables (see note 8 and note 10), goodwill, brand
intangibles, provisions and pensions as disclosed in note 3 of the
Group's annual financial statements. The estimates and associated
assumptions are based on management expertise and historical
experience and various other factors that are believed to be
reasonable under the circumstances.
Goodwill and brand intangibles
The key sources of estimation uncertainty in respect of goodwill
and brand intangibles are disclosed in notes 3 and 13 of the
Group's annual financial statements for the year ended 31 December
2021.
The goodwill allocated to the Group's acquired strategic land
holdings is further tested by reference to the proportion of
legally completed plots in the period compared to the total plots
which are expected to receive satisfactory planning permission in
the remaining strategic land holdings, taking account of historic
experience and market conditions. This review resulted in an
underlying impairment charge of GBP3.2m recognised during the
period. This impairment charge reflects ongoing consumption of the
acquired strategic land holdings and is consistent with prior
years.
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
Six months Six months Year to
to 30 to 30 June 31 December
June 2022 2021 2021
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Revenue from the sale of new
housing 1,633.7 1,749.3 3,449.7
Revenue from the sale of part
exchange
properties 50.9 89.2 155.4
Revenue from the provision of
internet
services 4.0 2.3 5.4
--------------------------------------------- -------------------- ----------------------- ------------------------
Revenue from the sale of goods
and services
as reported in the statement of
comprehensive
income 1,688.6 1,840.8 3,610.5
--------------------------------------------- -------------------- ----------------------- ------------------------
4. Tax
Analysis of the tax charge for the period
Six months Six months Year to
to 30 to 30 June 31 December
June 2022 2021 2021
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Tax charge comprises:
UK corporation tax in respect of
the
current period 98.6 91.5 181.2
Adjustments in respect of prior
years - (3.8) (8.3)
--------------------------------------------- -------------------- ----------------------- ------------------------
98.6 87.7 172.9
--------------------------------------------- -------------------- ----------------------- ------------------------
Deferred tax relating to
origination
and reversal of temporary
differences 1.3 1.2 5.4
Adjustments recognised in the
current
year in respect of prior years'
deferred
tax - - 1.3
--------------------------------------------- -------------------- ----------------------- ------------------------
1.3 1.2 6.7
--------------------------------------------- -------------------- ----------------------- ------------------------
99.9 88.9 179.6
--------------------------------------------- -------------------- ----------------------- ------------------------
The Group's overall effective tax rate for the period of 22.2%
is higher than the mainstream corporation tax rate of 19%, and
reflects the additional 4% Residential Property Developer Tax
("RPDT") on profits arising from residential property activity with
effect from 1 April 2022. This additional tax rate was enacted in
the current period and accordingly the effective tax rate includes
the effect of revaluing deferred tax assets and liabilities at this
higher rate. The RPDT will add to the increased mainstream
corporation tax rate of 25% which is legislated to take effect from
April 2023.
Deferred tax recognised in other comprehensive income
Six months Six months Year
to 30 to 30 June to
June 2022 2021 31
December
2021
GBPm GBPm GBPm
------------------------------------------------ -------------------- ----------------------- ---------------------
Recognised on remeasurement charges
on
pension schemes 16.7 16.0 24.8
------------------------------------------------ -------------------- ----------------------- ---------------------
Tax recognised directly in equity
Six months Six months Year to
to 30 to 30 June 31 December
June 2022 2021 2021
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Arising on transactions with
equity
participants
Current tax related to equity
settled
transactions - - 0.1
Deferred tax related to equity
settled
transactions 1.5 (1.4) (1.8)
--------------------------------------------- -------------------- ----------------------- ------------------------
1.5 (1.4) (1.7)
--------------------------------------------- -------------------- ----------------------- ------------------------
5. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
period (excluding those held in the employee benefit trust) which
were 319.2m (June 2021: 319.0m; December 2021: 319.0m).
Diluted earnings per share is calculated by dividing the profit
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue adjusted to
assume conversion of all potentially dilutive ordinary shares from
the start of the period, giving a figure of 320.8m (June 2021:
320.2m; December 2021: 320.2m).
Underlying earnings per share excludes the legacy buildings
provision charge and goodwill impairment. The earnings per share
from continuing operations were as follows:
Six months Six months Year to
to 30 to 30 June 31 December
June 2022 2021 2021
Basic earnings per share 106.5p 122.6p 246.8p
Underlying basic earnings per
share 107.5p 123.8p 248.7p
Diluted earnings per share 105.9p 122.1p 245.6p
Underlying diluted earnings per
share 106.9p 123.3p 247.6p
--------------------------------------------- -------------------- ----------------------- ------------------------
The calculation of the basic and diluted earnings per share is
based upon the following data:
Six months Six months Year to
to 30 to 30 June 31 December
June 2022 2021 2021
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Underlying earnings attributable
to shareholders 343.0 395.1 793.4
Goodwill impairment (3.2) (3.9) (6.2)
--------------------------------------------- -------------------- ----------------------- ------------------------
Earnings attributable to
shareholders 339.8 391.2 787.2
--------------------------------------------- -------------------- ----------------------- ------------------------
At 30 June 2022 the issued share capital of the Company was
319,317,641 ordinary shares (30 June 2021: 319,100,222; 31 December
2021: 319,206,474 ordinary shares).
6. Dividends
Six months Six months Year to
to 30 to 30 June 31 December
June 2022 2021 2021
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Amounts recognised as
distributions to
capital holders in the period:
2020 dividend to all shareholders
of
125p per share paid 2021 - 398.7 398.7
2020 dividend to all shareholders
of
110p per share paid 2021 - - 350.9
2021 dividend to all shareholders 399.0 - -
of
125p per share paid 2022
Total capital return to
shareholders 399.0 398.7 749.6
--------------------------------------------- -------------------- ----------------------- ------------------------
On 1 April 2022 125p per share (or GBP399.0m) of surplus capital
was returned to shareholders as an interim cash dividend in respect
of the financial year 31 December 2021.
On 8 July 2022 110p per share (or GBP351.1m) of surplus capital
was returned to shareholders as an interim cash dividend in respect
of the financial year 31 December 2021.
In total, 235p per share of surplus capital has been returned to
shareholders during 2022 in respect of the financial year 31
December 2021. There will be no further distributions to
shareholders in relation to the financial year 31 December
2021.
7. Inventories
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
------------------------------------- ---------- ---------- -------------------
Land 2,102.8 1,701.0 1,798.2
Work in progress 1,226.1 1,046.0 1,054.1
Part exchange properties 27.2 23.9 24.8
Showhouses 46.6 44.7 43.6
------------------------------------- ---------- ---------- -------------------
3,402.7 2,815.6 2,920.7
------------------------------------- ---------- ---------- -------------------
The Group has conducted a further review of the net realisable
value of its land and work in progress portfolio at 30 June 2022.
Our approach to this review has been consistent with that conducted
at 31 December 2021 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 30
June 2022 were GBP15.0m (30 June 2021: GBP20.3m; 31 December 2021:
GBP18.6m). Following the review, GBP3.8m of inventories are valued
at fair value less costs to sell rather than historical cost (30
June 2021: GBP4.6m; 31 December 2021: GBP4.1m).
8. Shared equity loan receivables
Six months Six months Year to
to 30 to 30 June 31 December
June 2022 2021 2021
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Shared equity loan receivables at
beginning
of period 45.6 56.2 56.2
Settlements (7.4) (9.2) (18.9)
Gains 2.1 2.0 8.3
--------------------------------------------- -------------------- ----------------------- ------------------------
Shared equity loan receivables at
end
of period 40.3 49.0 45.6
--------------------------------------------- -------------------- ----------------------- ------------------------
All gains/losses have been recognised through finance income in
profit and loss for the period of which GBP0.2m was unrealised
(June 2021: GBP0.4m; December 2021: GBP4.2m).
9. Legacy buildings provision
Six months Six months Year to 31
to 30 June to 30 June December 2021
2022 2021
GBPm GBPm GBPm
---------------------------------------- ------------------ ------------------ ---------------------
Legacy buildings provision at
beginning of period 72.7 75.0 75.0
Provision utilised in the period (3.4) - (2.3)
---------------------------------------- ------------------ ------------------ ---------------------
Legacy buildings provision at
end of period 69.3 75.0 72.7
---------------------------------------- ------------------ ------------------ ---------------------
In 2020 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 2022 at a
cost of GBP3.4m (2021: GBP2.3m). The provision at 30 June 2022
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 period. 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:
30 June 30 June 31 December
2022 2021 2021
Level 3 Level 3 Level 3
GBPm GBPm GBPm
------------------------------------------- ---------- ---------- -------------------
Shared equity loan receivables 40.3 49.0 45.6
------------------------------------------- ---------- ---------- -------------------
Shared equity loan receivables
Shared equity loan receivables represent loans advanced to
customers 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 assets. As a
result, the Group has applied inputs based on current market
conditions and the Group's historic experience of actual cash flows
resulting from such arrangements. These inputs are by nature
estimates and as such, the fair value has been classified as level
3 under the fair value hierarchy laid out in IFRS 13 Fair Value
Measurement.
Significant unobservable inputs into the fair value measurement
calculation include regional house price movements based on the
Group's actual experience of regional house pricing and management
forecasts of future movements, weighted average duration of the
loans from inception to settlement of ten years (2021: ten years)
and a discount rate of 5% (2021: 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 asset. 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
Six months Six months Year to
to 30 to 30 June 31 December
June 2022 2021 2021
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Cash and cash equivalents at
beginning
of period 1,246.6 1,234.1 1,234.1
(Decrease)/increase in net cash
equivalents
in cash flow (464.6) 81.1 12.5
--------------------------------------------- -------------------- ----------------------- ------------------------
Cash and cash equivalents at end
of period 782.0 1,315.2 1,246.6
IFRS 16 lease liability (9.8) (8.9) (8.8)
--------------------------------------------- -------------------- ----------------------- ------------------------
Net cash at end of period 772.2 1,306.3 1,237.8
--------------------------------------------- -------------------- ----------------------- ------------------------
Net cash is defined as cash and cash equivalents, bank
overdrafts, lease obligations and interest bearing borrowings.
12. Retirement benefit assets
As at 30 June 2022 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:
Six months Six months Year to 31
to 30 to 30 June December
June 2022 2021 2021
GBPm GBPm GBPm
----------------------------------------------- -------------------- ----------------------- ----------------------
Current service cost 0.9 0.9 2.0
Administrative expense 0.2 0.1 0.6
----------------------------------------------- -------------------- ----------------------- ----------------------
Pension cost recognised as
operating
expense 1.1 1.0 2.6
----------------------------------------------- -------------------- ----------------------- ----------------------
Interest income on net defined
benefit
asset (1.4) (0.4) (0.7)
----------------------------------------------- -------------------- ----------------------- ----------------------
Pension cost recognised as a net
finance
credit (1.4) (0.4) (0.7)
----------------------------------------------- -------------------- ----------------------- ----------------------
Total defined benefit pension
(income)/cost
recognised in profit or loss (0.3) 0.6 1.9
Remeasurement gains recognised in
other
comprehensive expense (59.4) (65.8) (83.3)
----------------------------------------------- -------------------- ----------------------- ----------------------
Total defined benefit scheme gain
recognised (59.7) (65.2) (81.4)
----------------------------------------------- -------------------- ----------------------- ----------------------
The amounts included in the balance sheet arising from the
Group's obligations in respect of the Pension Scheme are as
follows:
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
------------------------------------------------ ---------- ---------- -------------------
Fair value of pension scheme assets 658.4 714.2 751.9
Present value of funded obligations (449.0) (597.5) (603.1)
------------------------------------------------ ---------- ---------- -------------------
Net pension asset 209.4 116.7 148.8
------------------------------------------------ ---------- ---------- -------------------
The increase in the net pension asset to GBP209.4m (December
2021: GBP148.8m) is largely due to an increase in long-term
corporate bond yields increasing the discount rate assumption
applied to scheme obligations to 3.9% (December 2021: 1.9%) offset
by falling asset values.
13. Principal risks
1. Pandemic risk
Risk assessment Risk description Approach to risk Developments in
mitigation 2022
----------------------------------------------------------- ------------------- ------------------
The potential for The Group can draw The successful
Residual increased rates upon extensive Covid-19
risk rating: of transmission, Board vaccination
Medium further variants and management programme
of Covid-19 or a experience and the
Change from new pandemic occurring from the response government's
year end: in the UK, could to removal
Decrease have significant the initial of remaining
impacts across the Covid-19 restrictions,
Group's operations. outbreak. During have reduced the
These could include: this immediate
* Increased health and safety risk to our workforce, outbreak, robust risks associated
our customers and the wider public. and with
comprehensive the pandemic.
policies These positive
* Disruption to build programmes and delays in sales, and procedures evolutions have
due to staff absences and material and labour supply were allowed
issues. developed under the Group to
the retire its
supervision of the Covid-19 policy
* Economic downturn, with reduced consumer confidence, Health, Safety and and supporting
demand and pricing for new homes, thereby affecting Environment procedures.
revenues, margins, profits and cash flows and Department. Measures are
impairment of asset values. These procedures still in place to
allow reduce
for safe the spread of
continuity respiratory
of operations infections in the
under workplace,
various pandemic and are set out
conditions, in the
if required. Group's new
Health and
Remote working Wellbeing
capabilities Standards.
are in place,
facilitated The Group retains
through enhanced its
use strong balance
of technology. sheet,
This high liquidity
supports and robust
continuity financial
of operations in disciplines,
the which ensure we
event of ongoing are well
or placed to manage
future pandemic challenges
conditions. should further
The risks Covid-19
associated variants or other
with increased use pandemic
of remote working conditions
are materialise.
mitigated through
a
combination of IT
controls
and user awareness
training.
Potential
disruption
of supply is
mitigated
through
centralised
procurement and
management
of key materials.
The
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 2022
----------------------------------------------------------- ------------------- ------------------
The Group's strategy The Group's Our
Residual has been developed strategy well-established
risk rating: by the Board as is agreed by the strategy
Low the most appropriate Board continues to
approach to successfully at an annual reflect a
Change from deliver the Group's strategy firm
year end: purpose and ambition meeting. The understanding of
No change and generate optimal strategy the risks
sustainable value undergoes a associated with
for all stakeholders. continuous the economic
As political, economic and iterative cycle and
and other conditions process the housing
evolve, the strategy of review and market. Through
currently being adaptation minimising
pursued may cease at Board meetings associated
to be the most appropriate and financial risk
approach. in response to the and judging
If the Group's strategy evolution of the deployment of
is not effectively conditions capital
communicated to in which the Group at the right time
our workforce and operates. in the
/ or engagement The Board engages cycle, the Group
and incentive measures with has safeguarded
are inappropriate, all stakeholders its strong
operational activities to balance sheet
may not successfully ensure the and maintained
deliver the Group's strategy its positioning
strategic objectives. is understood and for continued
effectively future success.
communicated. For
example,
an Employee
Engagement
Panel, Diversity
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 2022
----------------------------------------------------------- ------------------- ------------------
The housebuilding The Group's The Board and our
Residual industry is sensitive long-term operational
risk rating: to changes in the strategy is management teams
High economic environment, focused have
including unemployment on the cyclical continued to
Change from levels, interest nature monitor the
year end: rates and consumer of the housing economic
No change confidence. market environment
and minimising closely
Deterioration in financial throughout the
economic conditions, risk, maintaining year, with
including increasing operational particular focus
interest rates, and financial on the
lower consumer confidence flexibility impact of
as well as those and judging the inflationary
brought about by timing pressures within
factors such as of capital our supply
the continued effects deployment chain.
of the Covid-19 through the cycle.
pandemic and the Despite these
war in Ukraine, The Board monitors challenges,
could affect demand lead indicators on market conditions
and pricing for the future remain
new homes. This direction positive, with
has the potential of the UK housing strong
to affect our revenues, market demand for
margins, profits to enable informed housing and
and cash flows and management of resilience in
potential impairment exposure selling
of asset values. to potential prices. The
market longer-term
Economic conditions disruption. fundamentals of
in the land market Pricing the housing
may adversely affect structures are market remain
the availability regularly strong.
of a sustainable reviewed to
supply of land at reflect
appropriate levels local market
of return. 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 the most
effective
deployment
of capital
possible.
----------------------------------------------------------- ------------------- ------------------
4. Government policy
Risk assessment Risk description Approach to risk Developments in
mitigation 2022
----------------------------------------------------------- ------------------- ------------------
Changes to government Government policy Recent government
Residual policy have the in actions,
risk rating: potential to impact relation to the such as the
High on several aspects housing introduction
of our strategy market is of the
Change from and operational monitored Residential
year end: performance. For closely. Property
No change example, the forthcoming Consistency Developer Tax,
withdrawal of the of policy the proposed
Help to Buy scheme formulation changes to the
in 2023, amendments and application planning
to planning regulations remains process and the
and the recent government supportive of the forthcoming
requirement to pay housebuilding withdrawal of the
a contribution to industry as a Help
a fund to cover whole, to Buy Scheme in
the cost of fire encouraging 2023,
safety remediation continued have a strong
works, could have substantial influence
an adverse effect investment on our business
on revenues, margins, in land, work in and the
tax charges and progress broader sector.
asset values. and skills to However,
support the government
The Department for output growth. Our continues
Levelling Up, Housing mission to build to recognise the
and Communities homes need
(DLUHC) has demanded with quality our for increased
that residential customers construction
property developers can rely on at a of new homes,
take a lead in the price providing
funding and rectification they can afford a broadly
of unsafe cladding and supportive
and fire safety our strategic environment
issues on buildings objectives for the industry.
over 11 metres in are aligned with
height constructed government On 5 April 2022,
in the last 30 years. objectives to Persimmon
The government asked increase signed the DLUHC
developers to sign housing stock. pledge,
a pledge committing which was
to pay for all the Land investment consistent with
necessary remediation decisions the
on buildings they and levels of work industry-leading
constructed. The in progress are commitment
government has also tightly we made over a
required developers controlled in year ago,
to make additional order that leaseholders
contributions to to mitigate in any
an industry-wide exposure multi-storey
scheme that protects to external building
all leaseholders influences. Persimmon
from paying towards constructed
any works. Persimmon has led would not have to
the pay
To reinforce this industry in its to remove any
demand, the government commitment cladding
has introduced through to rectifying or correct fire
the Building Safety legacy related
Act, a 'Building safety works. The safety issues.
Industry Scheme'. Group Persimmon
Membership of this has a GBP75m continues to work
scheme will be determined legacy closely
by the government, buildings with the Home
based on the developer's provision Builders
commitments and to fund necessary Federation to
actions to rectify work convert
cladding and fire on these the initial
safety related issues buildings. pledge into
on buildings it In addition, a legal agreement
has developed. The Persimmon with
government has indicated will not claim the government.
they would use the from
powers conferred the Government's
through the amendments Building
to block planning Safety Fund. We
and building control hope
permissions for these actions will
developers that lead to us
are not members becoming
of the scheme. a member of the
government's
DLUHC have also new 'Building
introduced the Levelling Industry
Up and Regeneration Scheme' and
Bill. This bill continue
emphasises the importance to engage in
of a Local Plan positive
and the need for discussions with
local 'support' officials.
for the development
it identifies. The We have stepped-up
bill will be complemented our approach to
by an update to working
the National Planning with local
Policy Framework. authorities,
with our new
Placemaking
Framework and new
stakeholder
engagement team
proactively
engaging with
local
authorities across
the country to
identify
how we are helping
them deliver their
key objectives and
enhance support
for
our schemes.
----------------------------------------------------------- ------------------- ------------------
5. Health, safety and environment
Risk assessment Risk description Approach to risk Developments in
mitigation 2022
----------------------------------------------------------- ------------------- ------------------
In addition to the The Board retains The effective
Residual human impacts of a management
risk rating: any accident, there very strong of health, safety
High is the potential commitment and
for reputational to health and environmental
Change from damage, construction safety risks has
year end: delays and financial and managing the remained a
No change penalties from any risks critical area
health, safety or in this area of focus for the
environmental incident. effectively. Board
This is and our
implemented management teams
by comprehensive throughout the
management year to
systems and date.
controls,
managed by our To ensure
highly continuous
experienced Group improvement
Health, in this key area,
Safety and a comprehensive
Environment review of the
Department, which Group's
includes Health & Safety
detailed training policies
and and procedures is
inspection being
programmes undertaken. In
to minimise the addition,
likelihood the Group is
and impact of deploying
accidents a new and
on our sites. wide-ranging
While Environmental
all reasonable Management
steps System to further
are taken to strengthen
reduce the Group's
the likelihood of controls.
an
incident, the
potential
human,
reputational
and financial
impacts
of any such
incident
are considered
high.
----------------------------------------------------------- ------------------- ------------------
6. Skilled workforce, retention and succession
Risk assessment Risk description Approach to risk Developments in
mitigation 2022
----------------------------------------------------------- ------------------- ------------------
Shortages of skilled Access to an High demand for
Residual labour, driven in appropriately labour
risk rating: part through the skilled workforce has continued to
High continued effects and be observed
of the UK's exit experienced throughout the
Change from from the EU and management year, and
year end: from increased UK team is essential has contributed
No change housebuilding activities, in to increased
create risks of maintaining cost pressures.
increased costs operational
and delays and disruption performance and The Group has
to build programmes. ensuring continued
the successful to invest in its
High staff turnover delivery people
or loss of staff of the Group's and processes to
in key roles could strategy. mitigate
result in disruption this risk. In
to operations. The Group operates particular,
a range of several
apprenticeships 'Persimmon
and in-house Pathway'
training schemes have been
and excellence developed
programmes, to provide
under the structured
supervision training
of the Group programmes across
Training core operational
department, in disciplines.
order
to support an As an accredited
adequate Living
supply of skilled Wage employer,
labour. the Group
In addition, the also voluntarily
Group commits
is committed to to going further
supporting than
industry the government
initiatives mandated
to address the minimum wage
skills levels for
gap. The Group's its workforce,
Space4 including
manufacturing both directly
facility, employed
which produces and
timber sub-contracted
frames, highly labour.
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.
Additional
measures
have been deployed
to increase
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 2022
----------------------------------------------------------- ------------------- ------------------
Materials availability Materials Certain aspects
Residual Ensuring access availability of material
risk rating: to the right quantity Our build supply chains
High and specification programmes continue
of materials is and supply chain to suffer from
Change from critical in delivering are disruption.
year end: high quality homes. closely monitored The sources of
No change to the disruption
Heightened levels allow us to manage include the
of demand for materials and react to any sustained
may cause availability supply growth in UK
constraints and chain issues and housebuilding
exacerbate inflationary to activities,
pressures. Furthermore, help ensure continued
build quality may consistent impacts of the
be compromised if high quality Covid-19
unsuitable materials standards. pandemic, issues
are procured leading We build strong associated
to damage to the relationships with the UK's
Group's reputation with key suppliers exit from
and customer experience. over the long term the EU, and the
to ensure war in
Land Purchasing consistency Ukraine. These
Land may be purchased of supply and cost factors
at too high a price, efficiency. Our have contributed
in the wrong location Group to increased
and at the wrong Procurement team lead times and
time in the housing works inflationary
market cycle. with our operating pressures for
businesses to some materials.
ensure To date, these
the Group's have been
suppliers largely offset by
provide materials house
to price inflation.
the expected The vertical
specification integration
and quantities. afforded by
our own
The Group's Brickworks and
Brickworks Tileworks
and Tileworks manufacturing
manufacturing facilities
facilities has helped
provide a mitigate some
significant material
proportion of the shortages in
bricks key areas.
and roof tiles
used In respect of
across our sites, land, we
providing have maintained
security of our
supply. well-established
This complements disciplined
our approach to
existing off-site replacement.
manufacturing Within the
facility at year to date, the
Space4, Group
which produces has continued to
timber invest
frames, highly in high quality
insulated land
wall panels and opportunities
roof at
cassettes. industry-leading
embedded
Land Purchasing margins.
The Group
maintains
strong land
holdings.
All land purchases
undergo
comprehensive
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 2022
----------------------------------------------------------- ------------------- ------------------
The effects of climate The Group takes a In 2021, the
Residual change and the UK's range Group set
risk rating: transition to a of measures to science-based
Medium lower carbon economy monitor carbon reduction
could lead to increasing and improve its targets, in line
Change from levels of regulation operational with
year end: and legislation, efficiency and the Paris
No change as seen with the direct Agreement, which
Future Homes Standard. environmental were fully
These may in turn impact, accredited
result in planning including by the Science
delays, increased measuring Based Targets
costs and competition CO(2) emissions Initiative. We
for some materials. and have set
the amount of ambitious 'net
Changes in weather waste zero' targets,
patterns and the we generate for aiming to deliver
frequency of extreme each 'net
weather events, home we sell. zero' homes in
particularly storms use to
and flooding, may The Group our customers by
increase the likelihood maintains 2030
of disruption to a detailed climate and become 'net
the construction change risk zero'
process. The availability register, in our operations
of mortgages and which ensures that by 2040.
property insurance the management and
may reduce in response mitigation of the The Group
to financial institutions risk continues to
considering the is embedded within make good
possible impacts the Group's risk progress on
relating to climate management its carbon
change. process. reduction roadmap
with a number of
We systematically projects
consider to research the
the potential most effective
impacts method of
of climate change delivering a
throughout 'net zero' home
the land in use
acquisition, and engaging a
planning and build third party
processes and work expert to measure
closely with the
planning embodied carbon
authorities and of our
other homes. Our homes
statutory bodies are already
to significantly
manage and more energy
mitigate efficient than
these risks. existing
housing stock and
The government's our
'Future pathway to 'net
Homes Standard' zero'
will homes in use by
be introduced by 2030 has
2025. clear interim
To plan for and milestones.
manage
the transition to Operationally,
low the Group
carbon homes, a has introduced
low electric
carbon homes vehicle options
working into its
group (consisting fleet, is now
of purchasing
members from 100% renewable
across energy
the Group's for its offices
various and manufacturing
disciplines) has facilities and
been continues
established. The to investigate
Group methods
engages of reducing the
proactively Group's
with the red diesel
housebuilding consumption
industry and the and increasing
government the use
to develop of alternative
industry fuels.
wide solutions to
meet The Group
the requirements undertook climate
of scenario analysis
the Future Homes in 2021
Standard. and has developed
a prioritised
We continually action plan to
seek continue
to strengthen our to assess and
supply mitigate
chain, for potential risks
example, and maximise
our off-site opportunities.
manufacturing
facilities provide
us with greater
assurance
of quality and
supply,
and use modern
methods
of construction
and
technology to
assist
the mitigation of
climate
change related
risks.
The Group
Procurement
team maintain
strong
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 2022
----------------------------------------------------------- ------------------- ------------------
Damage to the Group's Management The Persimmon Way
Residual reputation could Supervision continues
risk rating: adversely affect The Group is to drive benefits
Medium its ability to deliver committed throughout
its strategic objectives. to ensuring an the business, and
Change from If governance, build appropriate supports
year end: quality, customer culture and our desire to
No change experiences, operational maintaining 'build right,
performance, management the high quality first time, every
of health and safety of time'.
or local planning its operations.
concerns fall short This Persimmon
of our usual high is subject to formally
standards, this oversight commenced
may result in damage from the Board. the registration
to customer, commercial process
and investor relationships Maintaining trust for the New Homes
and have a detrimental in Quality
impact on financial our quality of Code (NHQC) on 14
performance. build January
is central to our 2022, one of the
reputation. first
In addition to our housebuilders to
commitments to do so.
address We have welcomed
legacy issues, the introduction
significant of the NHQC,
investments have which aims
been to drive up
made in the quality and
Persimmon customer service
Way, the Group's across
construction the industry
excellence together
programme. with the
This includes appointment of
comprehensive a New Homes
training Ombudsman
programmes, Service.
ongoing assurance
through The Group
the Group's team continues to
of invest in its
Independent people and
Quality processes,
Controllers driving
(IQCs). operational
improvements.
Stakeholder These
Relationships enhancements
We take actions to reduce the
maintain positive probability
relationships of operational
with all of our issues
stakeholders and the
to minimise the consequent
risks reputational
of reputational damage they can
damage cause.
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 2022
----------------------------------------------------------- ------------------- ------------------
The housebuilding Comprehensive Key regulatory
Residual industry is subject management areas of
risk rating: to extensive and systems are in focus within the
Medium complex laws and place year
regulations, particularly to ensure have included
Change from in areas such as regulatory planning
year end: land acquisition, and legal conditions, with
No change planning, building compliance, the Group,
regulations and including a suite in common with
the environment. of the wider
Ensuring compliance policies and industry,
in these areas can procedures continuing to
result in delays covering key areas experience delays
in securing the of legislation and to outlet
land required for regulation. openings due to
development and Additional the delays
in construction. oversight is in within the
Any failure to comply place planning system.
with regulations through the These delays have
could result in Group-level been
damage to the Group's functions and compounded by a
reputation and potential cross-functional Covid-related
imposition of financial steering groups backlog and
penalties. for increasing
key areas, such as complexity of
GDPR compliance. regulation,
Where including
these systems considerations
identify such as Natural
inconsistencies in England's
adherence to nutrient
agreed neutrality
processes, guidance.
corrective These matters
actions are continue
swiftly to be actively
taken. managed
by our
We engage operational
extensively teams.
with planning
authorities Persimmon
and other formally
stakeholders commenced
to reduce the the registration
likelihood process
and impact of any for the NHQC on
delays 14 January
or disruption. In 2022. The aims of
respect the
of land, the Group Code and its
controls supporting
sufficient process are
holdings to consistent
provide with the Group's
security of supply own focus
for medium term on further
trading improving build
requirements. Our quality and
land customer service
needs and standards.
potential
acquisitions are
subject
to extensive due
diligence
to 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 2022
----------------------------------------------------------- ------------------- ------------------
The Group relies The Group IT As the Group's
Residual on its IT systems department use of
risk rating: being consistently includes dedicated technology to
High available and secure. cyber security support
Failure of any of resource operational
Change from the Group's core in order to manage processes
year end: IT systems, particularly and oversee continues to
Increase those in relation security develop,
to customer information controls. This cyber and data
and customer service includes risks have
could result in use of third party become an area of
significant financial expertise to increased
costs, reputational ensure focus for the
damage and business implementation of Group. This
disruption. good-practice is reflected in
controls. the elevation
The risk has increased of this risk from
in prominence recently, Periodic 'medium'
due to heightened penetration to 'high'.
geopolitical uncertainty testing is carried
and instability, out through The Group has
and the use of cyber-attacks external continued
by state actors. security partners to strengthen its
to mitigation
test the security measures in
of respect of
our perimeter cyber risk, under
network. the
supervision of
In the event of an the Information
incident, the Security Steering
Group Group
has a defined (ISSG) and
Cyber through the
Incident Response work of the Group
Plan. IT department.
Training and To develop
regular controls further,
communications are an externally led
delivered to all review
users of the Group's
to increase cyber security
awareness measures has been
of cyber risks, carried
with out. This review
particular focus has benchmarked
on the Group's
risks associated controls and
with will assist in
remote and hybrid the development
working. of improvement
actions
to further
strengthen
our cyber risk
mitigations.
----------------------------------------------------------- ------------------- ------------------
12. Mortgage availability
Risk assessment Risk description Approach to risk Developments in
mitigation 2022
----------------------------------------------------------- ------------------- ------------------
Reduced availability We monitor Bank of The fundamentals
Residual or affordability England commentary of the
risk rating: of mortgages for on credit UK housing market
High customers could conditions remain
reduce demand for including the strong, with
Change from new homes and affect monthly robust consumer
year end: sales prices, revenues, approvals for demand and
No change profits, cash flows, house confidence
and asset values. purchases, reports in evidence
from UK Finance through our
and strong forward
lenders' sales position.
announcements We also continue
for trends in to see
lending. good levels of
Our investment in mortgage
land availability from
and work in lenders.
progress While mortgage
is monitored rates remain
continuously at historically
to ensure it is competitive
appropriate levels,
for our level of supporting
sales affordability
and our for new homes,
expectations lending
of the current trends continue
market to be
conditions. The an area of close
government's management
Help to Buy scrutiny
scheme, following recent
which is scheduled increases in the
to remain in place Bank
until 2023, of England base
supports rate.
customers to gain
access
to the housing
market
across the UK with
competitive
mortgage
rates.
----------------------------------------------------------- ------------------- ------------------
Statement of Directors' responsibilities in respect of the Half
Year Report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance
with UK adopted International Accounting Standard ("IAS") 34 Interim
Financial Reporting
-- the Half Year Report includes a fair review of the information required
by:
o DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred
during the first six months of the financial year and their
impact on the condensed set of financial statements and a description
of the principal risks and uncertainties for the remaining
six months of the year; and
o DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the
first six months of the current financial year and that have
materially affected the financial position or performance of
the entity during that period; and any changes in the related
party transactions described in the last annual report that
could do so
The Directors of Persimmon Plc and their function are listed
below:
Roger Devlin Chairman
Dean Finch Group Chief Executive
Jason Windsor Chief Financial Officer
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 Jason Windsor
Group Chief Executive Chief Financial Officer
16 August 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
INDEPENDENT REVIEW REPORT TO PERSIMMON PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the Condensed
Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Balance Sheet, the Condensed Consolidated Statement of
Changes in Shareholders' Equity, the Condensed Consolidated Cash
Flow Statement and the related notes 1 to 13. We have read the
other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Victoria Venning
Ernst & Young LLP
Leeds
16 August 2022
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END
IR PFMMTMTTBTPT
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August 17, 2022 02:00 ET (06:00 GMT)
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