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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Persimmon Plc | LSE:PSN | London | Ordinary Share | GB0006825383 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
35.50 | 2.77% | 1,318.00 | 1,318.50 | 1,319.50 | 1,321.00 | 1,296.00 | 1,296.00 | 1,388,111 | 16:35:11 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Gen Contr-single-family Home | 2.77B | 255.4M | 0.7996 | 16.49 | 4.21B |
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 ------------------ ------------------ New home average selling price GBP245,597 GBP236,199 ------------------ ------------------ Total Group revenues(1) GBP1.69bn GBP1.84bn ------------------ ------------------ New housing gross margin(2) 31.0% 30.9% ------------------ ------------------ Profit before tax GBP439.7m GBP480.1m ------------------ ------------------ Cash at 30 June GBP0.78bn GBP1.32bn ------------------ ------------------ Owned and under control land holdings 89,052 plots 85,771 plots at 30 June ------------------ ------------------ 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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