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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 17.00 | 1.29% | 1,334.50 | 1,335.00 | 1,336.50 | 1,336.00 | 1,299.00 | 1,325.50 | 1,261,877 | 16:35:23 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Gen Contr-single-family Home | 2.77B | 255.4M | 0.7996 | 16.70 | 4.27B |
From Apr 2019 to Apr 2024
TIDMPSN
RNS Number : 6120J
Persimmon PLC
20 August 2019
The following amendment has been made to the 'Half Year Results For The Six Months Ended 30 June 2019' announcement released today at 07:00 a.m. under RNS Number: 5520J.
In the current trading section, the average selling price of new homes sold forward into the private owner occupier market has been amended to GBP240,000.
All other details remain unchanged.
The full amended text is shown below.
PERSIMMON PLC
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2019
Persimmon Plc today announces its half year results for the six months ended 30 June 2019.
Highlights
"Improving the quality and service delivered to our customers remains our top priority and I am encouraged with the progress made in the first half, which clearly shows that Persimmon is changing. Our customer satisfaction ratings for the current HBF survey year are showing improvement and I am particularly pleased that, in July, Persimmon became the first housebuilder to introduce a retention scheme for customers placing us at the forefront of strengthened consumer rights for homebuyers."
"The improvements to our customer service approach had two main impacts in the period. First, customer service spend increased by c. 40% year on year and these additional initiatives are anticipated to increase our annual customer care costs by an estimated GBP15m. Second, and as noted earlier in the year, our decision to invest an additional c. GBP140m in work in progress as we held back some sites for later sales release to give customers more accurate moving-in dates reduced the Group's overall sales volumes. Allowing for these impacts, Persimmon's trading in the first half of 2019 was strong."
"I am proud of the commitment and dedication our teams have shown in supporting the many initiatives we have introduced to deliver a step change in our customers' experience."
"I am confident that the progress we are making with our initiatives, our strong forward build, healthy forward sales and robust balance sheet place Persimmon in a strong position for the second half."
Dave Jenkinson, Group Chief Executive
Strategic focus
Hot Features
Premium
-- Improving customer service levels
- Customer satisfaction ratings in the HBF survey year commencing
1 October 2018 have continued to improve
- Significant investment in improving customer care, with an
additional c. GBP140m invested in work in progress and an
estimated GBP15m increase in annual customer care spend
- Decision to delay sales release to later stage of construction
in higher demand locations beginning to deliver anticipated
benefits
- Customer care portal to be launched in the second half of
this year
-- Improving build quality and safety
- New industry leading retention scheme introduced in July,
with cover extended to include any faults identified during
the first week of occupation
- Construction programmes advancing - 19% increase in new home
inventory volumes year on year at period end improving new
home availability and delivery
- New independent team of construction quality inspectors being
introduced to strengthen our current assurance processes
across each of our regional businesses
- Incorporating core building safety principles of the Hackitt
Review into operating procedures to help the Group more clearly
identify and manage key risks at each individual site
-- Housebuilder for all
- Increasing the supply of good quality homes for everyone
with more first time buyers helped onto the housing ladder
than any other UK housebuilder - 3,082 new home sales in
H1 were sold to first time buyers, representing 52% of all
private sales
- Group average selling price c.17% lower than the national
average for newly built homes sold to owner occupiers(1)
- Creating opportunities for all - directly employing more
tradespeople (c. 1,950) than any other housebuilder, with
630 trainees employed through the last academic year and
over 150 new trainees anticipated for our autumn intake
- GBP255m invested in local communities in the first half,
including the delivery of 1,621 new homes for lower income
families to our housing association partners
- Launched our Building Futures campaign, joining forces with
Team GB, the Great Britain and Northern Ireland Olympic Team
run by the British Olympic Association, to support children
across the UK
Financial highlights
-- Financial trading performance remains strong
- Profit before tax of GBP509.3m (2018: GBP516.3m)
- 7,584 new homes sold (2018: 8,072)
- Total new home average selling price of GBP216,942 (2018:
GBP215,813)
- Total Group revenue 4.5% lower at GBP1.754bn (2018: GBP1.836bn)
- Underlying new housing operating margin(2) up by 130 basis
points year on year to 31.0% (2018: 29.7%); a reduction from
31.8% in the second half of last year
- Net free cash generation(3) of GBP182.4m (2018: GBP240.4m)
- Basic earnings per share of 129.3p (2018: 134.9p)
- Return on average capital employed(4) of 40.5% (2018: 41.7%)
- Return on equity(5) of 31.0% (2018: 30.2%)
-- Excellent platform for future growth
- 3,582 plots of new land secured in the period, including
1,962 plots converted from the Group's strategic land bank;
75,444 plots owned at 30 June (December 2018: 75,793 plots)
- Increase in work in progress investment to GBP1,024.0m (2018:
GBP749.6m)
- GBP832.8m cash held (December 2018: GBP1,048.1m), prior to
GBP350.1m capital return paid 2 July 2019
- Strong current forward sales of GBP2.048bn (2018: GBP2.120bn)
-- Shareholder returns
-- Return of surplus capital of 125 pence per share (GBP397.7m)
paid 29 March 2019 in addition to the scheduled payment
of 110 pence per share (GBP350.1m) paid after the balance
sheet date on 2 July 2019
1 National average selling price for newly built homes sourced from the UK House Price Index as calculated by the Office for National Statistics from data
provided by HM Land registry. Group average private selling price is GBP242,912.
2 Stated before goodwill impairment (2019 : GBP4.1m, 2018 : GBP4.4m)
3 Net cash generation stated before Capital Return Plan payments
4 12 month rolling average stated before goodwill impairment and includes land creditors
5 12 month rolling profit after tax generated from the average of the opening and closing total equity for the 12 month period
For further information please contact:
Dave Jenkinson, Group Chief Executive Kevin Smith
Mike Killoran, Group Finance Director Jos Bieneman
Persimmon Plc Ellen Wilton
Citigate Dewe Rogerson
Tel: +44 (0) 20 7638 9571 (on 20 August Tel: +44 (0) 20 7638 9571
2019)
Tel: +44 (0) 1904 642199 (thereafter)
Analysts unable to attend in person may listen to the presentation live at 09:30am by using the details below:
Telephone number: +44 (0)207 192 8338
Conference ID: 3887994
Password: Persimmon
Webcast link: https://edge.media-server.com/mmc/p/wikytvez
(An archived webcast of today's analyst presentation will be available on www.persimmonhomes.com/corporate this afternoon.)
HALF YEAR REPORT - TUESDAY 20 AUGUST 2019
CHAIRMAN'S STATEMENT
The programme of change and investment implemented across all areas of the business over the last six months is a clear signal of cultural and operational change at Persimmon, putting customer care at the very centre of the business. The focus on improving the speed and quality of service customers receive on a consistent basis is starting to deliver anticipated benefits as reflected in the ongoing improvement in the HBF customer ratings. We are pleased to have introduced the Persimmon retention scheme in July this year, a first for the industry, which will complement the additional investments and measures we are taking to ensure the business is in a strong position for the future.
Persimmon's results for the first half of 2019 reflect the strength of the Group's positioning in a resilient UK housing market. Profit before tax was GBP509.3 million (2018: GBP516.3 million) with an underlying new housing operating margin(1) of 31.0% (2018: 29.7%). The Group has continued to invest in work in progress of GBP1,024.0 million (2018: GBP749.6 million) to support improvement in customer satisfaction levels and future new home delivery. Cash balances of GBP832.8 million were held at the end of June (December 2018: GBP1,048.1 million) and the owned and controlled land holdings totalled 95,086 plots (December 2018: 99,088 plots).
CUSTOMERS AND COMMUNITIES
Persimmon delivers good quality new homes in locations across the UK where people want to live and work. Reflecting local communities' housing needs, we provide a wide range and choice of new homes on all our developments, supporting more first time buyers onto the housing ladder than any other UK housebuilder, with 52% of our new homes being sold to first time buyers in the first half of the year. Our support for the Government's objective of increasing the supply of good quality homes for everyone is further demonstrated by the Group's average selling price which is c. 17% lower than the national average for newly built homes sold to owner occupiers(2) .
Delivering a good quality new home for our customers and providing high levels of customer service throughout the home buying process is the top priority for the business. The Group is investing in a number of initiatives in its drive to increase customer service levels, including providing customers with more accurate moving in dates. We have continued to adopt a more focused approach to the timing of releasing new homes for sale in higher demand areas, both on selected new sites and for some plots on existing sites. As anticipated this has reduced the number of sales reservations that earlier sales release would achieve and resulted in the Group having c. 8% lower average active sales outlets year on year, at c. 345 sites. Trading through the first half was healthy as measured against the prior year which saw particularly strong comparatives, with the Group achieving an average weekly private sales reservation rate per site of 0.74 (2018: 0.78).
To complement our approach with respect to later sales release we have continued to make progress with our build programmes in order to provide customers with improved availability of new homes at more advanced stages of construction, with an additional GBP142m invested in work in progress. This commitment to greater investment in work in progress resulted in the Group having the equivalent of c. 6,150 new homes of construction inventory at 30 June, an increase of 19% than at the same point last year. Indeed, to further support our drive for continued improvement in build quality, we are introducing an additional team of construction quality inspectors who will work independently of our site management teams to ensure the homes built for our customers are of the high quality standard we require. This team will strengthen our current assurance processes which incorporate our existing site inspection regime conducted by our construction teams, our sub-contract partners and independent building control third parties. This approach is designed to help enforce ongoing cultural change based on the principles and recommendations of the Hackitt Review within the Group. In addition, we have changed our internal management processes to start to embed the principle of "the golden thread of information" highlighted in the Hackitt Review, which will help our teams more clearly identify and manage the key risks we face on each of our development sites, particularly regarding building safety.
In July we introduced the industry leading Persimmon retention scheme for our customers. Listening to feedback from our stakeholders we have improved its design to cover any faults identified by our customers up to a week after moving into their new home. We look forward to working with all relevant stakeholders as our customers take advantage of this important initiative which strengthens their consumer rights in the industry.
In response to feedback from our customers, this time last year the Group introduced its FibreNest service which aims to deliver ultrafast, full fibre to the home broadband connectivity to all our customers. The Group continues to roll out this service to support all new customers and currently has c. 2,200 customers enjoying the benefits of this service. Our customers rate the service highly. We intend to continue to roll out this service on new sites as they come forward to the benefit of all our customers.
As one of the largest housebuilders in the UK, Persimmon places great importance on the wider contribution the Group makes to the communities it serves. Having launched our Building Futures campaign, which will donate over GBP1 million to support children across the UK this year, we are pleased to have commenced our partnership with Team GB, the Great Britain and Northern Ireland Olympic Team run by the British Olympic Association, to help organisations that support young people across the UK. Making donations to organisations that support children under the age of 18, we are focusing on organisations in three main areas - sport, physical and mental health, and arts and education. For example, we have recently helped 150 schools with their school sports days, with some participation from Team GB athletes, which has promoted inclusive participation in sport, health and wellbeing. Our Building Futures competition is now at an advanced stage with finalists having been selected by our panel, including two Team GB athletes, and final voting taking place via www.persimmonhomes.com/building-futures/finalists. The winners of the Building Futures programme will be announced at a celebration event later this year.
From the launch of our long-term strategy at the start of 2012 to 30 June 2019 the Group has delivered c. 104,800 new homes across the UK. Over the same period the Group has invested c. GBP2.5 billion in local communities including the delivery of over 17,900 new homes for lower income families to our housing association partners. The Group's investment of c. GBP4.0 billion in new land and the opening of c. 1,450 new outlets since the start of 2012 demonstrates our continuing commitment to delivering the new homes that local communities need across the UK.
RESULTS
The Group's total revenues for the first half of the year were GBP1,754.0 million (2018: GBP1,835.8 million), with new housing revenues of GBP1,645.3 million (2018: GBP1,742.0 million) being 5.6% lower than last year. The Group sold 7,584 new homes in the first half (2018: 8,072) at an average selling price of GBP216,942 (2018: GBP215,813).
The Group remains focused on building good quality homes at a range of prices offering customers great choice and has experienced good demand across the regions. Within this we have seen a continuation of a little less urgency from customers acquiring new homes at higher price points. Sales to private owner occupiers in the first six months totalled 5,963 new homes (2018: 6,577), a reduction of 614 homes, whilst sales to our housing association partners were 1,621 new homes (2018: 1,495), an increase of 126 homes. The average selling price of the Group's private market sales was GBP242,912 (2018: GBP238,773), an increase of 1.7%. Of the Group's total private sales of 5,963 homes, 56% were sold across our northern businesses (2018: 53%). The Group delivered over GBP196 million of new homes to housing associations in the first half (2018: GBP172 million) at an average selling price of GBP121,413 (2018: GBP114,807) providing continued strong support to the creation of mixed and sustainable communities across the UK, which represented 21% of the Group's total sales (2018: 19%). The volume of sales achieved by the Persimmon brand was 5,470 homes (2018: 5,808). Charles Church achieved 493 home sales (2018: 769).
The Group's total gross margin for the first half was 31.7% (2018: 30.8%), with our new housing gross margin at 33.8%(3) (2018: 32.4%). The level of new housing gross margin in the first half reflects the ongoing investment being made in the Group's customer care resources and processes which has contributed to the reduction in housing gross margin from 34.1% in the second half of last year. The Group's customer care spend in the first half of the year increased by c. 40% over last year, reflecting this investment. The Group's margins are supported by its high quality consented land holdings with land cost recoveries in the first half of 13.9% of housing revenues (2018: 15.0%). At 30 June the Group's cost to revenue ratio(4) for its owned land holdings of 75,444 plots was 13.1%. The Group's continued investment in its customer satisfaction improvement initiatives, including the construction quality inspection team, will place the business in a strong position moving forwards. The Group's total gross profit for the first half was GBP555.5 million (2018: GBP565.1 million).
Underlying operating profit(1) for the Group was 1.6% lower than last year at GBP510.1 million (2018: GBP518.2 million). The Group's underlying new housing operating margin(1) of 31.0% was 130 basis points ahead of last year (2018: 29.7%).
The Group generated 122.9 pence of total capital value (before capital returns)(5) in the first six months of the year (2018: 118.2 pence). Total capital returns of 235 pence per share recognised in the period resulted in a decrease in reported net assets per share at 30 June of 115.2 pence to 890.8 pence from 1,006.0 pence at 31 December 2018. Underlying return on average capital employed(6) as at 30 June was 40.5% (2018: 41.7%). Underlying basic earnings per share(1) for the first six months of 2019 of 130.6 pence reduced by 4.2% compared to the prior year (2018: 136.3 pence). Return on equity(7) was 31.0% for the twelve month period to June 2019 (June 2018: 30.2%).
The Group's balance sheet is strong. At 30 June the Group held cash reserves of GBP832.8 million (December 2018: GBP1,048.1 million) reflecting further investment in work in progress carried at GBP1,024.0 million (December 2018: GBP881.8 million) and a reduction in land creditors to GBP484.0 million (December 2018: GBP548.0 million). In March we concluded the renewal of the Group's GBP300 million Revolving Credit Facility with strong support from the Group's five relationship banks. This facility has a five year term to 31 March 2024 and forms an important element in the Group's working capital resources and flexibility.
EMPLOYEES
The Group employs c. 5,000 people across the business, paid in accordance with the Living Wage Foundation payment criteria and including c. 1,950 tradespeople, more than any other housebuilder. The Group continues to increase the engagement and training of apprentices and trainees to help address resource demands. Over the last academic year the Group's 630 trainees continued to learn the traditional skills required for our construction activities together with professional and managerial capabilities. We anticipate building on these 381 traditional apprentices and the 249 professional trainees with over 150 new trainees expected to start with our new autumn intake The Group will continue to seek to increase its engagement of new talent across the UK providing opportunities for all to fulfil their potential.
LAND
For the year to date activity in the land market has largely continued to be disciplined, although for smaller land parcels we have seen an increase in competition in some locations. The land market has continued to offer good quality opportunities, particularly for sites suitable for the delivery of larger numbers of new homes. We have remained cautious in our assessment of potential land opportunities and have continued to judge each opportunity in the context of each of our 31 businesses' requirements and our overall holdings whilst being mindful of current, and prospective changes to, market conditions, particularly when considering the process associated with the UK's exit from the EU. We support the Government's further development of national planning policy to increase land release and efficient land usage as a necessary requirement to assist the industry to increase the output of newly built homes.
The Group acquired 22 new land parcels bringing a total of 3,582 new plots of land into the business during the first half of the year, including 10 locations for 1,962 plots converted from our strategic land portfolio. The Group's land spend was GBP239 million in the first half (2018: GBP343 million).
The Group owned and controlled 95,086 plots in its consented land holdings at 30 June 2019 (December 2018: 99,088 plots) with c. 50% previously held by the Group as strategic land. Within these land holdings, the Group owned 46,775 plots on sites with detailed planning consent, which are all under development. In addition to its consented land the Group owns and controls c. 15,950 acres of strategic land including a number of allocated sites. We continue to work in collaboration with planning authorities and local communities to help bring these sites through the planning system as quickly as possible.
CURRENT TRADING
We are encouraged by the level of customer activity through the quieter summer weeks with enquiries and visitors to our sites in line with our expectations. Whilst uncertainties persist regarding the future trajectory of the UK economy consumer confidence remains resilient. Customers are continuing to make carefully considered reservation commitments and cancellations continue to run at historically lower levels.
The Group's current forward sales position, including legal completions since 1 July 2019, remains strong with total forward sales revenue of GBP2.048 billion (2018: GBP2.120 billion). We have 5,988 new homes sold forward into the private owner occupier market (2018: 6,528) with an average selling price of c. GBP240,000 (2018: c. GBP235,800). The Group's average weekly private sales rate per site for the year to date is 0.72 (2018: 0.76) which is in line with our expectations.
Pricing has remained firm. We continue to advance our build programmes with the aim of maintaining a strong position to offer a good range of house types for customers to choose from and which are available to move into on shorter lead times.
We have continued to experience some pressure with respect to the cost and availability of certain materials in the supply chain as the output from the industry continues to expand. We currently anticipate that cost inflation for the Group will be around 4% for the current year. The Group remains focused on self-help measures to mitigate these challenges. These include the use of the Group's standard house types, utilisation of in-house manufactured brick and our collaborative approach to working with our sub-contractors and suppliers. In addition, we anticipate our new roof tile manufacturing facility will be commissioned in the second half and will commence delivery to the Group's development sites in the last quarter of the year. The Group's investments in its in-house manufacturing capabilities also creates the benefit of supporting improvements in overall supply chain capacity to assist the further expansion in industry output. Our Space4 manufacturing facility, which produces timber frames, closed insulated wall panels and roof cassettes also helps in easing skills pressures in certain locations as the availability of traditional skilled trades remains tight.
OUTLOOK
Consumer confidence continues to benefit from high levels of employment, low interest rates, and a competitive mortgage market. As the summer holiday period draws to a close in early September we expect to experience the normal seasonal increase in customer activity.
The conclusion to the process of the UK's withdrawal from the EU is currently set for the end of October this year, in the middle of the important autumn trading season. This undoubtedly creates uncertainty for consumers and business alike. However, Persimmon is in a strong position to take advantage of market conditions as events unfold. Our developments offer good quality newly built homes at affordable prices which reflect local communities' housing needs. We are mindful of the slower second hand housing market and anticipate that there may be an increase in demand to support customers through the use of our part exchange facilities.
The basis on which the UK will leave the EU, together with the details of the future trading relationship, remains uncertain. The Group continues to work with its suppliers to assess the risks associated with these challenges, putting in place measures that help to reduce these risks where required. The Group's current increased work in progress investment provides some necessary risk mitigation in the short term. Disruption to availability in the medium term remains a key risk and the Group may incur additional procurement costs including costs associated with potential weakness in sterling. Where necessary our suppliers are typically carrying increased stock holdings and/or are changing their ports of entry into the UK to mitigate risk of delays. Persimmon is supporting its suppliers with earlier and increased commitments where required. The Group's investment in its off-site manufacturing capabilities, Space4, Brickworks, and by the end of the year, Tileworks, will help mitigate potential supply disruption and cost impacts.
We plan to start construction on c. 85 new outlets through the second half of the year to refresh and support our site network. As noted in our trading update on 4 July, we continue to expect that our second half new home legal completion volumes will reflect our focus on making progress with our customer service initiatives, in part through later sales releases. Having entered the second half of the year with a stronger new home inventory position, and aided by our additional initiatives, we are prioritising further improvement in the quality and service that we provide to our customers. These initiatives and investments are currently anticipated to increase the Group's customer care costs on an annualised basis by c. GBP15m. We will continue to invest in our development work in progress to help ensure we deliver the high quality new homes that our customers expect. Whilst this substantial commitment will reduce the returns we generate from the capital employed in the business, we believe this is the correct approach to support our customers and provide greater quality and choice moving forwards. However, we expect the Group's cash generation will remain strong, reflecting the continued disciplined approach to land replacement.
The performance of the UK economy and the housing market will be determined, in part, by the continued development of Government policy through this important period for the country. Further expansion in the output of newly built homes will help meet unfulfilled housing needs in local communities. This further growth will also support the additional benefits of providing increased employment across the regions of the UK both directly on housing developments and in the supply chain. We hope to build on the c. 50,000(8) local construction and supply chain jobs that are supported by our national development activities. Further benefits associated with development activity, of higher contributions to communities through improved local amenities and infrastructure, taxes paid, and from additional investment will also be realised.
We will continue to concentrate on listening to all Group stakeholders to deliver the best possible outcomes whilst we remain vigilant regarding the risks and challenges the Group faces. The Independent Review of our customer care and quality processes is underway and we look forward to receiving its findings in the final quarter of the year.
On behalf of the Board, I would like to thank all of the Group's employees, workers, sub-contractors, and other stakeholders for their contribution to the continued strong operating performance of Persimmon, together with their renewed focus on improving customer satisfaction and build quality. With our strong financial position, high quality land holdings and healthy forward sales we remain confident of the Group's future prospects.
Roger Devlin
Chairman
19 August 2019
1 Stated before goodwill impairment (2019: GBP4.1m, 2018: GBP4.4m)
2 National average selling price for newly built homes sourced from the UK House Price Index as calculated by the Office for National Statistics from data provided by
HM Land registry. Group average private selling price is GBP242,912.
3 Stated on new housing revenues of GBP1,645.3m (2018: GBP1,742.0m) and gross profits of GBP555.5m (2018: GBP565.1m)
4 Land cost value for the plot divided by the anticipated future revenue of the new home sold
5 Movement in total equity before dividends on equity shares divided by the average number of shares in issue during the period
6 12 month rolling average stated before goodwill impairment and includes land creditors
7 12 month rolling profit after tax generated from the average of the opening and closing total equity for the 12 month period
8 Estimated using an economic toolkit
PERSIMMON PLC
Condensed Consolidated Statement of Comprehensive Income
For the six months to 30 June 2019
Six months Six months Year to 31
to 30 June to 30 June December 2018
2019 2018
Note Total Total Total
GBPm GBPm GBPm
----------------------------------------- ---------- ---------- ------------ ---------------
Total revenue 3 1,754.0 1,835.8 3,737.6
Cost of sales (1,198.5) (1,270.7) (2,557.7)
----------------------------------------- ---------- ---------- ------------ ---------------
Gross profit 555.5 565.1 1,179.9
Other operating income 5.1 2.7 5.6
Operating expenses (54.6) (54.0) (102.8)
Profit from operations before
impairment of intangible assets 510.1 518.2 1,091.9
Impairment of intangible assets (4.1) (4.4) (9.2)
----------------------------------------- ---------- ---------- ------------ ---------------
Profit from operations 506.0 513.8 1,082.7
Finance income 8.5 9.2 20.4
Finance costs (5.2) (6.7) (12.3)
----------------------------------------- ---------- ---------- ------------ ---------------
Profit before tax 509.3 516.3 1,090.8
Tax 4 (98.1) (97.4) (204.4)
----------------------------------------- ---------- ---------- ------------ ---------------
Profit after tax (all attributable
to equity holders of the parent) 411.2 418.9 886.4
----------------------------------------- ---------- ---------- ------------ ---------------
Other comprehensive (expense)/income
Items that will not be reclassified
to profit:
Remeasurement (losses)/gains
on defined benefit pension schemes 11 (3.6) 28.1 19.7
Tax 4 0.6 (4.8) (3.3)
----------------------------------------- ---------- ---------- ------------ ---------------
Other comprehensive (expense)/income
for the period, net of tax (3.0) 23.3 16.4
----------------------------------------- ---------- ---------- ------------ ---------------
Total recognised income for the
period 408.2 442.2 902.8
----------------------------------------- ---------- ---------- ------------ ---------------
Earnings per share
Basic 5 129.3p 134.9p 283.3p
Diluted 5 129.0p 130.1p 280.8p
----------------------------------------- ---------- ---------- ------------ ---------------
PERSIMMON PLC
Condensed Consolidated Balance Sheet
As at 30 June 2019 (unaudited)
30 June 30 June 31 December
2019 2018 2018
Note GBPm GBPm GBPm
--------------------------------- ----- ---------- ---------- ------------
Assets
Non-current assets
Intangible assets 189.3 198.2 193.4
Property, plant and equipment 74.3 54.4 58.0
Investments accounted for using
the equity method 2.1 3.0 3.0
Shared equity loan receivables 8 62.9 83.0 70.6
Trade and other receivables 7.1 7.0 7.0
Deferred tax assets 7.5 59.6 13.4
Retirement benefit assets 11 87.8 96.7 90.6
--------------------------------- ----- ---------- ---------- ------------
431.0 501.9 436.0
--------------------------------- ----- ---------- ---------- ------------
Current assets
Inventories 7 3,145.2 2,970.6 3,059.5
Shared equity loan receivables 8 10.8 21.0 16.3
Trade and other receivables 150.4 140.0 91.8
Cash and cash equivalents 10 832.8 1,154.6 1,048.1
--------------------------------- ----- ---------- ---------- ------------
4,139.2 4,286.2 4,215.7
--------------------------------- ----- ---------- ---------- ------------
Total assets 4,570.2 4,788.1 4,651.7
--------------------------------- ----- ---------- ---------- ------------
Liabilities
Non-current liabilities
Trade and other payables (220.4) (310.2) (270.4)
Deferred tax liabilities (27.2) (28.9) (27.7)
Partnership liability (30.7) (34.1) (35.2)
--------------------------------- ----- ---------- ---------- ------------
(278.3) (373.2) (333.3)
--------------------------------- ----- ---------- ---------- ------------
Current liabilities
Trade and other payables (1,012.8) (1,164.4) (1,058.5)
Capital Return liability (350.1) (343.8) -
Partnership liability (5.5) (5.4) (5.4)
Current tax liabilities (86.0) (65.0) (60.0)
--------------------------------- ----- ---------- ---------- ------------
(1,454.4) (1,578.6) (1,123.9)
--------------------------------- ----- ---------- ---------- ------------
Total liabilities (1,732.7) (1,951.8) (1,457.2)
--------------------------------- ----- ---------- ---------- ------------
Net assets 2,837.5 2,836.3 3,194.5
--------------------------------- ----- ---------- ---------- ------------
Equity
Ordinary share capital issued 31.8 31.3 31.7
Share premium 16.4 14.4 15.5
Capital redemption reserve 236.5 236.5 236.5
Other non-distributable reserve 276.8 276.8 276.8
Retained earnings 2,276.0 2,277.3 2,634.0
--------------------------------- ----- ---------- ---------- ------------
Total equity 2,837.5 2,836.3 3,194.5
--------------------------------- ----- ---------- ---------- ------------
PERSIMMON PLC
Condensed Consolidated Statement of Changes in Shareholders' Equity
For the six months to 30 June 2019 (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 2019:
Balance at 1 January
2019 31.7 15.5 236.5 276.8 2,634.0 3,194.5
Profit for the period - - - - 411.2 411.2
Other comprehensive
(expense) - - - - (3.0) (3.0)
Transactions with owners:
Dividends on equity
shares - - - - (747.8) (747.8)
Issue of new shares 0.1 0.9 - - - 1.0
Exercise of share options/share
awards - - - - (0.5) (0.5)
Share-based payments - - - - 3.9 3.9 Net settlement of share-based payments - - - - (22.3) (22.3) Satisfaction of share options from own shares held - - - - 0.5 0.5 --------------------------------- --------- --------- ------------ ------------------------ ---------- -------- Balance at 30 June 2019 31.8 16.4 236.5 276.8 2,276.0 2,837.5 --------------------------------- --------- --------- ------------ ------------------------ ---------- -------- Six months ended 30 June 2018: Balance at 1 January 2018 30.9 13.5 236.5 276.8 2,643.9 3,201.6 Profit for the period - - - - 418.9 418.9 Other comprehensive income - - - - 23.3 23.3 Transactions with owners: Dividends on equity shares - - - - (732.3) (732.3) Issue of new shares 0.4 0.9 - - - 1.3 Own shares purchased - - - - (0.1) (0.1) Exercise of share options/share awards - - - - (1.0) (1.0) Share-based payments - - - - 8.5 8.5 Net settlement of share-based payments - - - - (84.9) (84.9) Satisfaction of share options from own shares held - - - - 1.0 1.0 --------------------------------- --------- --------- ------------ ------------------------ ---------- -------- Balance at 30 June 2018 31.3 14.4 236.5 276.8 2,277.3 2,836.3 --------------------------------- --------- --------- ------------ ------------------------ ---------- -------- Year ended 31 December 2018: Balance at 1 January 2018 30.9 13.5 236.5 276.8 2,643.9 3,201.6 Profit for the year - - - - 886.4 886.4 Other comprehensive income - - - - 16.4 16.4 Transactions with owners: Dividends on equity shares - - - - (732.3) (732.3) Issue of new shares 0.8 2.0 - - - 2.8 Own shares purchased - - - - (1.3) (1.3) Exercise of share options/share awards - - - - (1.0) (1.0) Share-based payments - - - - 1.1 1.1 Net settlement of share-based payments - - - - (180.2) (180.2) Satisfaction of share options from own shares held - - - - 1.0 1.0 --------------------------------- --------- --------- ------------ ------------------------ ---------- -------- Balance at 31 December 2018 31.7 15.5 236.5 276.8 2,634.0 3,194.5 --------------------------------- --------- --------- ------------ ------------------------ ---------- --------
PERSIMMON PLC
Condensed Consolidated Cash Flow Statement
For the six months to 30 June 2019 (unaudited)
Six months Six months Year to 31
to 30 June to 30 June December 2018
2019 2018
Note GBPm GBPm GBPm
----------------------------------------- ----- ------------ ------------ ---------------
Cash flows from operating activities:
Profit for the period 411.2 418.9 886.4
Tax charge 4 98.1 97.4 204.4
Finance income (8.5) (9.2) (20.4)
Finance costs 5.2 6.7 12.3
Depreciation charge 6.5 4.5 10.0
Impairment of intangible assets 4.1 4.4 9.2
Share-based payment charge 1.5 8.7 7.9
Net imputed interest income 1.7 0.5 1.9
Other non-cash items (3.6) (2.6) (0.2)
----------------------------------------- ----- ------------ ------------ ---------------
Cash inflow from operating activities 516.2 529.3 1,111.5
Movement in working capital:
Increase in inventories (80.9) (140.8) (225.5)
Increase in trade and other receivables (63.9) (61.1) (26.7)
(Decrease)/increase in trade and
other payables (85.0) 50.1 (82.7)
Decrease in shared equity loan
receivables 17.6 18.9 41.6
----------------------------------------- ----- ------------ ------------ ---------------
Cash generated from operations 304.0 396.4 818.2
Interest paid (2.3) (3.2) (3.9)
Interest received 3.2 2.9 5.8
Tax paid (63.6) (93.6) (165.8)
----------------------------------------- ----- ------------ ------------ ---------------
Net cash inflow from operating
activities 241.3 302.5 654.3
----------------------------------------- ----- ------------ ------------ ---------------
Cash flows from investing activities:
Joint venture net funding movement 0.9 - -
Purchase of property, plant and
equipment (13.1) (6.4) (15.5)
Proceeds from sale of property,
plant and equipment 0.3 0.2 0.5
----------------------------------------- ----- ------------ ------------ ---------------
Net cash outflow from investing
activities (11.9) (6.2) (15.0)
----------------------------------------- ----- ------------ ------------ ---------------
Cash flows from financing activities:
Lease capital payments (2.0) - -
Payment of Partnership liability (3.4) (3.2) (3.2)
Net settlement of share-based
payments (42.6) (53.8) (159.9)
Own shares purchased - - (1.3)
Share options consideration 1.0 1.1 2.8
Dividends paid 6 (397.7) (388.5) (732.3)
----------------------------------------- ----- ------------ ------------ ---------------
Net cash outflow from financing
activities (444.7) (444.4) (893.9)
----------------------------------------- ----- ------------ ------------ ---------------
Decrease in net cash and cash
equivalents 10 (215.3) (148.1) (254.6)
----------------------------------------- ----- ------------ ------------ ---------------
Cash and cash equivalents at the
beginning of the period 1,048.1 1,302.7 1,302.7
----------------------------------------- ----- ------------ ------------ ---------------
Cash and cash equivalents at the
end of the period 10 832.8 1,154.6 1,048.1
----------------------------------------- ----- ------------ ------------ ---------------
Notes
1. Basis of preparation
The half year condensed financial statements for the six months to 30 June 2019 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and with International Accounting Standard 34 Interim Financial Reporting, as adopted by the European Union. 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 2018, which have been prepared in accordance with IFRSs as adopted by the European Union.
The comparative figures for the financial year ended 31 December 2018 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 2018, as described in those financial statements.
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2019:
-- IFRS 16 Leases -- Annual Improvements to IFRS Standards 2015-2017 Cycle -- Amendments to IAS 19 Plan Amendment, Curtailment or Settlement -- Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures -- IFRIC 23 Uncertainty over Income Tax Treatments -- Amendments to IFRS 9 Prepayment Features with Negative Compensation
With the exception of IFRS 16 Leases, the effects of the implementation of these standards have been limited to disclosure amendments.
The Group have adopted the modified (asset = liability) retrospective approach on implementation of IFRS 16 Leases and have not amended the prior year comparatives. The Group operate a number of leases that are affected by this new standard, principally in relation to office properties and vehicles. At 30 June 2019 a "right of use" asset of GBP10.1m is reported within Property, plant and equipment. The associated lease liability, reported within Trade and other payables, is GBP9.0m at 30 June 2019.
There are no new standards or amendment to standards, which are EU endorsed but not yet effective.
Going concern
After making due enquiries, and in accordance with the FRC's "Guidance on Risk Management, Internal Control and Related Financial and Business Reporting" issues in 2014, 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 yearly condensed financial statements requires management to make judgements and estimations of uncertainty at the balance sheet date. In preparing these half yearly condensed financial statements the significant judgements and estimations of uncertainty made by management were principally the same as those applied and included in Note 3 to the Group's consolidated financial statements for the year ended 31 December 2018.
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 2019 2018 2018
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Revenue from the sale of new
housing 1,645.3 1,742.0 3,545.8
Revenue from the sale of part
exchange
properties 108.7 93.8 191.8
--------------------------------------------- -------------------- ----------------------- ------------------------
Total revenue in the statement of
comprehensive
income 1,754.0 1,835.8 3,737.6
--------------------------------------------- -------------------- ----------------------- ------------------------
4. Tax
Analysis of the tax charge for the period
Six months Six months Year to
to 30 to 30 June 31 December
June 2019 2018 2018
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Tax charge comprises:
UK corporation tax in respect of
the
current period 97.4 97.4 202.1
Adjustments in respect of prior
years - (1.6) (5.0)
--------------------------------------------- -------------------- ----------------------- ------------------------
97.4 95.8 197.1
--------------------------------------------- -------------------- ----------------------- ------------------------
Deferred tax relating to
origination
and reversal of temporary
differences 0.7 1.6 6.9
Adjustments recognised in the
current
year in respect of prior years'
deferred
tax - - 0.4
--------------------------------------------- -------------------- ----------------------- ------------------------
0.7 1.6 7.3
--------------------------------------------- -------------------- ----------------------- ------------------------
98.1 97.4 204.4
--------------------------------------------- -------------------- ----------------------- ------------------------
Deferred tax recognised in other comprehensive income
Six months Six months Year
to 30 to 30 June to
June 2019 2018 31
December
2018
GBPm GBPm GBPm
------------------------------------------------ -------------------- ----------------------- ---------------------
Recognised on remeasurement charges
on
pension schemes (0.6) 4.8 3.3
------------------------------------------------ -------------------- ----------------------- ---------------------
Tax recognised directly in equity
Six months Six months Year to
to 30 to 30 June 31 December
June 2019 2018 2018
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Arising on transactions with
equity participants
Current tax related to equity
settled
transactions (7.8) (30.8) (65.0)
Deferred tax related to equity
settled
transactions 5.3 31.0 71.7
--------------------------------------------- -------------------- ----------------------- ------------------------
(2.5) 0.2 6.7
--------------------------------------------- -------------------- ----------------------- ------------------------
At 30 June 2019, with the exception of equity settled transactions, the Group has recognised deferred tax assets on deductible temporary differences at 17%, the rate enacted at the end of the reporting period.
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 trusts and any treasury shares, all of which are treated as cancelled) which were 317.9m (June 2018: 310.6m; December 2018: 312.9m).
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 318.9m (June 2018: 322.0m; December 2018: 315.7m).
Underlying earnings per share excludes 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 2019 2018 2018
Basic earnings per share 129.3p 134.9p 283.3p
Underlying basic earnings per
share 130.6p 136.3p 286.3p
Diluted earnings per share 129.0p 130.1p 280.8p
Underlying diluted earnings per
share 130.2p 131.5p 283.7p
--------------------------------------------- -------------------- ----------------------- ------------------------
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 2019 2018 2018
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Underlying earnings attributable
to shareholders 415.3 423.3 895.6
Goodwill impairment (4.1) (4.4) (9.2)
--------------------------------------------- -------------------- ----------------------- ------------------------
Earnings attributable to
shareholders 411.2 418.9 886.4
--------------------------------------------- -------------------- ----------------------- ------------------------
At 30 June 2019 the issued share capital of the Company was 318,529,875 ordinary shares (31 December 2018: 317,560,061 ordinary shares).
6. Dividends/Return of capital
Six months Six months Year to
to 30 to 30 June 31 December
June 2019 2018 2018
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Amounts recognised as
distributions to
capital holders in the period:
2017 dividend to all shareholders
of
125p per share paid 2018 - 388.5 388.5
2017 dividend to all shareholders
of
110p per share paid 2018 - - 343.8
2018 dividend to all shareholders 397.7 - -
of
125p per share paid 2019
--------------------------------------------- -------------------- ----------------------- ------------------------
Total capital return to
shareholders 397.7 388.5 732.3
--------------------------------------------- -------------------- ----------------------- ------------------------
On 29 March 2019 a capital return payment of 125p per share (or GBP397.7m) was paid as an interim cash dividend.
As at 30 June 2019 the Group balance sheet included a capital return liability of GBP350.1m in relation to the future capital return payment of 110p per share. This was paid as a final dividend in respect of the financial year 31 December 2018 after the balance sheet date on 2 July 2019.
7. Inventories
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
------------------------------------- ------------------- ------------------- -------------------
Land 2,013.0 2,132.3 2,077.2
Work in progress 1,024.0 749.6 881.8
Part exchange properties 61.8 45.8 56.2
Showhouses 46.4 42.9 44.3
------------------------------------- ------------------- ------------------- -------------------
3,145.2 2,970.6 3,059.5
------------------------------------- ------------------- ------------------- -------------------
At 30 June 2019 the Group conducted a further review of the net realisable value of its land and work in progress portfolio. Our approach to this review has been consistent with that conducted at 31 December 2018 and was fully disclosed in the financial statements for the year ended on that date. Net realisable value provisions held against inventories at 30 June 2019 were GBP36.2m (2018: GBP40.1m). Following the review, GBP14.3m of inventories are valued at fair value less costs to sell rather than historical cost (2018: GBP22.9m).
8. Shared equity loan receivables
Six months Six months Year to
to 30 to 30 June 31 December
June 2019 2018 2018
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Shared equity loan receivables at
beginning
of period 86.9 117.3 117.3
Settlements (17.6) (18.9) (41.6)
Gains 4.4 5.6 11.2
--------------------------------------------- -------------------- ----------------------- ------------------------
Shared equity loan receivables at
end
of period 73.7 104.0 86.9
--------------------------------------------- -------------------- ----------------------- ------------------------
All gains/losses have been recognised through finance income in profit and loss for the period of which GBP1.3m was unrealised (June 2018: GBP1.8m; December 2018: GBP3.0m).
9. 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
2019 2018 2018
Level 3 Level 3 Level 3
GBPm GBPm GBPm
------------------------------------------- ------------------- ------------------- -------------------
Shared equity loan receivables 73.7 104.0 86.9
------------------------------------------- ------------------- ------------------- -------------------
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 (2018: ten years) and a discount rate of 9% (2018: 9%) 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.
10. 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 2019 2018 2018
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Decrease in net cash and cash
equivalents
in cash flow (215.3) (148.1) (254.6)
Net cash at beginning of period 1,048.1 1,302.7 1,302.7
--------------------------------------------- -------------------- ----------------------- ------------------------
832.8 1,154.6 1,048.1
Lease liability (9.1) - -
--------------------------------------------- -------------------- ----------------------- ------------------------
Net cash at end of period 823.7 1,154.6 1,048.1
--------------------------------------------- -------------------- ----------------------- ------------------------
Net cash is defined as cash and cash equivalents less lease liabilities. The decrease in net cash and cash equivalents above is stated after the payment of capital returns of GBP397.7m (June 2018: GBP388.5m). The Group has generated free cash before these capital returns of GBP182.4m (June 2018: GBP240.4m). This reflects an additional net investment in working capital year on year of over GBP75m (H1 2018: over GBP50m), primarily in work in progress.
11. Retirement benefit assets
The amounts recognised in the consolidated statement of comprehensive income are as follows:
Six months Six months Year to
to 30 June to 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
-------------------------------------------- --------------------- ----------------------- ------------------------
Current service cost 0.9 1.0 2.0
Past service cost - - 5.5
Administrative expense 0.5 0.5 0.9
-------------------------------------------- --------------------- ----------------------- ------------------------
Pension cost recognised as
operating
expense 1.4 1.5 8.4
-------------------------------------------- --------------------- ----------------------- ------------------------
Interest cost 7.4 7.1 14.2
Return on assets recorded as
interest (8.7) (7.9) (15.9)
-------------------------------------------- --------------------- ----------------------- ------------------------
Pension cost recognised as a net
finance
credit (1.3) (0.8) (1.7)
-------------------------------------------- --------------------- ----------------------- ------------------------
Total defined benefit pension
cost recognised
in profit or loss 0.1 0.7 6.7
Remeasurement losses/(gains)
recognised
in other comprehensive
(expense)/income 3.6 (28.1) (19.7)
-------------------------------------------- --------------------- ----------------------- ------------------------
Total defined benefit scheme
loss/(gains)
recognised 3.7 (27.4) (13.0)
-------------------------------------------- --------------------- ----------------------- ------------------------
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
2019 2018 2018
GBPm GBPm GBPm
------------------------------------------------ ------------------- ------------------- -------------------
Fair value of pension scheme
assets 661.8 646.3 616.8
Present value of funded obligations (574.0) (549.6) (526.2)
------------------------------------------------ ------------------- ------------------- -------------------
Net pension asset 87.8 96.7 90.6
------------------------------------------------ ------------------- ------------------- -------------------
12. Principal risks
The Board have assessed the Principal Risks as disclosed in the 2018 Annual Report & Accounts and have determined that there has been no change in risks faced or risk rating at 30 June 2019. The principal risks which may affect the business and the future performance of the Group are set out below:
Risk Impact Mitigation Residual Risk Rating
UK's exit from the EU The UK's exit from the We continue to monitor the High
European Union may lead to political situation, the UK
increased economic economy and the housing
uncertainty adversely market through
impacting: consumer the review of external
confidence, demand and information and changes in
pricing for new homes, the behaviour of our customer
revenues, profits and cash base. We closely
flows and may result in the manage and control our work
impairment of asset values. in progress and land
Potential legislative changes investment and our stringent
on customs arrangements and investment appraisals
increases in trade tariffs will continue, ensuring
could exposure to market disruption
create bottlenecks at ports is reduced.
and impact on the We maintain close contact
availability and cost of with our key suppliers and
imported materials will continue to employ
and components within our robust tendering
supply chain. processes to ensure risks
Possible restrictions on around material availability
freedom of movement may and cost are mitigated as far
impact on the availability of as possible.
skilled construction The vertical integration
workers. afforded by use of our own
Brickworks, Space4 and going
forwards
Tileworks production
mitigates this risk further.
We will remain focused on our
training initiatives to
improve the supply of the
necessary
management and construction
skills the Group requires.
(Also see mitigation and
review of Government policy
and Labour and Resources)
------------------------------ ------------------------------ ---------------------
National and regional economic The housebuilding industry is We continually monitor lead High
conditions sensitive to changes in the indicators on the future
economic environment, direction of the UK housing
including market so
unemployment, interest rates as to manage our exposure to
and consumer confidence. Any any future market disruption.
deterioration in economic Our diversity of geographical
conditions market
may have an adverse impact on presence and our continual
demand and pricing for new monitoring of our
homes, which could have a geographical spread helps us
material mitigate the effects
effect on our revenues, of local economic
margins, profits and cash fluctuations.
flows and result in the We control the level of build
impairment of asset on site by closely monitoring
values. our work in progress levels.
Economic conditions in the We
land market may adversely carry out extensive due
affect the availability of a diligence prior to our land
sustainable investment decisions having
supply of land at appropriate regard to
levels of return. local market conditions and
the Group's existing
strategic and on market land
holdings. Significant
land additions are reviewed
by the Board.
------------------------------ ------------------------------ ---------------------
Government policy Changes to Government policy We monitor Government policy High
have the potential to impact in relation to the housing
on several aspects of our market very closely.
strategy Consistency of
and operational performance. policy formulation and
For example, changes to the application is very
planning system, changes in supportive of the
the tax housebuilding industry,
regime, or further amendment encouraging
of the Help to Buy scheme continued substantial
could have an adverse effect investment in land, work in
on revenues, progress and skills to
margins and asset values. support output growth.
Changes to the planning We actively manage our land
system may also adversely investment decisions and
impact the Group's levels of work in progress to
ability to source suitable mitigate
land to deliver appropriate exposure to external
levels of returns. influences.
Both major political parties
in the UK continue to support
the Help to Buy scheme, which
has
been extended to remain in
place until 2023.
------------------------------ ------------------------------ ---------------------
Mortgage availability Any restrictions in the We monitor Bank of England High
availability or affordability commentary on credit
of mortgages for customers conditions including the
could reduce monthly approvals
demand for new homes and for house purchases and UK
affect revenues, profits and Finance's monthly reports and
cash flows. lenders' announcements for
trends
in lending. We monitor
customer access to mortgages
through our sales processes.
We ensure
that our investment in land
and work in progress is
appropriate for our level of
sales and
our expectations for market
conditions. The Government's
Help to Buy scheme, which is
anticipated
to remain in place until
2023, supports customers to
gain access to the housing
market across
the UK with competitive
mortgage rates.
------------------------------ ------------------------------ ---------------------
Health and safety The health and safety of our The Board has a strong High
employees, subcontractors, commitment to health and
customers and visitors to our safety and managing the risks
construction in this area
sites is of paramount effectively. This is
importance to us. Accidents implemented by comprehensive
on our sites could lead to management systems and
reputational controls, managed
damage and financial by our Group Health and
penalties. Safety Department, which
includes detailed training
and inspection
programmes to minimise the
likelihood and impact of
accidents on our sites. While
all reasonable
steps are taken to reduce the
likelihood of an incident,
the potential impacts of any
such
incident are considered to be
high.
------------------------------ ------------------------------ ---------------------
Labour and Resources: Skilled Access to an appropriately We closely monitor our build High
workforce, retention and skilled workforce is a key programmes to enable us to
succession requirement for the Group. manage our labour
Increasing requirements effectively.
UK house building activity in We operate in-house
recent years has increased apprentice and training
demand for skilled labour, programmes to provide
which adequate supply of skilled
has increased pressure on labour.
costs. We are committed to playing a
A skilled management team is full and active role in
essential in maintaining external initiatives to
operational performance and address the
the implementation skills shortage such as the
of the Group's strategy. Home Building Skills
Partnership, a joint
initiative of the
Construction
Industry Training Board and
the Home Builders Federation.
Where appropriate, we also
use the Group's Space4 modern
method of construction which
helps
diversify resource
requirements on site.
The Group focuses on
retaining its key staff
through a range of measures,
including career
management and performance
incentives. At the most
senior level, the Nominations
Committee
oversees these processes and
promotes effective succession
planning.
------------------------------ ------------------------------ ---------------------
Labour and Resources: Materials Materials Medium
Materials and Land Recent growth in UK Our build programmes and our
availability housebuilding has led to an supply chain are closely
increased demand for monitored to allow us to
materials which is placing manage and
greater pressure on the react to any supply chain
supply chain. This may issues. We build strong
continue to cause relationships with key
availability constraints suppliers over the
and increase cost pressures. long term to ensure
Land purchasing consistency of supply and
Land may be purchased at too cost efficiency.
high a price, in the wrong We have invested in expanding
place and at the wrong time our offsite manufacturing hub
in the at Harworth, near Doncaster,
housing cycle. to
strengthen security of
supply. Our brick plant is
providing a significant
proportion of the
bricks we use and our roof
tile manufacturing facility
will commence operations in
2019. This
complements our existing
off-site manufacturing
capability at Space4, which
produces timber
frames, highly insulated wall
panels and roof cassettes as
a modern method of
constructing
new homes.
Land Purchasing
All land purchases undergo
stringent viability
assessments performed by our
dedicated land
and planning teams and must
meet specific levels of
projected returns.
The Board review and
determine the appropriate
timing of land purchases
having regard to current
market conditions and sales
rates.
------------------------------ ------------------------------ ---------------------
Strategy The Group's strategy has been The Group's strategy is Low
developed by the Board as the agreed by the Board at an
most appropriate approach to annual strategy meeting and
successfully thereafter regularly
deliver the optimal reviewed at Board meetings.
sustainable value for The Board engages with
shareholders and other management and employees to
stakeholders. ensure the
As political, economic and strategy is communicated and
other conditions evolve, it understood and that all
is possible that the strategy employees have a clear
currently understanding
being pursued may cease to be of the potential benefits and
the most appropriate risks of the strategy.
approach.
------------------------------ ------------------------------ ---------------------
Climate Change Should the effects of climate We monitor our operational
change and the UK's efficiency and direct Medium
transition to a lower carbon environmental impact in a
economy lead number of ways
to increasing national including measuring our own
regulation this could cause CO2 emissions and the amount
additional planning delays, of waste we generate for each
increase the home
cost and accessibility of we sell.
materials required within our We systematically consider
construction process and the potential impacts of
potentially climate change throughout the
limit their supply or require land acquisition,
additional features which planning and build processes
could significantly increase and work closely with
our costs. planning authorities and
Changes in weather patterns other statutory
and the frequency of extreme bodies to manage and mitigate
weather events, particularly risks. For example, we
storms conduct full environmental
and flooding, may increase assessments
the likelihood of disruption for each parcel of land we
to the construction process. acquire for development to
The availability ensure our activities fulfil
of mortgages and property all obligations,
insurance may reduce should respecting the natural
financial institutions take environment and the
account communities for which we are
of impacts relating to delivering newly built
climate change. Changes in homes. We are keen to adopt
weather patterns may increase Sustainable Urban Drainage
build costs Systems and other technology
and/or development on all
timeframes. our new sites, subject to
local planning requirements,
to address the risk of
flooding.
We continually seek to
strengthen our supply chain.
Our off site 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.
------------------------------ ------------------------------ ---------------------
Reputation Access to housing is a The Group has a strong Medium
significant social issue and commitment to high quality of
housebuilding is a high operations. Oversight from
profile industry the Board
which attracts a great deal seeks to ensure key processes
of media and political are robust and any matters
attention. In cases where are addressed.
customer experiences, We engage actively with
operational performance, stakeholders to minimise the
management of health and risks of reputational damage
safety, remuneration matters and we aim
or local planning to comply with best practice
concerns fall short of our in corporate governance. We
usual high standards, this actively support local
may attract media attention. communities
This may in addressing housing needs,
impinge on the reputation of in creating attractive
the business which may have neighbourhoods and employing
an adverse impact on the local people,
Group's both on our sites and in the
operations. supply chain.
Significant contributions are
made to local infrastructure
and good causes within the
communities
in which the Group operates.
------------------------------ ------------------------------ ---------------------
Regulatory compliance The housebuilding industry is We operate comprehensive Low
subject to extensive and management systems to ensure
complex laws and regulations, regulatory and legal
particularly compliance, including
in areas such as land a suite of policies and
acquisition, planning and the procedures covering key areas
environment. Ensuring of legislation and
compliance in these regulation.
areas can result in delays in We engage extensively with
securing the land required planning authorities and
for development and in other stakeholders to reduce
construction. the likelihood
Any failure to comply with and impact of any delays or
regulations could result in disruption. We also hold a
damage to the Group's land bank sufficient to
reputation and provide security
potential imposition of of supply for medium term
financial penalties. land requirements.
------------------------------ ------------------------------ ---------------------
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 IAS 34 Interim Financial reporting as adopted by the EU
-- 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 Dave Jenkinson Group Chief Executive Mike Killoran Group Finance Director Nigel Mills Senior Independent Director Marion Sears Non-Executive Director Rachel Kentleton Non-Executive Director Simon Litherland Non-Executive Director Claire Thomas Non-Executive Director By order of the Board Dave Jenkinson Mike Killoran Group Chief Executive Group Finance Director 19 August 2019
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
Introduction
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 2019 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 12. 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.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. 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.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, 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.
As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. 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 Ireland) 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.
Conclusion
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 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
19 August 2019
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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August 20, 2019 03:41 ET (07:41 GMT)
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