TIDMPSN
RNS Number : 9582I
Persimmon PLC
18 August 2021
PERSIMMON PLC
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2021
Strong trading performance; positive outlook reaffirmed ;
creating sustainable value
Persimmon Plc today announces its half year results for the six
months ended 30 June 2021.
Dean Finch, Group Chief Executive, said:
"Persimmon's first half performance has been robust. In
particular, I am pleased we have delivered strong growth in legal
completions whilst also achieving higher levels of build quality
and customer satisfaction.
"We made good progress in the land market in the period,
bringing over 10,000 plots of high quality land into the business,
achieving good visibility of new outlet openings and providing
momentum for our future growth. With c. 85 new outlets opening in
the second half of the current year, we are improving availability
and choice for our customers.
"We're managing the balance of inflationary pressures well and
currently anticipate that our industry leading returns will remain
resilient. Our forward sales position is c. 9% ahead of the same
point in 2019, with our cumulative private sales rate over 20%
above that of 2019 for the year to date.
"I would like to thank all my colleagues across the business who
have achieved these results.
"Persimmon's high quality land holdings, disciplined land
replacement strategy, healthy liquidity, experienced management
team and continued resolve to drive improvements in build quality
and customer service provide an excellent platform for its future
success.
"Our ambition is to be seen by our customers as delivering both
outstanding service and outstanding value. I am determined to build
on the progress we have made and enhance our capability to
consistently provide high quality homes which will help secure
sustainable benefits for all of our stakeholders.
"We anticipate successfully delivering c. 10% growth in sales
completions this year. The Group has a great platform and good
momentum to deliver further disciplined growth into the medium
term, creating value for all."
Highlights
H1 2021 H1 2020
New home completions 7,406 4,900
-------------------- ---------------
New home average selling price GBP236,199 GBP225,066
-------------------- ---------------
Total Group revenues(1) GBP1.84bn GBP1.19bn
-------------------- ---------------
New housing operating margin(2) 27.6% 26.6%
-------------------- ---------------
Profit before tax GBP480.1m GBP292.4m
-------------------- ---------------
Cash at 30 June GBP1.32bn GBP0.83bn
-------------------- ---------------
Current forward sales position GBP2.23bn GBP2.48bn
-------------------- ---------------
Current customer satisfaction score(3) 91.9% 89.6%
-------------------- ---------------
Dividend (per share) 125p (March 2021) 40p (September
2020)
110p (August 2021) 70p (December
2020)
-------------------- ---------------
Strong platform for high quality growth
-- Experienced management team delivering high quality homes across
the Group's 31 housebuilding businesses.
-- A diverse UK-wide network, operating on c. 300 active outlets on
average during 2021, with a strong pipeline expected to deliver approximately
85 new outlets by the end of this year, with a similar number of
new outlets targeted to open in the first half of 2022.
-- High quality land holdings, with 85,771 plots owned and under control
at 30 June 2021 (December 2020: 84,174), with industry leading embedded
returns.
-- The Group brought 10,272 plots into the business in the period whilst
maintaining the Group's high quality return requirements, across
48 locations at a replacement rate of c. 140%. Exciting pipeline
of deals progressing.
-- The Persimmon Way is fully operational across the business focused
on delivering consistent high standards of build quality.
-- Pre-Covid build rates have been maintained for the last twelve months.
Industry leading financial performance
-- Good first half performance against the backdrop of the continuing
pandemic and the pandemic's impact in the first half of the prior
year - profit before tax of GBP480.1m (2020: GBP292.4m).
-- Average private sales rate for the period was over 30% ahead of 2020,
the increase reflecting the unprecedented site shutdowns in 2020
due to the pandemic, but was also c. 20% ahead of 2019.
-- New housing operating margin of 27.6%(2) for the six months to 30
June 2021 (2020: 26.6%).
-- The business is managing the balance of inflationary pressures being
experienced by the industry well.
-- GBP479.8m of net cash generation before capital returns of GBP398.7m
and land spend of GBP200.4m.
-- Underlying return on average capital employed(4) of 37.9% (December
2020: 29.4%).
-- Over the last 3 years, the Group's average underlying return on capital
employed has been 36.5% reflecting the sustainable performance of
the business.
-- After tax return on equity of 22.6%(5) (2020: 21.5%).
Focusing on our customers - build right, first time, every time
-- The Group is delivering increased volumes of legal completions and
at higher levels of build quality and customer service; the Group's
HBF customer satisfaction rating(3) being ahead of the five star
threshold since January 2020.
-- Continuing to improve consistency in build quality and customer service
remains a key focus for the business.
-- As part of the ongoing implementation of The Persimmon Way, the Group
is continuing to invest in improving quality assurance, with a 70%
increase in the number of Independent Quality Controllers across
the business from 31 December 2020.
-- The Group continues to invest in its people with increased training
and skills development, with for example, c. 400 of our site management
team registered to complete National Vocational Qualifications relevant
to their role.
Supporting sustainable communities
-- Strong sense of purpose supports the Group's sustainable business
model in delivering long-term sustainable benefits in the best interests
of all stakeholders through the cycle.
-- The wellbeing of the Group's workforce, customers and local communities
remains a top priority.
-- Covid-19 secure operating procedures continue maintaining the stringent
two metre social distancing rules.
-- The Group's private average selling price of GBP258,220 is c.15%(6)
below the UK national average.
-- Approximately 50% of homes sold into the owner occupier market were
to first time buyers.
-- Invested over GBP0.5bn in local communities in the last eighteen
months, covering the period since the pandemic began, delivering
over 3,500 homes to our local housing association partners.
-- The Group supports c. 86,000(7) jobs across our communities and within
our wider supply chain.
-- The Group's challenging science based targets, which align to the
Paris Agreement, are now fully accredited by the Science Based Target
Initiative.
-- Proud sponsor of Team GB and, through the Persimmon Charitable Foundation,
the Group supports local charities and community groups across the
UK, having donated c. GBP2.4m to over 1,300 local good causes over
the last eighteen months.
Capital return programme
-- 235p per share paid in respect of the year ended 31 December 2020.
-- As announced in March 2021, the Board intends to revert to the pre-Covid
profile of capital return of two payments a year, with the payment
of the regular annual distribution of 125p per share being made in
early July 2022.
Outlook
-- Good forward sales of GBP2.23bn, including legal completions in the
second half so far, up c. 9% on the more normal trading year of 2019.
-- Cumulative average private weekly sales rate for the 33 weeks to
date is over 20% ahead of 2019.
-- As previously announced, we anticipate delivering c. 10% growth in
sales completions this year (FY 2020: 13,575 legal completions),
with further growth to come.
-- The Group is managing the inflationary effects in the market well
and we currently anticipate the Group's industry leading returns
will remain resilient supported by its high quality land holdings.
-- The Group maintains a strong balance sheet with healthy levels of
liquidity.
-- Persimmon's well-established strategy which recognises the cyclical
nature of the housing market by maintaining financial flexibility
and deploying capital at the appropriate time in the cycle, provides
a high quality foundation to secure superior long term sustainable
returns for all stakeholders.
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 revenue of GBP1,749.3m (2020: GBP1,102.8m)
and underlying profit from operations of GBP483.0m (2020: GBP293.2m)
calculated before goodwill impairment of GBP3.9m (2020: GBP1.6m).
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 legacy buildings provisions of
GBP75.0m (December 2020: GBP75.0m) and goodwill impairment of GBP6.6m
(December 2020: GBP4.3m).
5. 12 month rolling profit after tax generated from the average of the
opening and closing total equity for the period.
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. Estimated using an economic toolkit.
For further information please contact:
Dean Finch, Group Chief Executive Kevin Smith
Mike Killoran, Group Finance Director Jos Bieneman
Persimmon Plc Ellen Wilton
Tel: +44 (0) 1904 642199 Tel: +44 (0) 20 7638 9571
A presentation to analysts and investors will be available from
07.00 am on 18 August 2021. To view the presentation, please use
the webcast link below:
Webcast link: https://edge.media-server.com/mmc/p/7xn5x3jf
There will also be a Q&A session with management, hosted by
Group Chief Executive, Dean Finch and Group Finance Director, Mike
Killoran via conference call at 09.00 am. Analysts may join the
call by using the details below:
Dial in: +44 (0) 33 0551 0200
Passcode: Persimmon
An audiocast of the call will be available on
www.persimmonhomes.com/corporate from this afternoon.
PERSIMMON PLC
RESULTS FOR THE SIX MONTHSED 30 JUNE 2021
CHAIRMAN'S STATEMENT
Persimmon has delivered a robust financial performance in the
period, generating new housing revenue of GBP1.75bn in the last six
months (2020: GBP1.10bn) and a profit before tax of GBP480.1m
(2020: GBP292.4m). The business' diverse UK wide network of sites
together with its resilient balance sheet, high quality land
holdings and disciplined land replacement provide strong
foundations for high quality growth. With The Persimmon Way, the
Group's consolidated construction approach, now fully operational
in the business providing further opportunity, we are confident
that we can deliver high standards of build quality and customer
satisfaction, consistently across our new homes whilst increasing
our volumes.
Strategy
Persimmon builds communities and creates places where our
customers wish to live and work. The Group has been pursuing a
consistent strategy for a number of years, building a resilient
liquidity position and high quality land holdings. This strategy,
which recognises and creates resilience against the cyclical nature
of the housing market, maintains financial and operational
flexibility and deploys capital at the right time in the cycle.
This ensures that the business is able to generate sustainable
superior returns for the benefit of all of its stakeholders over
the long-term.
Persimmon recognises it plays an important role in society. By
following its strategy the Group has again demonstrated its
resilience through the recent challenges associated with the
ongoing pandemic and which has allowed the Group to be able to
continue to contribute more widely to the communities it serves. I
am pleased that we have taken important - and industry-leading -
steps to address legacy cladding and leasehold issues. By acting
and putting customers first we are continuing to work to help
remove uncertainty and concern, providing support to local
communities.
Capital Return Programme
The Group has now distributed 235p per share to shareholders in
respect of the year ended 31 December 2020, after re-iterating its
commitment to do so in March 2021. The Board accelerated the
payment of the regular annual distribution of 125p per share as an
interim dividend, to March 2021 (from early July 2021). In
addition, on 13 August 2021, the Group accelerated the return of
surplus capital in relation to the year ended 31 December 2020 by
way of a payment of 110p per share, rather than making two payments
of 55p per share, one to be paid in August 2021 and the second in
December 2021 as had previously been indicated. This has returned
the Group to distributing two capital return payments every 12
months, a year earlier than originally envisaged. There will be no
further dividend payments in relation to the year ended 31 December
2020.
As indicated at the release of Persimmon's final results on 3
March 2021, the Board intends to continue this pre-Covid profile of
capital return payments in 2022, being distributions in relation to
the financial year ending 31 December 2021. The payment of the
regular annual distribution of capital of 125p per share will be
paid in early July 2022 and any surplus capital in relation to the
financial year ended 31 December 2021 will be paid in late
March/early April 2022. The value of the surplus capital return, as
always, will be subject to continual assessment by the Board in
line with the Group's strategy.
Board Changes
The Board is pleased to welcome Shirine Khoury-Haq who joined as
an Independent Non-Executive Director from 1 July 2021. Shirine
joined the Board's Audit, Risk and Nomination Committees on the
same date.
Rachel Kentleton, Non-Executive Director, will step down from
the Board on 31 August 2021 to concentrate on her executive
responsibilities, having recently been appointed Chief Financial
Officer of St. Modwen Properties Ltd. On behalf of the Board, I
would like to thank Rachel for the significant contribution she has
made over the last six years and wish her well in her new role.
Shirine will succeed Rachel as Chair of the Audit Committee.
The Board would also like to take this opportunity to thank
Persimmon's employees, workforce and suppliers for their hard work
and commitment.
Persimmon is well positioned for the future with an experienced
management team, a strong platform for high quality growth, and a
resilient liquidity position and balance sheet. We are confident of
the Group's future success.
Roger Devlin
Chairman
17 August 2021
CHIEF EXECUTIVE'S REVIEW
Introduction
The business continues to perform well, with new home sale
completion levels approaching those seen in the first half of 2019,
whilst also delivering higher levels of customer satisfaction. In
the period, we delivered 7,406 legal completions (2020: 4,900),
generating gross profit of GBP540.5m (2020: GBP345.2m) and with the
Group's new housing operating margin up 100 basis points at
27.6%(1) (2020: 26.6%). I am particularly pleased that our current
Home Builders Federation eight week customer satisfaction score
continues to run ahead of the five-star threshold at 91.9%(2) and
that within our results we saw a growth in private sales when
compared to 2019.
We have also managed to deliver these results during a period of
notable challenges. I would like to pay tribute to my colleagues
across the business for the way they have managed the ongoing
challenge presented by the pandemic and maintained strong build
rates at improved levels of quality despite the restrictions.
Beyond this, we have managed the cost inflation and labour
shortages that are effecting the industry well, with our
Brickworks, Tileworks and Space4 timber frame manufacturing
facilities playing an important role in providing cost efficient
security of supply. Alongside the price increases on home sales
secured, the Group's high quality asset base, vertical integration
and strong cost management have helped maintain industry-leading
margins.
Five priorities
At the 2020 final results I commented that in my first six
months in post I had been impressed by Persimmon's strengths and
had identified areas for renewed focus. I set out five priorities
for the business to build on these strengths and enhance our
capabilities to become a builder consistently achieving a five-star
rating in the HBF eight week customer survey. These priorities
are:
-- Build quality: our ambition is to build right, first time, every
time;
-- Reinforce trust in the brand: consistently trusted to deliver a home
to be proud of and a builder customers would readily recommend to
others;
-- Growth: through our improvements in build quality and increased focus
on customer care we will be strengthening our capability to deliver
more five-star homes in meeting customer demand;
-- Maintaining an industry leading financial performance: sustaining
our strong margins and returns and driving healthy profit and cash
generation; and,
-- Supporting sustainable communities: we will play an active role in
the imperative of achieving a net zero carbon economy, as well as
setting new biodiversity and sustainable community targets.
In the five months since I set out these priorities we have made
important progress in continuing to support the communities we
serve, demonstrating our credentials as a responsible business,
recognising the wider role we play in society. I am pleased that
our carbon reduction targets have been recently fully accredited by
the Science Based Target Initiative. We have continued to take
action to meet these targets with a switch to fully renewable
electricity for our offices and manufacturing facilities, saving
over 1,600 tonnes of CO (2) a year.
In February we pledged to support leaseholders in multi-storey
developments we built that required cladding removal and in
obtaining the EWS1 form they need to sell their home. We created a
GBP75m fund and our team has been in contact with management
companies and building owners to ensure the required progress is
being made, work having been completed on 2 buildings already. In
addition, on 23 June we were pleased to lead the industry and agree
voluntary undertakings with the Competition and Markets Authority
in their leasehold enquiry, including extending our existing Right
to Buy scheme for customers to purchase their freehold interest. We
are pleased to have reached this agreement and provide certainty to
leasehold customers.
Strong platform for high quality growth
I am determined that Persimmon maintains its industry-leading
financial performance by incorporating the benefits of providing
both outstanding service and outstanding value; a responsible
company delivering both the new homes the country needs and opening
up the opportunity of home ownership to thousands of families a
year. I am more certain than ever that by making continued progress
on these priorities, Persimmon will be well placed to deliver that
ambition.
Four key features of the business provide a strong, resilient
platform for a sustainable future and enable the Group to continue
to develop and deliver the disciplined growth we seek. First, our
senior management across the business and their teams are deeply
experienced in the industry with the knowledge and skills to
continue to develop the business and secure its future growth.
Second, our disciplined approach to land replacement, investing in
the places where our customers wish to live and work. Third, our
focus on quality and service, placing the customer at the heart of
our business, and lastly, the Group's strong balance sheet, high
quality land holdings and healthy liquidity provide the platform
from which our future growth will be secured.
Experienced management teams
With highly experienced senior management we continue to invest
in our teams' skills and capabilities to secure improvements in
operational performance and deliver the future high quality growth
of the business.
Increased investment in training is an important part of our
approach. The Persimmon Pathway, providing training modules
tailored to individual colleagues' needs, continues to be rolled
out across the business. Through this initiative, all site
management colleagues are being offered the opportunity to secure
an NVQ at a level appropriate to their role. In addition, some
sales staff have already secured their external accreditation from
the Institute of Sales Professionals, another industry first. The
Persimmon Pathway will help nurture the Group's talent to deliver
the senior management of the future.
Alongside this investment in our colleagues' skills development,
we continue to introduce digital technology that supports them in
their roles as well as providing enhanced assurance processes
across the Group. For example, our leading site manager app
provides an efficient digitised and standardised process to check
the successful completion of all key stages of construction of each
newly built home in line with our construction requirements as
embodied within The Persimmon Way. Our customer portal has also
been successfully piloted and will provide a means for purchasers
to monitor their home's progress and to communicate easily and
directly with their local team on any questions they have during
both construction and after they move into their new home.
High quality land holdings
In line with the Group's strategy we continue to pursue
disciplined land replacement, acquiring land in the right
locations, to strengthen our platform for growth.
In the first six months of the year, 10,272 plots were brought
into the business, across 48 locations whilst maintaining the
Group's high quality return requirements. This land replacement
rate of almost 140% enhances our already strong land holdings and
provides a good pipeline of future opportunities.
Management has continued with the disciplined execution of the
Group's strategy which recognises the strength of the Group's
replacement land pipeline. The slower planning processes
encountered over the last eighteen months coupled with the strong
sales rates achieved has led to a reduction in the number of active
outlets over the period. However, the Group has continued to
progress its exciting opportunities in the land market and the
acceleration of our disciplined land replacement activity will see
around 85 new outlets being brought into construction by the end of
the year, with a similar number of new outlets targeted to open in
the first half of 2022.
This healthy profile of projected new outlet openings provides
good momentum for further growth in output into the medium term. As
we have experienced over the last eighteen months, continuing to
secure planning permission promptly will of course be an important
factor that influences the pace at which new outlets are brought
forward, but our clear determination is to secure disciplined high
quality land replacement opportunities to drive the Group's
growth.
Improving quality; delivering value
Continuing to drive improvements in build quality and customer
service is important for our future success. As a house builder,
building for many what is their most expensive and coveted
purchase, it is also the right thing to do. But I also firmly
believe that the improvements we are pursuing will secure cost
benefits and efficiency savings, delivering greater returns
reflecting the enhanced value our homes bring.
In increasing our capabilities to consistently deliver homes
that secure five-star customer satisfaction ratings and higher
standards of build quality, our ambition is to build right, first
time, every time and deliver both outstanding service and
outstanding value. We have already made important progress, with
the current eight-week customer satisfaction score remaining above
the five-star threshold at 91.9%(2) and seeing a continuing
reduction in the numbers of construction related items reported by
our warranty providers.
I am determined that we build on this progress, to extend and
embed it within the organisation and capture the cost efficiencies
it will generate. Through The Persimmon Way we will continue to
identify areas for further improvement and establish initiatives
and new ways of working to secure the enhanced outcomes we want to
see.
We have reviewed our technical drawings and standardised our
construction guidance, improving consistency, driving best practice
across the business which will simplify our processes and remove
inefficiencies. This sits alongside our enhanced build quality
standards with more exacting tolerances, above current industry
norms.
We are making good progress in establishing what we believe will
be the industry's largest team of independent inspectors with a 70%
increase in the team since December 2020, well on course to meet
our target of doubling this resource by the end of the year. They
are empowered to ensure construction quality at key stages of build
is achieving the Group's requirements through active intervention
and guidance, and providing feedback to the construction management
team enabling further focused skills training to be delivered where
required.
As part of our drive to deliver outstanding service and be a
home builder customers would readily recommend to others, we listen
to the feedback provided by our customers. We have reviewed our
house types and made elevation and specification changes that we
believe reflect their views and have broadened the Group's standard
house type range to better create the places where our customers
would wish to live. We have continued to improve elements of our
homes' construction to support our customers' levels of
satisfaction whilst living in their new home which we anticipate
will also reduce the need for our after-care services.
To reward the achievement of success we have established an
internal awards programme to reward excellence in build quality.
The Construction Excellence Awards, launched earlier this year,
reward site teams that demonstrate innovation and outstanding
management skill to achieve excellence on their development. An
inaugural national winner will be selected later this year from the
winners from each of our operating businesses. More broadly,
management incentive programmes have been revised so that
successful achievement of improvement in quality and customer care
are appropriately rewarded.
Through our continued focus in these areas, I am confident these
initiatives will help drive up build quality and customer service
standards and secure efficiencies from our build right, first time,
every time ambition. This will position the business well in
anticipation of the introduction of the New Homes Quality Code once
the current consultation process is complete.
Alongside the continued development of The Persimmon Way, we are
also working across the industry to help drive up standards in
crucial areas. We have, for example, signed the 'Building a Safer
Future Charter' as an inaugural member, demonstrating our
determination to drive safety improvements within our company and
across the industry. We have also partnered with RoofCERT to drive
the take up of this independent accreditation for roofers, holding
briefings to encourage our sub-contractors to take advantage of the
scheme and provide greater assurance within the industry.
Strong financial position
Persimmon has high quality land holdings and healthy liquidity
with a cash position of over GBP1.3bn at the end of June. This
provides confidence that allows resilient shareholder returns and a
platform for disciplined growth. Persimmon has a long track record
of delivering sustained and superior returns for the benefit of all
its stakeholders and as part of continuing to successfully execute
this strategy I am determined to maintain it. Whilst delivering
future growth in output we also anticipate our industry leading
returns will remain resilient, which will accommodate the
anticipated increase in our build cost inflation this year of c.
4.5% to 5.0%, as previously reported. Persimmon's approach to land
replacement continues to reinforce the high quality of returns
embedded within our land holdings, providing continued surety as to
the resilience of the Group's future delivery.
Outlook
The fundamentals of the housing market continue to remain
positive with improving consumer confidence, low interest rates,
and mortgage lenders that are keen to support customers to buy a
home of their own. We expect a more normal seasonal trading pattern
to reassert itself through this year compared with 2020, which was
disrupted significantly by the pandemic. As such, 2019 provides a
more appropriate comparison, reflecting a more typical trading
pattern. Our forward sales position, including legal completions to
date, is c. 9% ahead compared with 2019 and our cumulative average
weekly private sales rate per site for the first 33 weeks of the
year is over 20% stronger than 2019. Our forward sales include c.
6,500 homes to private owner occupiers at an average selling price
of approximately GBP253,000. Customer enquiry levels remain strong
and cancellation rates are in line with historical norms.
We continue to manage the inflationary pressures in the industry
well. As predicted, whilst we have experienced increased cost
inflation related to certain components of our supply chain, we
currently anticipate our industry leading returns to remain
resilient.
This is an exciting time for the Group. We have a strong
platform for future growth with high quality land holdings, a
diverse UK wide network and a business operating from approximately
300 outlets on average throughout the current year. We are
expecting an increase of c. 10% in new home legal completions this
year (FY 2020: 13,575 legal completions). With c. 85 new outlets
opening by the end of this year and a similar number of new outlets
targeted to open in the first half of 2022 , subject to the timely
granting of planning permission, we have a good pipeline of new
outlets coming through the business. This provides us with the
opportunity to further strengthen our platform, build on this
momentum, and secure additional disciplined growth in the coming
years to provide the new homes that the country needs .
The longer-term fundamentals of the UK housing market remain
strong. The Government has provided substantial intervention during
this period of global crisis to help ensure the UK economy
continues to progress. We remain mindful of the evolving situation,
including the pandemic and its potential impact on the UK economy,
consumer confidence, employment levels together with pressures on
the Group's supply chain. However, Persimmon's well established
strategy of maintaining financial flexibility and deploying capital
at the right time in the cycle safeguards a strong balance sheet,
supported by high quality land holdings and a healthy liquidity
position to the benefit of all stakeholders. Persimmon's
performance over the last eighteen months has demonstrated that
successful execution of its strategy provides the business with the
flexibility and resilience needed to manage not only the cyclical
nature of the housing market but events that create similar market
disruption. This, together with an agile and responsive management
team, ensures that the business remains well set to continue to
generate superior and sustainable returns for the benefit of all
its stakeholders.
Dean Finch
Group Chief Executive
17 August 2021
Footnotes
1. Stated on new housing revenue of GBP1,749.3m (2020:
GBP1,102.8m) and underlying profit from operations of GBP483.0m
(2020: GBP293.2m) calculated before goodwill impairment of GBP3.9m
(2020: GBP1.6m).
2. The Group participates in a National New Homes Survey, run by
the Home Builders Federation. The rating system is based on the
number of customers who would recommend their builder to a
friend.
FINANCIAL AND BUSINESS REVIEW
Strong trading
Trading has been strong throughout the period with healthy
levels of customer demand and improved selling prices across our
regions. Total revenues(1) for the period were GBP1.84bn (2020:
GBP1.19bn), with new housing revenue of GBP1.75bn (2020:
GBP1.10bn). The Group delivered 7,406 new homes (2020: 4,900) at an
average selling price of GBP236,199 (2020: GBP225,066), a 4.9%
increase over the first half of 2020.
6,104 new homes were delivered to private owner occupiers (2020:
4,029) at an average selling price of GBP258,220, an increase of
4.9% from the first half of 2020 (2020: GBP246,208), reflecting
both the mix of homes sold in the period and some improvement in
achieved selling prices. In addition, 1,302 homes were provided to
our housing association partners (2020: 871) at an average selling
price of GBP132,959 (2020: GBP127,266).
The Group's gross profit for the period was GBP540.5m (2020:
GBP345.2m) generating a new housing gross margin of 30.9% (2)
(2020: 31.3%). The Group's well established strategy for land
replacement supports the business' strong gross margin delivery,
with land cost recoveries of 14.1% (3) of new housing revenues for
the period (2020: 14.1%). The improved selling prices achieved have
combined with good management of the cost inflation we have
experienced during the period to continue to deliver industry
leading returns.
Underlying operating profit for the Group was GBP483.0m (4)
(2020: GBP293.2m) generating an underlying new housing operating
margin of 27.6% (5) (2020: 26.6%).
The Group generated a profit before tax of GBP480.1m in the
period (2020: GBP292.4m). This result reflects the Group's high
quality asset base and the business' expertise in providing its
local communities with the appropriate mix of house types in their
desired locations.
Robust balance sheet
The Group has a strong balance sheet with high quality land
holdings and healthy levels of liquidity. At 30 June 2021, as
expected, the Group had work in progress of c. 4,800 equivalent
units of new home construction (December 2020: c. 5,600),
reflecting the strength of the Group's legal completions in part
leading to the past period of lower active outlet availability, and
the disruption to construction activity during the first lockdown
in 2020 due to the pandemic. Our build rates continue at pre-Covid
levels and we are focused on improving our stock position to
increase availability and choice for our customers. With the
security of availability of our in-house manufactured build
components including closed panel timber frame kits,
pre-manufactured roof cassettes, brick and roof tiles, the Group
remains in a strong position to support its build programmes to
deliver our targeted growth in output whilst also achieving a
resilient closing stock position at the end of 2021.
The Group's defined benefit net pension asset has increased to
GBP116.7m at 30 June 2021 (December 2020: GBP50.6m) largely due to
the recovery in markets and good asset performance combined with
the actuarial benefit from the increase in discount rates through
the period. Total equity increased to GBP3,567.4m from GBP3,518.4m
at 31 December 2020. Reported net assets per share of 1,117.9p
represents a 1.4% increase from 1,102.7p at 31 December 2020.
Underlying return on average capital employed(6) as at 30 June was
37.9% (December 2020: 29.4%), demonstrating the resilience of the
business. Underlying basic earnings per share(4) for the first six
months of 2021 was 123.8p, a 64.8% increase compared to the prior
period (2020: 75.1p).
High quality land holdings
The Group increased its owned and under control land holdings
from 84,174 plots at 31 December 2020 to 85,771 at 30 June 2021 to
facilitate future growth in output. 42,039 of these plots have
detailed planning consents and are under development.
In addition to these land holdings, the Group has c. 14,600
acres of strategic land in its portfolio with the potential to
deliver over 100,000 new homes, including good visibility over c.
39,200 plots, c. 25,500 being plots held under option that are
proceeding through planning and an additional c. 13,700 plots which
are controlled and allocated in local plans.
Persimmon has continued to pursue its disciplined strategy of
identifying opportunities to acquire land in areas where people
wish to live and work, providing housing in areas with the most
need. Whilst maintaining its disciplined land replacement strategy,
the Group brought 10,272 plots into the business across 48
locations throughout the UK with 4,788 of these plots converted
from our strategic land portfolio. At 30 June 2021, Persimmon's
owned land holdings of 66,708 plots (2020: 70,208 plots) have an
overall proforma gross margin(7) of c. 33% and a cost to revenue
ratio of 11.4%(8) (2020: 12.5%).
In line with our expectations, we have incurred land spend of
GBP200.4m in the period, including GBP90.5m of payments in
satisfaction of deferred land commitments.
Healthy liquidity
The Group had a cash balance of GBP1.32bn at 30 June 2021
(December 2020: GBP1.23bn) with land creditors of GBP365.7m
(December 2020: GBP329.3m), of which GBP97.2m is to be paid by the
end of the year. The Group generated GBP479.8m of cash in the
period, before returning GBP398.7m surplus capital to shareholders.
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 five year turn out to 31 March 2026.
Promoting good health and wellbeing
We recognise our responsibility to our colleagues, customers,
and wider society and the health, safety and wellbeing of the
Group's workforce, customers and the public has been paramount
throughout this period. As such, the Group's Covid-secure operating
protocols have been maintained. There are no changes to procedures
on our sites or our manufacturing facilities and the stringent two
metre social distancing rule remains in place. In addition, our
sales offices are continuing to apply social distancing measures.
Flexible working is being retained for our office based staff,
enabling them to work from home where possible. Recognising the
importance of our employees' mental health and wellbeing, the
Group's senior management team completed mental health awareness
training and we have approximately 160 trained mental health first
aiders across the business.
Significant employment opportunities
Persimmon provides significant social value, creating important
job and career opportunities both within its direct workforce and
in the communities it serves, employing over 5,000 people across
the UK and supporting approximately 86,000(9) jobs across its
supply chain. The Group's results are a testament to their hard
work, diligence and commitment.
Persimmon has continued to invest in its workforce providing c.
6,200 training days during the first half of the year, c. 2,300 of
which were provided via in-house online courses. In the current
academic year, the Group recruited c. 680 trainees and apprentices,
providing them with key skills and on the job training covering a
wide range of disciplines. A new graduate scheme has been launched,
with the Group's first recruits starting in September 2021. In
addition, Persimmon recently began working with the 'Volunteer it
Yourself' organisation, rejuvenating local sports facilities and
mentoring and upskilling young adults from more deprived areas.
Persimmon will continue to offer opportunities for individuals from
all walks of life to successfully develop their career at
Persimmon, opportunities which are recognised by the Social
Mobility Pledge, to which the Group is a signatory.
Having already adopted the principles of the Living Wage for our
direct employees, the Group is now working towards full foundation
accreditation through seeking similar commitments from our supply
chain.
Building sustainable communities
The Group plays an important role creating places in support of
sustainable communities in locations where people wish to live and
work. Persimmon focuses on building "homes for all" with an average
selling price in the owner occupier market which is c. 15% (10)
below the UK national average. Approximately 50% of our private
homes were sold to first time buyers. In the last eighteen months,
covering the period since the pandemic began, the Group has
invested over GBP0.5bn in local communities, delivering over 3,500
homes to our local housing association partners. In addition, the
Persimmon Charitable Foundation donated c. GBP2.4m to over 1,300
local good causes over the same period.
FibreNest, the Group's ultrafast, full fibre broadband service,
which is highly rated by our customers, is now more important than
ever, allowing them to work from home and access other online
services. Broadband connectivity from moving in day remains a key
focus for the Group in delivering the highest levels of service to
our customers. FibreNest is currently serving c.16,500 homes across
222 sites.
Helping to safeguard our environment
As a Group, we are committed to playing our part in reducing
global greenhouse gas emissions. As such, the Group has set
challenging carbon reduction targets, announced in March 2021. The
Group is targeting to achieve net zero carbon emissions in our
homes in-use by 2030 and across our operations by 2040. In
addition, Persimmon has set interim science based carbon reduction
targets to reduce carbon emissions from our own operations by 46.2%
by 2030 and our indirect operations by 22% per m(2) completed floor
area by 2030, in line with the Paris Agreement.
These science based targets have now been fully accredited by
the Science Based Target Initiative and the business is developing
roadmaps to deliver on these important goals. Emission reduction
initiatives include the Group's regional demonstration project in
Fulford, York, being run in conjunction with the University of
Salford to develop a zero carbon home. Tenants will occupy the home
once it is built. The true "in-use" carbon savings, as well as how
well suited the home is for family living, will be measured and
monitored. In addition, the Group is now purchasing 100% renewable
energy for Persimmon's offices and manufacturing facilities saving
over 1,600 tonnes of CO2 each year, has introduced electric vehicle
options into its fleet and is investigating methods of reducing the
business' red diesel consumption through increased digital
technology, driver training and alternative fuels.(11)
The Group provides substantial green and diverse open space
through its developments as an essential element in making places
where communities can be supported to thrive. Over the last five
years, Persimmon has planted almost half a million trees and
created over 3,000 acres of public open space, enriching its
communities and contributing to enhancing biodiversity.
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 GBP1,749.3m (2020:
GBP1,102.8m) and gross profits of GBP540.5m (2020: GBP345.2m).
3. Land cost value for the plot divided by the revenue of the
new home sold.
4. Stated before goodwill impairment of GBP3.9m (2020:
GBP1.6m).
5. Stated on new housing revenue of GBP1,749.3m (2020:
GBP1,102.8m) and underlying profit from operations of GBP483.0m
(2020: GBP293.2m) calculated before goodwill impairment of GBP3.9m
(2020: GBP1.6m).
6. 12 month rolling average calculated on underlying operating
profit and total capital employed (including land creditors).
Underlying operating profit is stated before legacy buildings
provisions of GBP75.0m (December 2020: GBP75.0m) and goodwill
impairment of GBP6.6m (December 2020: GBP4.3m).
7. Estimated weighted average gross margin based on assumed
revenues and costs at 30 June 2021 and normalised output
levels.
8. Land cost value for the plot divided by the anticipated
future revenue of the new home sold.
9. Estimated using an economic toolkit.
10. 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.
11. The Group's approach to reporting its Sustainability
Accounting Standards Board (SASB) disclosures as contained in the
2020 Annual Report (AR) is referenced as good practice by the
Financial Reporting Council here:
https://www.frc.org.uk/news/july-2021/frc-outline-necessary-action-for-effective-esg-rep
and the Group has been notified that the FRC's thematic review of
Streamlined Energy and Carbon Reporting (SECR) in the 2020 AR (page
68) is again to be referenced as good practice on publication of
the FRC report in September 2021.
PERSIMMON PLC
Condensed Consolidated Statement of Comprehensive Income
For the six months to 30 June 2021 (unaudited)
Six months Six months Year to 31
to 30 June to 30 June December 2020
2021 2020
Note Total Total Total
GBPm GBPm GBPm
----------------------------------------- --------- ---------- ------------ ---------------
Total revenue 3 1,840.8 1,190.5 3,328.3
Cost of sales (1,300.3) (845.3) (2,433.9)
----------------------------------------- --------- ---------- ------------ ---------------
Gross profit 540.5 345.2 894.4
Analysed as:
Underlying gross profit 540.5 345.2 969.4
Legacy buildings provision - - (75.0)
----------------------------------------- --------- ---------- ------------ ---------------
Other operating income 4.8 3.4 5.4
Operating expenses (66.2) (57.0) (116.3)
----------------------------------------- --------- ---------- ------------ ---------------
Profit from operations 479.1 291.6 783.5
Analysed as:
Underlying operating profit 483.0 293.2 862.8
Legacy buildings provision - - (75.0)
Impairment of intangible assets (3.9) (1.6) (4.3)
----------------------------------------- --------- ---------- ------------ ---------------
Finance income 3.4 5.1 8.9
Finance costs (2.4) (4.3) (8.6)
----------------------------------------- --------- ---------- ------------ ---------------
Profit before tax 480.1 292.4 783.8
Analysed as:
Underlying profit before tax 484.0 294.0 863.1
Legacy buildings provision - - (75.0)
Impairment of intangible assets (3.9) (1.6) (4.3)
----------------------------------------- --------- ---------- ------------ ---------------
Tax 4 (88.9) (54.8) (145.4)
----------------------------------------- --------- ---------- ------------ ---------------
Profit after tax (all attributable
to equity holders of the parent) 391.2 237.6 638.4
----------------------------------------- --------- ---------- ------------ ---------------
Other comprehensive income/(expense)
Items that will not be reclassified
to profit:
Remeasurement gains/(losses)
on defined benefit pension schemes 11 65.8 (54.9) (42.5)
Tax 4 (16.0) 8.9 6.5
----------------------------------------- --------- ---------- ------------ ---------------
Other comprehensive income/(expense)
for the period, net of tax 49.8 (46.0) (36.0)
----------------------------------------- --------- ---------- ------------ ---------------
Total recognised income for
the period 441.0 191.6 602.4
----------------------------------------- --------- ---------- ------------ ---------------
Earnings per share
Basic 5 122.6p 74.6p 200.3p
Diluted 5 122.1p 74.4p 199.6p
----------------------------------------- --------- ---------- ------------ ---------------
PERSIMMON PLC
Condensed Consolidated Balance Sheet
As at 30 June 2021 (unaudited)
30 June 30 June 31 December
2021 2020 2020
Note GBPm GBPm GBPm
--------------------------------- ----- ---------- ---------- ------------
Assets
Non-current assets
Intangible assets 177.9 184.5 181.8
Property, plant and equipment 93.4 86.7 90.4
Investments accounted for using
the equity method 0.3 2.1 2.1
Shared equity loan receivables 8 35.9 50.2 41.7
Trade and other receivables 3.0 7.1 4.0
Deferred tax assets 10.7 6.7 7.7
Retirement benefit assets 11 116.7 23.1 50.6
--------------------------------- ----- ---------- ---------- ------------
437.9 360.4 378.3
--------------------------------- ----- ---------- ---------- ------------
Current assets
Inventories 7 2,815.6 3,227.3 2,901.3
Shared equity loan receivables 8 13.1 12.5 14.5
Trade and other receivables 139.2 97.3 86.6
Current tax assets 12.8 - 8.3
Cash and cash equivalents 10 1,315.2 828.9 1,234.1
--------------------------------- ----- ---------- ---------- ------------
4,295.9 4,166.0 4,244.8
--------------------------------- ----- ---------- ---------- ------------
Total assets 4,733.8 4,526.4 4,623.1
--------------------------------- ----- ---------- ---------- ------------
Liabilities
Non-current liabilities
Trade and other payables (190.5) (173.7) (179.3)
Deferred tax liabilities (41.5) (17.8) (22.9)
Partnership liability (23.1) (27.0) (27.8)
--------------------------------- ----- ---------- ---------- ------------
(255.1) (218.5) (230.0)
--------------------------------- ----- ---------- ---------- ------------
Current liabilities
Trade and other payables (830.8) (848.8) (794.2)
Partnership liability (5.5) (5.5) (5.5)
Legacy buildings provision (75.0) - (75.0)
Current tax liabilities - (3.0) -
--------------------------------- ----- ---------- ---------- ------------
(911.3) (857.3) (874.7)
--------------------------------- ----- ---------- ---------- ------------
Total liabilities (1,166.4) (1,075.8) (1,104.7)
--------------------------------- ----- ---------- ---------- ------------
Net assets 3,567.4 3,450.6 3,518.4
--------------------------------- ----- ---------- ---------- ------------
Equity
Ordinary share capital issued 31.9 31.9 31.9
Share premium 22.9 19.8 22.3
Capital redemption reserve 236.5 236.5 236.5
Other non-distributable reserve 276.8 276.8 276.8
Retained earnings 2,999.3 2,885.6 2,950.9
--------------------------------- ----- ---------- ---------- ------------
Total equity 3,567.4 3,450.6 3,518.4
--------------------------------- ----- ---------- ---------- ------------
PERSIMMON PLC
Condensed Consolidated Statement of Changes in Shareholders'
Equity
For the six months to 30 June 2021 (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 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
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Six months ended 30
June 2020:
Balance at 1 January
2020 31.9 19.2 236.5 276.8 2,693.9 3,258.3
Profit for the period - - - - 237.6 237.6
Other comprehensive
expense - - - - (46.0) (46.0)
Transactions with owners:
Issue of new shares - 0.6 - - - 0.6
Exercise of share options/share
awards - - - - (0.2) (0.2)
Share-based payments - - - - 2.4 2.4
Net settlement of share-based
payments - - - - (2.3) (2.3)
Satisfaction of share
options from own shares
held - - - - 0.2 0.2
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Balance at 30 June
2020 31.9 19.8 236.5 276.8 2,885.6 3,450.6
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Year ended 31 December
2020:
Balance at 1 January
2020 31.9 19.2 236.5 276.8 2,693.9 3,258.3
Profit for the year - - - - 638.4 638.4
Other comprehensive
expense - - - - (36.0) (36.0)
Transactions with owners:
Dividends on equity
shares - - - - (350.7) (350.7)
Issue of new shares - 3.1 - - - 3.1
Exercise of share options/share
awards - - - - (0.2) (0.2)
Share-based payments - - - - 7.7 7.7
Net settlement of share-based
payments - - - - (2.4) (2.4)
Satisfaction of share
options from own shares
held - - - - 0.2 0.2
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Balance at 31 December
2020 31.9 22.3 236.5 276.8 2,950.9 3,518.4
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
PERSIMMON PLC
Condensed Consolidated Cash Flow Statement
For the six months to 30 June 2021 (unaudited)
Six months Six months Year to 31
to 30 June to 30 June December 2020
2021 2020
Note GBPm GBPm GBPm
----------------------------------------- ----- ------------ ------------------ ------------------
Cash flows from operating activities:
Profit for the period 391.2 237.6 638.4
Tax charge 4 88.9 54.8 145.4
Finance income (3.4) (5.1) (8.9)
Finance costs 2.4 4.3 8.6
Depreciation charge 7.2 7.1 14.1
Impairment of intangible assets 3.9 1.6 4.3
Legacy buildings provision - - 75.0
Share-based payment charge 4.7 2.8 6.4
Net imputed interest expense/(income) 1.1 (0.6) (1.4)
Other non-cash items (4.2) (3.9) (7.3)
----------------------------------------- ----- ------------ ------------------ ------------------
Cash inflow from operating activities 491.8 298.6 874.6
Movement in working capital:
Decrease/(increase) in inventories 90.5 (65.7) 265.0
Increase in trade and other receivables (55.3) (41.8) (45.8)
Increase/(decrease) in trade and
other payables 49.1 (70.0) (116.9)
Decrease in shared equity loan
receivables 9.2 7.9 16.4
----------------------------------------- ----- ------------ ------------------ ------------------
Cash generated from operations 585.3 129.0 993.3
Interest paid (2.6) (2.5) (4.1)
Interest received 1.3 2.6 4.7
Tax paid (92.2) (129.7) (228.4)
----------------------------------------- ----- ------------ ------------------ ------------------
Net cash inflow/(outflow) from
operating activities 491.8 (0.6) 765.5
----------------------------------------- ----- ------------ ------------------ ------------------
Cash flows from investing activities:
Joint venture net funding movement 1.8 - -
Purchase of property, plant and
equipment (9.3) (10.1) (18.9)
Proceeds from sale of property,
plant and equipment 0.5 0.5 0.8
----------------------------------------- ----- ------------ ------------------ ------------------
Net cash outflow from investing
activities (7.0) (9.6) (18.1)
----------------------------------------- ----- ------------ ------------------ ------------------
Cash flows from financing activities:
Lease capital payments (1.8) (1.8) (3.6)
Payment of Partnership liability (3.8) (3.6) (3.6)
Net settlement of share-based
payments - - (2.4)
Share options consideration 0.6 0.6 3.1
Dividends paid 6 (398.7) - (350.7)
----------------------------------------- ----- ------------ ------------------ ------------------
Net cash outflow from financing
activities (403.7) (4.8) (357.2)
----------------------------------------- ----- ------------ ------------------ ------------------
Increase/(decrease) in net cash
and cash equivalents 10 81.1 (15.0) 390.2
----------------------------------------- ----- ------------ ------------------ ------------------
Cash and cash equivalents at the
beginning of the period 1,234.1 843.9 843.9
----------------------------------------- ----- ------------ ------------------ ------------------
Cash and cash equivalents at the
end of the period 10 1,315.2 828.9 1,234.1
----------------------------------------- ----- ------------ ------------------ ------------------
Notes
1. Basis of preparation
The half year condensed financial statements for the six months
to 30 June 2021 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 2020, which have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No. 1606/2002 as it applies in the European
Union.
The comparative figures for the financial year ended 31 December
2020 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 2020, 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 2021:
-- Amendments to IFRS 4 Insurance Contracts
-- Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark
reform - phase 2
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:
-- Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent
Liabilities and
Contingent Assets; and Annual Improvements 2018 - 2020
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
2021. Persimmon's long term-strategy, which recognises the risks
associated with the housing cycle by maintaining operational
flexibility, investing in high quality land, minimising financial
risk and deploying capital at the right time in the cycle, has
equipped the business with strong liquidity and a robust balance
sheet.
The Group delivered 7,406 new homes (2020: 4,900, 2019: 7,584)
and generated profit before tax of GBP480.1m (2020: GBP292.4m,
2019: GBP509.3m) in the period. At 30 June 2021, the Group had a
strong balance sheet with GBP1,315.2m of cash (2020: GBP828.9m,
2019: GBP832.8m), high quality land holdings and modest land
creditors of GBP365.7m (December 2020: GBP329.3m). In addition, the
Group has an undrawn Revolving Credit Facility of GBP300m, which
has a five year term out to 31 March 2026.
The Group's forward order book, including legal completions
taken in the second half, is c. 9% stronger than 2019, and c. 10%
down on the elevated levels of 2020, which were impacted by pent up
demand as the UK came out of the first period of lockdown. The
cumulative average private sales reservation rate for the first 33
weeks of the year is c. 20% ahead of last year.
The Directors have reviewed the Group's principal risks, see
note 12 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 2020. 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 2020, which included three stress
testing scenarios in line with one of the potential outcomes of the
recent BEIS consultation, 'Restoring trust in audit and corporate
governance', remains relevant and valid.
In addition, given the on-going uncertainties surrounding the
pandemic, the Directors have assessed the impact of a complete
shutdown of the housing market from the date of this announcement
to 31 December 2022 on the resilience of the Group. This extreme
scenario assumes that the Group does not receive any further sales
receipts for the period whilst maintaining its current level of
fixed costs.
Throughout this scenario, the Group maintains substantial
liquidity with a positive cash balance and no requirement to access
the Group's GBP300m Revolving Credit Facility.
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), 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
2020.
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 GBP3.9m 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
31
to 30 June to 30 June December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- -------------------- ---------------------- --------------------
Revenue from the sale of new housing 1,749.3 1,102.8 3,129.5
Revenue from the sale of part exchange
properties 89.2 86.7 196.2
Revenue from the provision of internet
services 2.3 1.0 2.6
-------------------------------------------------- -------------------- ---------------------- --------------------
Revenue from the sale of goods and
services
as reported in the statement of
comprehensive
income 1,840.8 1,190.5 3,328.3
-------------------------------------------------- -------------------- ---------------------- --------------------
4. Tax
Analysis of the tax charge for the period
Six months Six months Year to
31
to 30 June to 30 June December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- -------------------- ---------------------- --------------------
Tax charge comprises:
UK corporation tax in respect of the
current
period 91.5 56.7 148.5
Adjustments in respect of prior years (3.8) (2.3) (6.4)
-------------------------------------------------- -------------------- ---------------------- --------------------
87.7 54.4 142.1
-------------------------------------------------- -------------------- ---------------------- --------------------
Deferred tax relating to origination
and
reversal of temporary differences 1.2 0.4 2.6
Adjustments recognised in the current
year
in respect of prior years' deferred
tax - - 0.7
-------------------------------------------------- -------------------- ---------------------- --------------------
1.2 0.4 3.3
-------------------------------------------------- -------------------- ---------------------- --------------------
88.9 54.8 145.4
-------------------------------------------------- -------------------- ---------------------- --------------------
The Group's overall effective tax rate of 18.5% is lower than
the mainstream rate of 19% as a result of a prior year tax credit
arising from the removal of some uncertainties regarding the
Group's prior year tax computations.
The applicable corporation tax rate remains at 19% in line with
corporation tax rates effective from 1 April 2017. On 10 June 2021
a new statutory corporation tax rate was enacted into law
increasing the tax rate to 25% with effect from April 2023. In
relation to the Group's deferred tax calculations, all deferred tax
balances have been revalued to reflect this increased rate.
Deferred tax recognised in other comprehensive income
Six months Six months Year to
31
to 30 June to 30 June December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- -------------------- ---------------------- --------------------
Recognised on remeasurement charges on
pension
schemes 16.0 (8.9) (6.5)
-------------------------------------------------- -------------------- ---------------------- --------------------
Tax recognised directly in equity
Six months Six months Year to
31
to 30 June to 30 June December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- -------------------- ---------------------- --------------------
Arising on transactions with equity
participants
Current tax related to equity settled
transactions - (0.6) (1.1)
Deferred tax related to equity settled
transactions (1.5) 1.0 (0.2)
-------------------------------------------------- -------------------- ---------------------- --------------------
(1.5) 0.4 (1.3)
-------------------------------------------------- -------------------- ---------------------- --------------------
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 319.0m (June 2020: 318.7m; December 2020: 318.8m).
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 320.2m (June 2020:
319.5m; December 2020: 319.9m).
Underlying earnings per share excludes the legacy buildings
provision charge and goodwill impairment. The earnings per share
from continuing operations were as follows:
Six months Six months Year to
31
to 30 June to 30 June December
2021 2020 2020
Basic earnings per share 122.6p 74.6p 200.3p
Underlying basic earnings per share 123.8p 75.1p 220.7p
Diluted earnings per share 122.1p 74.4p 199.6p
Underlying diluted earnings per share 123.3p 74.9p 219.9p
-------------------------------------------------- -------------------- ---------------------- --------------------
The calculation of the basic and diluted earnings per share is
based upon the following data:
Six months Six months Year to
31
to 30 June to 30 June December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- -------------------- ---------------------- --------------------
Underlying earnings attributable to
shareholders 395.1 239.2 703.5
Legacy buildings provision (net of
tax) - - (60.8)
Goodwill impairment (3.9) (1.6) (4.3)
-------------------------------------------------- -------------------- ---------------------- --------------------
Earnings attributable to shareholders 391.2 237.6 638.4
-------------------------------------------------- -------------------- ---------------------- --------------------
At 30 June 2021 the issued share capital of the Company was
319,100,222 ordinary shares (30 June 2020: 318,941,892; 31 December
2020: 319,071,261 ordinary shares).
6. Dividends/Return of capital
Six months Six months Year to
31
to 30 June to 30 June December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- -------------------- ---------------------- --------------------
Amounts recognised as distributions to
capital
holders in the period:
2019 dividend to all shareholders of
40p
per share paid 2020 - - 127.5
2019 dividend to all shareholders of
70p
per share paid 2020 - - 223.2
2020 dividend to all shareholders of 398.7 - -
125p
per share paid 2021
Total capital return to shareholders 398.7 - 350.7
-------------------------------------------------- -------------------- ---------------------- --------------------
After careful assessment of the capital needs of the business,
the Board accelerated the payment of the regular annual
distribution of 125 pence per share, as an interim dividend for the
financial year ended 31 December 2020, to 26 March 2021 from early
July 2021. In addition, on 13 August 2021, the Board accelerated
the return of surplus capital in relation to the financial year
ended 31 December 2020 by way of a payment of 110 pence per share,
rather than making two payments of 55 pence per share, one to be
paid in August 2021 and the second in December 2021 as had
previously been indicated. This has returned the Group to
distributing two capital return payments every 12 months, a year
earlier than originally envisaged. There will be no further
dividend payments in relation to the financial year ended 31
December 2020.
7. Inventories
30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
------------------------------------- ----------------- ----------------- ---------------------
Land 1,701.0 1,896.6 1,722.1
Work in progress 1,046.0 1,223.7 1,091.6
Part exchange properties 23.9 55.2 40.9
Showhouses 44.7 51.8 46.7
------------------------------------- ----------------- ----------------- ---------------------
2,815.6 3,227.3 2,901.3
------------------------------------- ----------------- ----------------- ---------------------
The Group has conducted a further review of the net realisable
value of its land and work in progress portfolio at 30 June 2021.
Our approach to this review has been consistent with that conducted
at 31 December 2020 and was fully disclosed in the financial
statements for the year ended on that date. The key judgements and
estimates in determining the future net realisable value of the
Group's land and work in progress portfolio are future sales
prices, house types and costs to complete the developments. Sales
prices and costs to complete were estimated on a site by site
basis. There is currently no evidence or experience in the market
to inform management that expected selling prices used in the
valuations are materially incorrect.
Net realisable value provisions held against inventories at 30
June 2021 were GBP20.3m (2020: GBP29.6m). Following the review,
GBP4.6m of inventories are valued at fair value less costs to sell
rather than historical cost (2020: GBP8.2m).
8. Shared equity loan receivables
Six months Six months Year to
31
to 30 to 30 June December
June
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- -------------------- ---------------------- --------------------
Shared equity loan receivables at
beginning
of period 56.2 68.6 68.6
Settlements (9.2) (7.9) (16.4)
Gains 2.0 2.0 4.0
-------------------------------------------------- -------------------- ---------------------- --------------------
Shared equity loan receivables at end
of period 49.0 62.7 56.2
-------------------------------------------------- -------------------- ---------------------- --------------------
All gains/losses have been recognised through finance income in
profit and loss for the period of which GBP0.4m was unrealised
(June 2020: GBP0.9m; December 2020: GBP1.5m).
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
2021 2020 2020
Level 3 Level 3 Level 3
GBPm GBPm GBPm
------------------------------------------- ----------------- ----------------- ---------------------
Shared equity loan receivables 49.0 62.7 56.2
------------------------------------------- ----------------- ----------------- ---------------------
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 (2020: ten years)
and a discount rate of 5% (2020: 5%) based on current observed
market interest rates offered to private individuals on secured
second loans.
The discounted forecast cash flow calculation is dependent upon
the estimated future value of the properties on which the shared
equity loans are secured. Adjustments to this input, which might
result from a change in the wider property market, would have a
proportional impact upon the fair value of the 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
31
to 30 June to 30 June December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- -------------------- ---------------------- --------------------
Cash and cash equivalents at beginning
of
period 1,234.1 843.9 843.9
Increase/(decrease) in net cash
equivalents
in cash flow 81.1 (15.0) 390.2
-------------------------------------------------- -------------------- ---------------------- --------------------
Cash and cash equivalents at end of
period 1,315.2 828.9 1,234.1
IFRS 16 lease liability (8.9) (9.3) (9.6)
-------------------------------------------------- -------------------- ---------------------- --------------------
Net cash at end of period 1,306.3 819.6 1,224.5
-------------------------------------------------- -------------------- ---------------------- --------------------
Net cash is defined as cash and cash equivalents, bank
overdrafts, lease obligations and interest bearing borrowings.
11. Retirement benefit assets
As at 30 June 2021 the Group operated four employee pension
schemes, being two Group personal pension schemes and two defined
benefit pension schemes. Remeasurement gains and losses in the
defined benefit schemes are recognised in full as other
comprehensive income within the consolidated statement of
comprehensive income. All other pension scheme costs are reported
in profit or loss.
The amounts recognised in the consolidated statement of
comprehensive income are as follows:
Six months Six months Year to
31
to 30 June to 30 June December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------- -------------------- ---------------------- --------------------
Current service cost 0.9 1.0 1.9
Past service cost - - 0.5
Administrative expense 0.1 0.2 0.6
-------------------------------------------------- -------------------- ---------------------- --------------------
Pension cost recognised as operating
expense 1.0 1.2 3.0
-------------------------------------------------- -------------------- ---------------------- --------------------
Interest income on net defined benefit
asset (0.4) (0.7) (1.7)
-------------------------------------------------- -------------------- ---------------------- --------------------
Pension cost recognised as a net
finance
credit (0.4) (0.7) (1.7)
-------------------------------------------------- -------------------- ---------------------- --------------------
Total defined benefit pension cost
recognised
in profit or loss 0.6 0.5 1.3
Remeasurement (gains)/losses
recognised in
other comprehensive expense (65.8) 54.9 42.5
-------------------------------------------------- -------------------- ---------------------- --------------------
Total defined benefit scheme
(gain)/loss
recognised (65.2) 55.4 43.8
-------------------------------------------------- -------------------- ---------------------- --------------------
The amounts included in the balance sheet arising from the
Group's obligations in respect of the Pension Scheme are as
follows:
30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
------------------------------------------------ ----------------- ----------------- ---------------------
Fair value of pension scheme assets 714.2 662.3 694.4
Present value of funded obligations (597.5) (639.2) (643.8)
------------------------------------------------ ----------------- ----------------- ---------------------
Net pension asset 116.7 23.1 50.6
------------------------------------------------ ----------------- ----------------- ---------------------
The increase in the net pension asset to GBP116.7m (December
2020: GBP50.6m) is largely due to an increase in long-term
corporate bond yields increasing the discount rate assumption
applied to scheme obligations to 1.9% (December 2020: 1.4%).
12. Principal risks
Pandemic Risk
Residual Impact Mitigation
Risk An increase in the Covid-19 During the current pandemic, the Group's
High transmission rate or a new business continuity plans were deployed
pandemic occurring in the UK swiftly, with Board oversight. A Covid-19
Change may lead to a requirement for Steering Committee continues to monitor
from year our workforce and our customers progress.
end to comply with varying degrees The Group has a highly experienced
No change of social distancing measures Group Health, Safety and Environment
or other measures introduced Department with well-established Group
to curb the spread of the disease. policies and procedures together with
This action may disrupt continuity the ability to swiftly enhance or adapt
of site construction and access safe operating protocols to mitigate
to labour and materials, leading against specific risks. For example,
to significant delays to the the Group quickly amended, tested and
Group's build programmes and executed the Group's Covid-19 Risk
the legal completions of new Assessments and associated procedures
home sales. The magnitude of to mitigate the risk of transmission
any impact on the business of the Covid-19 infection.
will depend on the extent of (Also see Health and Safety risk).
the measures introduced as During the Covid-19 pandemic, the Group
applied to our workforce, our was able to rapidly transition to increased
customers, and wider society. levels of remote working through enhanced
The pandemic presents an increased use of technology. The Group's sales
health and safety risk to the teams provided a continuous service
public, our workforce and customers to our customers through our digital
on our sites and our employees sales platform and other online tools,
in our offices and in our off-site which enabled the business to continue
manufacturing facilities. to take sales reservations and legal
Social distancing requirements completions throughout the lockdown
have resulted in an increased period.
number of our workforce working Our remote working processes have been
remotely leading to additional strengthened further through a number
IT and information security of collaboration tools to enable effective
risks. home working.
An increase in the Covid-19 These enhancements to the Group's remote
transmission rate or a new working capabilities supports appropriate
pandemic may also adversely numbers of our workforce to work from
impact the wider economy resulting home when required, for example in
in reduced consumer confidence, response to amendments to Government
lower demand and pricing for guidance as changes to infection transmission
new homes, thereby impacting rates occur.
revenues, margins, profits The risks of increased use of remote
and cash flows and may give working are mitigated through regular
rise to impairment of asset communication with all users reminding
values. them of potential issues, particularly
for example in relation to phishing
emails and other Cyber security threats.
(Also see mitigation of Cyber and Data
Risk).
The impact of build delays caused by
the lockdown were mitigated by our
planned increase in levels of construction
work in progress coming into the pandemic.
This was the result of a strategic
decision to provide greater stock availability
to our customers, to improve quality
and service levels, and in anticipation
of increased demand ahead of the end
of the Government's current Help to
Buy scheme. The Group continues to
aim to hold strong levels of investment
in construction work in progress to
provide an effective buffer to potential
build delays. The Group's build programmes
returned to pre-Covid levels by July
2020 assisted by the Group's decision
for all colleagues to continue to prepare
for a strong return to site and not
to take advantage of the Government's
Job Retention Scheme.
The vertical integration afforded by
our own Brickworks, Space4 and Tileworks
production mitigates the risk of potential
supply chain disruption.
The Group's long-term strategy recognises
the risks associated with the cyclical
nature of the housing market by minimising
financial risk, maintaining operational
and financial flexibility and deploying
capital at the most appropriate time
in the cycle. This strategy and management's
preparedness, responsiveness and agility
provide us with the sound fundamentals
required to enter periods of demand,
volume or pricing downturns in a position
of strength with strong levels of liquidity
and a robust balance sheet.
--------------------------------------- ------------------------------------------------
Strategy
Residual Impact Mitigation
Risk The Group's strategy has been The Group's strategy is agreed by the
Low developed by the Board as the Board at an annual strategy meeting,
most appropriate approach to and undergoes a continuous and iterative
Change successfully deliver the Group's process of implementation, review and
from year purpose and ambition and generate adaptation at Board meetings and in
end optimal sustainable value for response to the evolution of conditions
No change all stakeholders. in which the Group operates.
As political, economic and The Board engages with all stakeholders
other conditions evolve, the to ensure the strategy is communicated,
strategy currently being pursued understood and effective. For example,
may cease to be the most appropriate an Employee Engagement Panel, Gender
approach. Diversity Panel and employee engagement
If the Group's strategy is surveys have been established to monitor
not effectively communicated the cultural health of the organisation
to our workforce and / or engagement and ensure strategy is understood and
and incentive measures are implemented.
inappropriate, operational
activities may not successfully
deliver the Group's strategic
objectives.
--------------------------------------- ------------------------------------------------
UK's exit from the EU
Residual Impact Mitigation
Risk Whilst the completion of the We continue to monitor the political
High free trade agreement between situation, the UK economy and the housing
the UK and the EU has relieved market through the review of external
Change some immediate concerns, including information and changes in the behaviour
from year regarding increased customs of our customer base. We robustly manage
end duties on supplies imported and control our work in progress and
No change from the EU, the broader impact land investment and our stringent investment
of these new trade arrangements appraisals will continue, aiming to
has yet to be seen. ensure exposure to market disruption
The new arrangements may lead is reduced.
to increased economic uncertainty We routinely engage with our key suppliers
adversely impacting: consumer and are currently working closely with
confidence, demand and pricing them to ensure that our supply chain
for new homes, revenues, margins, is not materially impacted. We will
profits and cash flows and continue to employ effective tendering
may result in the impairment processes to ensure cost impacts are
of asset values. mitigated as far as possible. The vertical
The new trade arrangements integration afforded by use of our
may result in delays impacting own Brickworks, Space4 and Tileworks
the availability and cost of production will mitigate the availability
imported materials and components and cost risks further. (Also see mitigation
within our supply chain. and review of Government policy and
Labour and Resources)
--------------------------------------- ------------------------------------------------
National and regional economic conditions
Residual Impact Mitigation
Risk The housebuilding industry The Group's long-term strategy recognises
High is sensitive to changes in the cyclical nature of the housing
the economic environment, including market and focuses on minimising financial
Change unemployment, interest rates risk, maintaining operational and financial
from year and consumer confidence. Any flexibility and judging the timing
end deterioration in economic conditions of capital deployment through the cycle.
No change may have an adverse impact We continually monitor lead indicators
on demand and pricing for new on the future direction of the UK housing
homes, which could have a material market so as to manage our exposure
effect on our revenues, margins, to any future market disruption. We
profits and cash flows and regularly review our pricing structure
result in the impairment of to ensure it reflects local market
asset values. conditions and continuously monitor
Economic conditions in the the Group's geographical spread.
land market may adversely affect Our diversity of geographical markets
the availability of a sustainable and our range of price points helps
supply of land at appropriate us mitigate the effects of regional
levels of return. economic fluctuations. In the current
climate, our strategy of providing
'homes for all' at more affordable
price points is proving successful.
We control the level of build on site
by closely monitoring our stock and
work in progress levels. The Group's
strong land holdings provide continuity
of supply and disciplined and extensive
due diligence processes are always
undertaken prior to entering into any
land investment decisions. These processes
have regard to local market demands
and conditions, and the Group's existing
strategic and on market land holdings.
All land additions are reviewed by
the Executive Directors.
--------------------------------------- ------------------------------------------------
Government policy
Residual Impact Mitigation
Risk Changes to Government policy We monitor Government policy in relation
High have the potential to impact to the housing market closely. Consistency
on several aspects of our strategy of policy formulation and application
Change and operational performance. remains very supportive of the housebuilding
from year For example, changes to the industry, encouraging continued substantial
end planning system, changes in investment in land, work in progress
No change the tax regime, or further and skills to support output growth.
amendment of the Help to Buy Our strategic objectives, delivering
scheme or other housing policies 'homes for all', are aligned with Government
could have an adverse effect priorities for increasing housing stock.
on revenues, margins and asset The devolved Governments continue to
values. Changes to the planning support the industry with their respective
system may also adversely impact Help to Buy and other equity loan schemes.
the Group's ability to source In England, a replacement Help to Buy
suitable land to deliver appropriate scheme opened for customers to reserve
levels of return. new homes from 16 December 2020 and
is available until 31 March 2023. In
Scotland, the First Home Fund Scheme
reopened on 1 April 2021.
We actively manage our land investment
decisions and levels of work in progress
to mitigate exposure to external influences.
--------------------------------------- ------------------------------------------------
Mortgage availability
Residual Impact Mitigation
Risk Any restrictions in the availability We monitor Bank of England commentary
High or affordability of mortgages on credit conditions including the
for customers could reduce monthly approvals for house purchases
Change demand for new homes and affect and UK Finance's monthly reports and
from year revenues, profits, cash flows, lenders' announcements for trends in
end and asset values. There has lending. We ensure that our investment
No change been some tightening of lending in land and work in progress is appropriate
criteria observed post Covid-19. for our level of sales and our expectations
for market conditions. The devolved
Government's Help to Buy and other
equity loan schemes, support customers
to gain access to the housing market
across the UK with competitive mortgage
rates.
--------------------------------------- ------------------------------------------------
Health, safety and the environment
Residual Impact Mitigation
Risk The health and safety of our The Board has a very strong commitment
High employees, subcontractors, to health, safety and the environment,
customers and visitors to our and managing the risks in this area
Change construction sites is of paramount effectively. This is implemented by
from year importance to us. Accidents comprehensive management systems and
end on our sites could also lead controls, managed by our highly experienced
No change to reputational damage and Group Health, Safety and Environment
financial penalties. Department, which includes detailed
Environmental breaches may training and inspection programmes
result in financial penalties, to minimise the likelihood and impact
undermine the creation of sustainable of accidents or environmental breaches
communities and damage the on our sites. The Group's established
reputation of the Group. policies and procedures can be quickly
and effectively adapted to evolving
health and safety guidance and regulation.
This has been recently demonstrated
with the swift Group wide adoption
of Covid-19 secure operating procedures.
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.
The Group's Health, Safety and Environment
Department continues to enhance the
Group's environmental processes and
policies in partnership with the Group's
Sustainability Committee and the wider
operational teams. Regional Environmental
Champions have been introduced to ensure
compliance with these processes on
site.
--------------------------------------- ------------------------------------------------
Labour and resources: skilled workforce, retention and succession
Residual Impact Mitigation
Risk Access to an appropriately We closely monitor our build programmes
Medium skilled workforce is a key to enable us to manage our labour requirements
requirement for the Group. effectively. We operate in-house apprentice
Change Rising UK house building activity and training programmes, to support
from year in recent years has increased an adequate supply of skilled labour.
end demand for skilled labour, Our in-house Group Training Department
No change which has increased pressure provides standardised training that
on costs. is centrally controlled.
A skilled management team is We are also committed to playing a
essential in maintaining operational full and active role in external initiatives
performance and the implementation to address the skills shortage such
of the Group's strategy. as the 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 the establishment of a Gender
Diversity Panel, an Employee Engagement
Panel, employee engagement surveys,
further development of performance
management frameworks, career management,
and incentives. At the most senior
level, the Nomination Committee oversees
these processes and promotes effective
succession planning.
--------------------------------------- ------------------------------------------------
Labour and resources: materials and land purchasing
Residual Impact Mitigation
Risk Materials availability Materials availability
Medium Recent growth in UK housebuilding Our build programmes and our supply
and supply chain disruption chain are closely monitored to allow
Change caused by the Covid-19 pandemic us to manage and react to any issues
from year has led to an increased demand and to help ensure consistent high
end for materials which is placing quality standards. We build strong
No change greater pressure on some elements relationships with key suppliers over
of the supply chain. This may the long term to maintain consistency
continue to cause availability of supply and cost efficiency.
constraints and increase cost We have invested in expanding our off-site
pressures. manufacturing hub at Harworth, near
Doncaster, to strengthen security of
supply. Our brick plant and roof tile
manufacturing facility provide a significant
proportion of these materials to our
sites. This complements our existing
off-site manufacturing capability at
Build quality may be compromised Space4, which produces timber frames,
if unsuitable materials are highly insulated wall panels and roof
procured leading to damage cassettes as a modern method of constructing
to the Group's reputation and new homes.
customer experience.
Our procurement team ensures that the
Group's suppliers provide materials
to the expected specification. Materials
are inspected on receipt at site.
Throughout construction, each of our
new homes undergo 21 key stage checks
Land Purchasing by our Independent Quality Inspectors,
Land may be purchased at too as part of 'the Persimmon Way' (the
high a price, in the wrong Group wide consolidated approach to
location and at the wrong time new home construction), and before
in the housing market cycle. handover to the customer, our management
teams perform a seven stage internal
quality check process.
Land Purchasing
The Group has strong land holdings.
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 existing market conditions
and sales rates.
--------------------------------------- ------------------------------------------------
Climate change
Residual Impact Mitigation
Risk Should the effects of climate We monitor our operational efficiency
Medium change and the UK's transition and direct environmental impact in
to a lower carbon economy lead a number of ways including measuring
Change to increasing national regulation our scope 1 and scope 2 CO (2e) emissions
from year this could cause additional and the amount of waste we generate
end planning delays, increase the for each home we sell.
No change cost and accessibility of materials The Group maintains a climate change
required within our construction risk register which ensures that the
process and potentially limit management and mitigation of this risk
their supply or require additional is embedded within the Group's risk
features which could significantly management processes. The risk register
increase our costs. is updated at least once a year and
Changes in weather patterns reviewed by the Group Sustainability
and the frequency of extreme Manager, the Group Internal Audit Manager
weather events, particularly and the Risk Committee. The Group has
storms and flooding, may increase appointed a Group Sustainability Manager
the likelihood of disruption bringing increased focus to both the
to the construction process. risks and opportunities surrounding
The availability of mortgages climate change.
and property insurance may We systematically consider the potential
reduce in response to financial impacts of climate change throughout
institutions considering the the land acquisition, planning and
possible impacts relating to build processes and work closely with
climate change. Changes in planning authorities and other statutory
weather patterns may also lead bodies to manage and mitigate these
to increased build costs and/or risks. For example, we conduct full
development timeframes. environmental assessments for each
parcel of land we acquire for development
to ensure our activities fulfil all
obligations, respecting the natural
environment and the communities for
which we are delivering newly built
homes. We are keen to adopt Sustainable
Urban Drainage Systems on all our new
sites, subject to local planning requirements,
to address the risk of flooding.
Assisted by an independent expert,
the Group has set science based carbon
reduction targets for its Scope 1,
2 and 3 emissions. Steering Groups
have been established to plan and manage
the Group's carbon reduction pathway
to ensure these targets are met.
The Group's low carbon home Steering
group has launched a Regional Demonstration
Project to understand the environmental,
social and financial impacts of implementing
the Future Homes Standard, monitoring
the home's occupants to understand
real life 'liveability' through time.
Working with Energy House Laboratories
at the University of Salford, we will
monitor the true in-use carbon savings
of the home, impacts to the homeowner
as well as potential additional processes
and costs to the build process.
The aim of the project is to inform
UK policy direction and debate on building
low carbon homes cost effectively at
scale. We will seek to identify the
optimum opportunities when considering
input costs versus carbon savings for
each component used within the demonstration
house. The demonstration house will
be built in autumn 2021 in Fulford,
York, North Yorkshire.
We continually seek to strengthen our
supply chain, for example, 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. The
Group procurement team maintain strong
links with our suppliers delivering
value through our supply chain by regular
engagement and robust tendering processes.
--------------------------------------- ------------------------------------------------
Reputation
Residual Impact Mitigation
Risk Damage to the Group's reputation Management Supervision
Medium could adversely impact on its The Group has a strong commitment to
ability to deliver its strategic appropriate culture and maintaining
Change objectives. the high quality of its operations.
from year For example, should governance, Oversight from the Board seeks to ensure
end build quality, customer experiences, key processes are robust and any shortcomings
No change operational performance, management identified are promptly and effectively
of health, safety and the environment addressed.
or local planning concerns The Group's build quality and customer
fall short of our usual high service processes are a key strategic
standards, this may result priority and significant investment
in damage to customer, commercial has been made in this area with the
and investor relationships Customer Care Improvement Plan now
and lead to higher staff turnover. embedded within the business. Persimmon's
Homebuyer Retention scheme, introduced
on 1 July 2019 and which is unique
in the market, is proving to be both
popular with customers and a key driver
of behavioural change within the business.
The Consumer Code for Housebuilders
has highlighted this industry leading
scheme as an area of good practice
in relation to customer service.
Where management oversight identifies
inconsistencies in adherence to agreed
processes, correcting actions are swiftly
taken, for example in the case of incorrect
cavity barrier installations where
immediate action was taken through
inspections and remediation.
The Group has introduced the Persimmon
Way in order to strengthen build quality
and assurance processes and establish
a consolidated, consistent Group wide
approach to construction. The Group
Construction Director is responsible
for the implementation of the Persimmon
Way and reports to the Group Chief
Executive. Independent Quality Inspectors
undertake inspections at 21 key stages
of the construction process as well
as continually assessing the finished
quality of our new homes.
The Group is to implement a process
of complimentary external verification
of the key processes to further support
Group best practice.
Stakeholder Relationships
We take actions to maintain positive
relationships with all of our stakeholders
to minimise the risks of reputational
damage and aim to comply with best
practice in corporate governance.
The Group continues to develop engagement
activities with all stakeholders. For
example, improved engagement with our
employees is facilitated through the
Employee Engagement and Gender Diversity
Panels which meet regularly and report
to the Board. The Group has also invested
in a number of measures to improve
customer experience by putting customers
before volume. For example, significant
investment in increased work in progress
levels, the introduction of a Home
Buyer Retention Scheme for customers,
and investment in the development of
a customer portal which is currently
being piloted ahead of a wider Group
roll-out. In addition, the Group continues
to foster long term, mutually beneficial
relationships with its suppliers.
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. The Group
supports Team GB, the British Olympic
team, and continues to pursue extensive
community support programmes in partnership
with Team GB, as part of the Group's
Healthy Community charitable activities.
--------------------------------------- ------------------------------------------------
Regulatory compliance
Residual Impact Mitigation
Risk The housebuilding industry We operate comprehensive management
Medium is subject to extensive and systems to ensure regulatory and legal
complex laws and regulations, compliance, including a suite of policies
Change particularly in areas such and procedures covering key areas of
from year as land acquisition, planning legislation and regulation. Where these
end and the environment and building systems identify inconsistencies in
No change and fire safety regulations. adherence to agreed processes, correcting
Ensuring compliance in these actions are swiftly taken. For example,
areas can result in delays our response to the incorrect cavity
in securing the land required barrier installations where immediate
for development and in construction action was taken through inspections
and increased costs of development. and remediation.
Any retrospective changes in We also carefully monitor evolving
these regulations or failure regulations and consider the impact
to comply with them could result on the Group and its responsibilities.
in remediation costs, damage For example, the Group has been closely
to the Group's reputation and assessing the impact of the changing
potential imposition of financial fire safety regulations with respect
penalties. to multi storey, multi occupancy buildings,
The risk has increased from particularly in respect of buildings
the 2019 annual report due less than 18 metres in height, that
to the rapidly and continuously may have used now-banned materials.
evolving regulations and practices As practices have evolved, the Group
regarding fire safety of multi has responded swiftly and committed
storey, multi occupancy buildings. to perform fire safety remedial works
where necessary on buildings that it
currently owns and work with owners
and other stakeholders on buildings
that the Group developed.
We engage extensively with planning
authorities and other stakeholders
to reduce the likelihood and impact
of any delays or disruption. In addition,
the Group controls sufficient land
holdings to provide security of supply
for medium term trading requirements.
--------------------------------------- ------------------------------------------------
Cyber and Data Risk
Residual Impact Mitigation
Risk Failure of any of the Group's We operate centrally maintained IT
Medium IT systems, particularly those systems with a fully tested disaster
in relation to customer information recovery programme.
Change and customer service could All infrastructure is highly resilient,
from year result in significant financial with geographically diverse data centres
end costs, business disruption that have a series of backups.
No change and reputational damage due Regular awareness emails are delivered
to the loss, theft or corruption to all users and the Group performs
of data either inadvertently substantial online training activity
or via a targeted cyber-attack. to increase awareness of cyber risks.
Specialists within the Group's IT Department
provide oversight on the suite of controls
in place to ensure they are continually
updated to mitigate evolving threats.
The Group has detailed and robust systems
development and implementation processes
in place and a Cyber Incident Response
Plan. An Information Security Steering
Group has been established to provide
oversight of the Group's cyber security
strategy and to continue to promote
a positive culture for cyber security.
Periodic penetration testing is carried
out through security partners to test
the security of our perimeter network.
An externally led review of the Group's
cyber security processes and controls
has been completed in 2020 and provided
assurance over the Group's existing
measures.
Established GDPR compliant business
processes and data management are maintained
and regularly reviewed.
--------------------------------------- ------------------------------------------------
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:
-- 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
-- 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
Mike Killoran Group Finance Director
Nigel Mills Senior Independent Director
Rachel Kentleton Non-Executive 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 Mike Killoran
Group Chief Executive Group Finance Director
17 August 2021
The Group's annual financial reports, half year reports and
trading updates are available from the Group's website at
www.persimmonhomes.com/corporate
INDEPENT 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 2021 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.
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 2021 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 and Ireland) "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board. 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 will be prepared in accordance with UK adopted IFRSs. 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".
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.
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, is 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 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.
Ernst & Young LLP
Leeds
17 August 2021
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR PRMPTMTMBBBB
(END) Dow Jones Newswires
August 18, 2021 02:00 ET (06:00 GMT)
Grafico Azioni Persimmon (LSE:PSN)
Storico
Da Feb 2024 a Mar 2024
Grafico Azioni Persimmon (LSE:PSN)
Storico
Da Mar 2023 a Mar 2024