TIDMPSN
RNS Number : 8625I
Persimmon PLC
10 August 2023
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2023
Disciplined management during market uncertainty; building a
platform for future growth
Persimmon Plc today announces its half year results for the six
months ended 30 June 2023.
Dean Finch, Group Chief Executive, said:
"Against a backdrop of higher mortgage rates, the removal of
Help to Buy and significant market uncertainty, Persimmon has
delivered a robust sales rate excluding bulk sales whilst growing
the private average selling price in our forward order book and
also securing cost savings. We are on track to deliver profit
expectations for the year and are building a platform for future
growth.
"Our private sales rate has remained broadly consistent
throughout the period resulting in a private forward order book
that is now 83% higher than it was at the beginning of the year,
despite controlled use of sales incentives and limited recourse to
investor deals. Our pricing overall has remained resilient with
continued positive momentum in the forward order book. However, the
reduced volumes in the first half of the year has negatively
affected our operating margins as we predicted earlier in the year.
As we look forward, we expect increasing completions to result in
improving operating margins.
"We have been proactive in managing our cost base however, this
has been done without losing our focus on quality. We were
delighted to retain a five-star customer service rating in the
period and have made very pleasing progress in our Trustpilot
scores. The Group's national network of outlets providing high
quality products at a range of attractive prices and an improved
brand reputation are crucial strengths in this market.
"We have maintained targeted investment in exceptional new land
opportunities and enhanced key capabilities to deliver high quality
homes for customers consistently. Subject to the challenges in the
planning system we are determined to grow our outlet numbers in a
disciplined way. Our new Space4 factory and investment in TopHat
modular manufacturer will help us drive even greater efficiencies
in the coming years. We are carefully strengthening our operations
and national outlet network to position ourselves for future growth
while protecting margins.
"With the historic under-supply of homes the longer term outlook
for housing remains positive. Persimmon has a proven track record
of delivering strong returns through the cycle. I am confident that
the combination of a relentless focus on our key enduring strengths
while enhancing key capabilities, will again drive strong returns
through the next cycle."
Financial highlights
H1 2023 H1 2022
New home completions 4,249 6,652
New home average selling price GBP256,445 GBP245,597
Total Group revenue(1) GBP1.19bn GBP1.69bn
Underlying new housing gross margin(2) 21.5% 31.0%
Underlying operating profit(3) GBP152.2m GBP440.7m
Underlying operating margin(4) 14.0% 27.0%
Profit before tax GBP151.0m GBP439.7m
Earnings per share 34.4p 106.5p
Interim dividend per share 20p -
Cash at 30 June GBP0.36bn GBP0.78bn
Land holdings at 30 June - plots owned and
under control 84,751 89,052
Underlying 12 month rolling return on average
capital employed(5) 21.1% 30.9%
Trading highlights
-- 4,249 new home completions in H1 (2022: 6,652), reflecting
the lower forward order book coming into the year following the
market challenges after last Autumn's 'mini-Budget'
o Group private average selling price of GBP288,327, up 8% year
on year, partially reflecting a greater proportion of larger homes
sold
o Group average selling price of GBP256,445 up 4% year on
year
-- Sales rate of 0.59 for the period (2022: 0.91), broadly
sustaining the higher than expected rates seen in the first quarter
and secured with the controlled use of incentives and investor
deals
o Average incentive levels of 3.2% in the period on the Group's
private sales (H2 2022: 1.5%)
o Investor deals accounted for 0.03 of the sales rate in the
period; continue to assess approaches from interested parties on a
case-by-case basis
-- Cash at 30 June 2023 of GBP357m, after GBP192m in dividend
payments and GBP182m of land creditors paid in the period
o Continued close WIP and cost control, to manage cash and
margins while maintaining capability for upturn
o New revolving credit facility signed in July, increasing to
GBP700m and extending to July 2028; includes sustainability-linked
metrics
-- Interim dividend of 20p per share to be paid on 3 November
2023, to shareholders on the register on 13 October 2023
Operational highlights
-- Maintained five-star customer satisfaction rating for second
year running and have made good progress on our Trustpilot
scores
-- Excellent progress on build quality with a c.50% reduction in
Reportable Items(6) over the last year; building homes customers
can rely on at a price they can afford
-- Continued targeted investment in vertical integration through
a new Space4 factory and TopHat, a modular home manufacturer
-- Maintained positive progress on building safety remediation
programme; many active tenders and works on-going; 36 of 80
developments completed; GBP350m provision announced in March
remains unchanged
-- Continue to engage with the Competition and Markets Authority Housing Market Study
Land and planning highlights
-- Selective approach to land buying with 3,245 plots brought
into the business across 15 locations, maintaining good coverage
across the country
-- Selling outlets remained broadly flat in the period (June 2023: 273; December 2022: 272)
o Our ambition remains to return to pre-Covid outlet numbers in
the medium term, subject to planning constraints
-- Sharpened approach to planning through local engagement with
5,102 plots across 33 sites achieving detailed planning consent in
the period
o Represents 120% of completions in the period; focus on seeking
permissions on already owned land
o Some progress in addressing nutrient neutrality through
proactive local engagement on mitigation
Outlook
-- Current forward sales position (including 5 weeks post period
end) of GBP1.6bn; 30% lower year on year (2022: GBP2.2bn)
o Forward private sales of GBP875.9m, up 83% compared to 1
January 2023 (GBP478.5m)
o Forward private average selling prices up 0.9% compared to 1
January 2023
-- Full year completions expected to be at least 9,000, the top
end of our previously indicated range, with operating profits in
line with expectations given stubborn build cost inflation in the
period
o Prevailing build cost inflation of around 5%, we expect it to
moderate further in the months ahead
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 GBP1,089.6m (2022:
GBP1,633.7m) and gross profit of GBP234.0m (2022: GBP506.2m).
3 Stated before goodwill impairment (2023: GBP5.8m, 2022: GBP3.2m).
4 Stated before goodwill impairment (2023: GBP5.8m, 2022:
GBP3.2m) and based on new housing revenue.
5 12 month rolling average calculated on operating profit before
goodwill impairment of GBP9.2m (2022: GBP5.5m) and legacy buildings
provision charge of GBP275.0m (2022: GBPnil) and total capital
employed (including land creditors). Capital employed being the
Group's net assets less cash and cash equivalents plus land
creditors.
6 A Reportable Item is an area of non-compliance with NHBC
standards. The item is rectified fully before completion of the
home.
For further information please contact:
Victoria Prior, Group IR Director Olivia Peters
Anthony Vigor, Group Director of Policy and External Affairs Teneo
Persimmon Plc persimmon@teneo.com
Tel: +44 (0) 1904 642199 Tel: +44 (0) 7902 771 008
There will be an analyst and investor presentation at 09.00
today, hosted by Group Chief Executive, Dean Finch and Chief
Financial Officer, Jason Windsor.
Analysts unable to attend in person may listen live via
conference call by registering using the link below:
https://register.vevent.com/register/BI721dc6c73bb042db9d2365131ef60590
The presentation can be viewed via the webcast using the link
below:
https://edge.media-server.com/mmc/p/gdpdpt3a/
An archived webcast of today's analyst presentation will be
available on www.persimmonhomes.com/corporate from this
afternoon.
CHIEF EXECUTIVE'S REVIEW
Discipline through uncertainty; strengthening future
platform
Overview
Persimmon is on track for the full year to deliver results in
line with expectations. In the period we have delivered a PBT of
GBP151m, will pay an interim dividend of 20p per share and have a
cash position at 30 June of GBP357m. Despite the significant
economic, political and geo-political challenges of the last 9
months Persimmon continues to actively protect margins. Given the
strength of our land bank, our focus on cost efficiency and our
continued land buying expertise, this will continue.
For the full year we expect to deliver at least 9,000
completions, the top end of our previously indicated range. In the
period, the Group's average private weekly sales rate was 0.59 net
reservations per outlet per week. This broadly maintained the
improved rate seen in the first quarter of the year following the
challenges at the end of 2022, but is around 35% lower than the
strong comparator of last year. Incentives have also been used in a
very controlled manner at around 3.2% per plot, split roughly 2.2%
cash and 1.0% non-cash. In the 5 weeks since the period closed,
sales rates have been 0.41, compared to 0.69 for the same period
last year. Cancellations have remained around typical rates for the
year so far at c.18%.
Private average selling prices in the current forward order book
are proving resilient, up 0.9% since the start of the year. Our
current forward sales position is GBP1.6bn, 30% lower year on year
(2022: GBP2.2bn), reflecting the Group's lower sales rates. This
forward sales position is, however, over 49% higher than at the
start of the year. Affordability remains the key challenge, with
mortgage availability at higher loan-to-value ratios and the
removal of Help to Buy impacting First Time Buyers in particular.
The proportion of sales to First Time Buyers has dropped to 34% in
the period, compared to 42% in the first half of last year.
In the period 4,249 completions were delivered. This is a
reduction of 36% compared to the first six months of 2022, largely
due to beginning the year with a lower forward order book following
the market challenges experienced after last Autumn's
'mini-Budget'. The Group's average selling price of GBP256,445
(2022: GBP245,597) is up 4% year on year, partially reflecting the
delivery of a greater proportion of larger homes to our customers.
Underlying selling prices have remained broadly flat for the
period. Together these lower completions combined with price growth
has resulted in housing revenue declining by 33% to GBP1.09bn
(2022: GBP1.63bn).
As anticipated in the 2022 full year results announcement, the
net impact of house price inflation in the period against stubborn
cost inflation, lower volumes and increased sales and marketing
costs has reduced the Group's housing gross margin(1). This
together with a higher proportion of homes sold to our housing
associations partners (2023: 23%; 2022: 17%) has adversely impacted
housing gross margin by 950 bps.
%
Housing gross margin H1 2022 31.0
------
Inflation impact (4.2)
------
Sales rate (2.3)
------
Increased proportion of completions to housing association
partners (0.9)
------
Sales incentives and marketing (2.1)
------
Housing gross margin H1 2023 21.5
------
The Group generated an underlying housing operating margin(2) of
14.0% (2022: 27.0%).
In response to these pressures, we have rigorously sought new
opportunities for efficiency and cost savings, especially in light
of prevailing build cost inflation of around 5%, with a clear focus
on protecting margins. As such, Persimmon's well established and
disciplined cash and cost management processes are being
stringently applied as we use incentives in a controlled way,
carefully monitor land and work in progress investment and
diligently control our already lean overhead cost base. With a
total fixed cost base of GBP281m, we believe we compare favourably
within the sector.
We are also looking to the future and have sought targeted
investment, in excellent new land opportunities and our vertical
integration, to enhance our capability to respond rapidly and
effectively in an industry-leading way to improved market
conditions.
Delivery on strategic priorities
In line with our strategic priorities, our experienced
management team has focused on the following in the first half of
the year:
-- Maintaining a disciplined, proactive approach with cost and cash controls in place
-- Vertical integration to provide efficiency and resilience in supply
-- Improving sales effectiveness
-- Land and planning success
-- Continued focus on build quality, safety and sustainability
Maintaining a disciplined, proactive approach with cost controls
in place
Persimmon's senior management teams have significant experience
in applying rigorous cost control throughout the cycle, focusing on
protecting margins and cash generation. Drawing on this experience,
the Group acted quickly to enhance its already strong investment
discipline and working capital cost controls in the fourth quarter
of 2022 to protect our cash position and provide the flexibility to
pursue attractive growth opportunities in the longer-term. This
approach has been maintained in the first half with additional cost
control measures put in place and stronger central oversight of
spend within the regional businesses to balance the need for
significant discipline, alongside targeted investment in long term
success.
Our cost discipline is focused on four areas of 'smart'
savings.
First, we are reviewing value engineering across the Group to
share lessons and opportunities for efficiency, as well as further
procurement savings. This involves a plot-by-plot, site-by-site
review to identify areas for cost savings or value enhancement that
do not compromise quality. This review typically considers, for
example, whether we are optimising: the house type range on a
specific site; the external works (e.g. drives, patios and
retaining walls); and, the construction methods used, including
whether there's more opportunity to use our own brick and tile
products more widely. This enhanced review and oversight of site
costs is being complemented where possible by the expanded use of
procurement framework agreements and frequent supplier negotiations
to reduce the impact from build cost inflation and capture any
pricing opportunities as soon as possible.
Second, in an era of significant affordability challenges
alongside cost inflation, we are identifying opportunities to
secure savings in specifications that are less important to
customers and do not compromise on quality. We believe this review
could identify savings of up to GBP1,800 per plot. Persimmon's
mission is ever-more relevant: to build homes customers can rely on
at a price they can afford. In identifying opportunities for build
cost savings, this work is a crucial part of achieving that.
Third, we are reviewing our sub-contractor pricing on a more
frequent basis to identify opportunities to secure increased
savings. We are actively retendering sites to identify savings.
Just as we absorbed many price increases from sub-contractors in
recent years, so we need to share the cost pressures in this new
challenging environment. While there are of course variations
across trades, groundworker, bricklayer and dry liner costs are in
general coming down, for example. National infrastructure projects
like HS2 continue to create pressures in the broader sector,
however the overall inflationary pressure is reducing and we are
working proactively and in a detailed manner to capture it.
Fourth, Persimmon is already a 'lean' organisation within the
sector but we of course are keeping our overheads under constant
review. A recruitment freeze across the Group has seen headcount
reduce by nearly 300 in the period. Further reviews are on-going
and we are targeting GBP25m annualised saving, which will benefit
our 2024 operating budget. We will continue to balance the need for
cost savings with our aim of ensuring the company has the ability
to respond quickly to an improvement in the market to achieve our
objective of growing fastest in the industry - while delivering
industry-leading margins - as market conditions improve.
Underpinning all of these smart savings initiatives is the
further enhancement of our disciplined control of Work In Progress
to manage cash. This enhanced management has more closely matched
build rates to sales with build rates in the period running at
around 26% lower year-on-year at 195 units per week, while also
delivering targeted progress on our build given the low number of
equivalent units (c. 3,900) that we entered 2023 with. We have
ended the period with around 4,700 equivalent units providing
benefits from improved quality and greater customer choice. New
outlet openings are also rigorously reviewed on a similar basis:
balancing the cash investment required with likely customer demand
and ensuring we have a strong platform for future growth. Build
rates and outlet openings are kept under constant review by both
local and Group management teams.
Vertical integration providing efficiency and resilience in
supply
A key differentiator is Persimmon's vertical integration,
especially through our BrickWorks, TileWorks and Space4 timber
frame factories. These facilities provide a cost-effective,
resilient supply of high-quality materials. As part of our
continued review of costs and efficiencies these facilities are
providing further opportunities.
At the start of the year we altered the shift patterns at our
factories to ensure our manufacturing facilities remained a low
cost solution for the business, but we have the ability to ramp up
production quickly when market conditions improve. We have also
reviewed where we can expand the use of these products by operating
regions. We have increased the use of our own products to 55% of
all bricks used (2022: 41%). A switch to our own brick products
typically secures a GBP2,000 per plot saving.
Our vertically integrated approach demonstrates both our
cost-efficiency focus and how we are investing to enhance our
capabilities to grow quickly when the market conditions improve. In
June we secured planning permission for our new Space4 factory in
Leicestershire. This next-generation factory will use advanced
automation to provide up to 7,000 units a year and allow even more
of the frame set to be built in the factory. The new factory will
have the capability, for example, to include windows and
pre-drilled electrical and plumbing spaces amongst other advances.
Timber frame is currently seven weeks faster to build than
traditional homes. We expect these new frames to improve that by a
further two weeks at least.
Our investment in TopHat, announced in April, adds further
exciting opportunities. As part of their innovative modular units,
TopHat has developed an industry-leading brick façade. There is an
exciting opportunity to combine this façade with our timber frame
unit to provide further efficiency benefits as well as help manage
the growing challenge of labour shortages in key trades with the
assurance of factory-produced quality. TopHat's industry-leading
modular units will also provide the opportunity to expand our range
of products to customers.
Improving sales effectiveness
The period has seen significant market challenges and
volatility. This has been principally caused by mortgage rate
increases. There have been more welcome signs recently - albeit
after only one data point - on inflation and associated reductions
in some headline mortgage rates, however this only underlines the
volatility in the market. Within this context the Group has worked
hard to secure sales while using incentives and investor deals in a
controlled way. Without this discipline we could have sold more
homes, but at a lower price with the associated effect on margin. A
private weekly sales rate per outlet per week of 0.59 in the period
broadly maintains the improvement seen in the first quarter of the
year after the market challenges following last Autumn's
mini-Budget. Nonetheless, they are 35% lower than last year's
strong comparator. Cancellations have remained broadly stable at
typical historic levels. Taken together we are now confident we
will deliver at least 9,000 legal completions in 2023, the top end
of our previously indicated range. Since its introduction in 2022,
Persimmon has delivered 260 homes under the Government's 'First
Home' scheme, one of the largest contributions of any developer.
These are below market value homes, supported by a Homes England
grant.
Part exchange has proved popular, being used across the Group in
approximately 19% of gross reservations in the period (2022: 5%).
Within this, we are seeing a noticeable increase in existing
Persimmon and Charles Church customers using part exchange to
purchase a new home with us. This customer loyalty is pleasing to
see as it reflects the improvements we have made to quality and
customer service in recent years, as well as opening up the
opportunity for further growth in repeat custom.
In this more challenging market, our recent improvements to
quality and customer service while maintaining our affordability
advantage are ever more important. In the period Persimmon Homes'
average selling price is around 25% below the market average(3) .
We are now more consistently building well-located,
attractively-priced homes to a high standard. We have promoted this
with increased investment in marketing, with our two main
campaigns, launched on Boxing Day and over Easter, receiving strong
customer interest. We are planning another campaign for the
up-coming key selling season.
We have also been enhancing our digital marketing and customer
service capabilities, addressing historic underinvestment in these
key commercial areas and aiming to improve lead generation and
conversion. We now have 'always on' digital marketing, targeting
advertising at key market segments - such as First Time Buyers,
young families seeking space and downsizers - with a greater
propensity to buy new build homes. This more targeted approach
enables more bespoke messaging to resonate with these groups and
generates insight that can aid constant refinement of marketing
strategy.
A new sales and marketing customer relation management (CRM)
system, YourKeys, will provide a 'one-stop shop' for all customers,
making their buying experience with us easier and more engaging. As
well as providing real-time updates on the progress of a reserved
home, parts of the purchase process can be completed online at the
customer's convenience. The process will also be made more
efficient for our sales agents and colleagues. The roll-out will
start later this year and once implemented will provide a CRM
system that can be added to in the coming years, further enhancing
customer service and providing a rich database to refine our
targeted marketing.
Our new approach to marketing and enhancements to customer
service are helping to generate interest and enquiries. The current
challenge is to convert the interest into sales. While banks are
lending and there is significant - perhaps, record - levels of
equity in the market, loan-to-value ratios remain high.
Affordability remains the key challenge in the market and we are
considering new, innovative opportunities to support First Time
Buyers in particular in the absence of government policies such as
Help to Buy. As well as being a core Persimmon strength, cost
efficiency and savings are ever-more important to be able to offer
customers the opportunity of homeownership when affordability is
stretched for many.
Land and planning success
With our existing high quality land holdings, we have maintained
our stringent and disciplined approach to land opportunities and
continue to invest in exceptional cases to strengthen our platform
for growth, at the right time, when the market improves.
Overall, land spend in the period was GBP240m, GBP 176 m lower
than in the prior year (2022: GBP 416m ) reflecting this
disciplined approach. Of the GBP240m land spend, GBP182m was the
settlement of land creditors (2022: GBP 136 m). In addition, we
brought 3,245 plots across 15 sites into our owned and under
control land holdings in the period. The majority were in the North
and Scotland where average selling prices have remained firm or
increased. Overall the land we brought in reflected o ur balanced
coverage across the country, a key differentiator for our business.
Persimmon's competitive edge is our ability to operate successfully
nationally, with our land teams utilising specific local knowledge.
At 30 June 2023, our owned and under control land holdings stood at
84,751 plots (December 2022: 87,190).
With an increasingly lengthy and complex planning system, we are
focused on bringing our land pipeline through the planning system,
prioritising already owned plots. We have put new systems and
processes in place to seek more and faster permissions where
possible. Our central planning team has set clear new guidelines,
including a Placemaking Framework, that balance Persimmon's key
strength of plotting efficiency with excellent design and
masterplanning that meet increasingly stringent local requirements.
This is complemented by a proactive public affairs strategy that
engages local authorities and key stakeholders at an earlier stage
of the application process to ensure we are also reflecting local
priorities in both the detail and presentation of our plans. This
is supported by regular Group-level review to identify
opportunities for success.
Although this new approach is still bedding in, we secured full
or reserved matters planning permissions for 5,102 plots in the
first half of the year, 120% above our completions in the same
period. At 30 June 2023 we had 273 selling outlets (December 2022:
272). We are closely monitoring new openings and the associated
investment required against sales projections. We are also,
however, seeking to enhance our platform for future growth and have
a nationwide network of well-located outlets to meet an increase in
demand. Our ambition remains, therefore, to get back to a pre-Covid
outlet position in the medium term.
Continued focus on build quality, safety and sustainability
Persimmon's focus on consistent delivery of high-quality homes
through Build Right, First Time, Every Time in recent years has
been crucial for both customer service and cost-efficiency. We are
delighted to have maintained our 5-star HBF rating, awarded to us
for the second year running in March. This demonstrates our
improved delivery of consistently high-quality homes through our
Persimmon Way build quality programme. For the new survey year, our
HBF 8-week customer satisfaction score(4) is currently 92.3%,
reflecting our on-going focus. Our Trustpilot scores continue to
improve, with Persimmon Homes now 4.1 stars and Charles Church,
4.2. In January 2022 these scores were 3.0 and 2.5 stars,
respectively.
A crucial indicator of our success in Build Right, First Time,
Every Time is our progress on NHBC Reportable Items (RI) (5) .
These RIs follow independent assessment of our build quality by
warranty providers, in this case NHBC. An RI indicates a build
error that needs addressing before occupation and is marked as an
average score per assessment. In the last year we have seen a c.50%
improvement in our score, to 0.26 RIs per inspection. This is now
better than the industry average and whereas 3 years ago we were
regularly the worst performing major builder, we are currently
towards the top of the league table.
Persimmon's key safety indicators are strong within the
industry. Nonetheless, a good business should be striving to reduce
all harm where it can and ensure the safety and well-being of
colleagues, customers and the local community. As part of our
continual review of safety performance and approach, we will launch
enhanced policies and a new measurement system that will help
achieve an objective of 'zero harm' within Persimmon.
We continue to make good progress against our carbon-reduction
targets. These targets were accredited by the blue-ribbon Science
Based Targets initiative and include the stretching aim for all our
homes to be zero carbon in use by 2030 and our operations to be net
zero by 2040. Persimmon's approach is to deliver ahead of
established carbon-reduction targets where possible, whilst
ensuring cost effectiveness for customers. We continue to pursue
trials of innovative materials and construction processes to
deliver this, including our second zero carbon home in Malmesbury
and new heating systems and technologies. Our investment in TopHat
also provides access to their ultra-efficient modular homes and
build processes.
Outlook
While the house building sector is navigating a challenging
economic environment, Persimmon's focus on discipline, cost control
and margin protection while enhancing our operational capabilities
continues. We have and will continue to manage the balance sheet
very robustly. We remain on track to deliver our profit
expectations for the year.
We have broadly maintained sales rates through the period,
despite market volatility and a very controlled use of investor
deals and sales incentives. We have been contacted by a number of
interested parties looking to secure investor deals and we will
continue to assess them on a case-by-case basis. While we ended the
period with a forward sales position of GBP1.4bn, 27% lower year on
year (2022: GBP1.9bn), private average selling prices in the
forward order book are up 0.6% year on year and in line with the
position coming into 2023. In the 5 weeks since the period ended,
the forward sales position has grown to GBP1.6bn, with private
average selling prices remaining firm. Within the GBP1.6bn, the
private sales are up 83% since the start of the year. While there
are potential signs of some mortgage rates reducing from recent
highs, market volatility is likely to continue and affordability
concerns remain. We are exploring innovative ways to help customers
realise their ambition of owning a home and are seeing pleasing
examples of enhanced loyalty especially through our Part Exchange
offer. We expect to deliver at least 9,000 completions this year,
the top end of our previously indicated range, with margins as
outlined at our year end announcement.
Prevailing build cost inflation of around 5% is a reduction from
the highs seen earlier in the year and we expect it to moderate
further in the months ahead. Disciplined cost control will continue
as we actively protect our margin. Regular interrogation of build
processes, product specifications and sub-contractors will drive
opportunities for savings, as will on-going overhead reviews. We
have continued our stringent and targeted approach to new land
additions, which are strengthening our platform for future growth.
Our ambition to grow our national outlet network back to pre-Covid
levels in the medium term remains, subject to the challenges in the
planning system where our new enhanced approach is demonstrating
some early success. Our new Space4 facility and investment in the
country's most innovative modular home manufacturer, TopHat,
provide exciting opportunities for cost and build efficiencies,
while delivering factory-guaranteed quality.
Persimmon has two well-known private brands with significantly
improved customer reputations, operating from a nationwide network
of outlets and offering a broad range of attractively priced and
high-quality homes to customers. With the long-term fundamentals of
the housing market strong as shortages of new homes and developable
land persist, our strengthening platform for future growth is
exciting. Just as we have been - and continue to be - very careful
to manage the business as the market conditions deteriorated, so we
must be ready to respond quickly as they improve.
Persimmon has an excellent track record of delivering strong
returns through the cycle. Our unique combination of strengths -
value proposition, nationwide network and in-house manufacturing
capabilities - augmented by our improved reputation for quality and
service with customers and stakeholders means our ambition is to
grow quickly as the market improves, while delivering an
industry-leading margin. We believe this will again drive strong
returns through the next cycle. It is an exciting prospect.
Dean Finch
Group Chief Executive
Footnotes
1 Stated on new housing revenues of GBP1,089.6m (2022:
GBP1,633.7m) and gross profits of GBP234.0m (2022: GBP506.2m).
2 Stated on new housing revenue of GBP1,089.6m (2022:
GBP1,633.7m) and underlying profit from operations of GBP152.2m
(2022: GBP440.7m) calculated before goodwill impairment of GBP5.8m
(2022: GBP3.2m).
3 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.
4 The Group participates in a National New Homes Survey, run by
the Home Builders Federation. The rating system is based on the
number of customers who would recommend their builder to a
friend.
5 A Reportable Item is an area of non-compliance with NHBC
standards. The item is rectified fully before completion of the
home.
FINANCIAL REVIEW
Trading
The Group generated total revenue(1) of GBP1.19bn (2022:
GBP1.69bn), with new housing revenue of GBP1.09bn (2022:
GBP1.63bn).
Legal completions, as anticipated, were lower than the prior
year and reflect the lower forward order book position at the start
of the year and reduced sales activity. The Group delivered 4,249
new homes (2022: 6,652) at an average selling price of GBP256,445
(2022: GBP245,597) which is 4% higher year on year, partially due
to an increased proportion of larger homes sold offset by a greater
proportion of homes to our housing association partners than the
prior year period.
The Group delivered 3,281 new homes to its private owner
occupier customers (2022: 5,553) at an average selling price 8%
higher than a year ago (2023: GBP288,327; 2022: GBP267,325),
reflecting greater demand for our three, four and five bed homes
and mix of sites in the period. While interest remains good for all
our homes, sales to first time buyers remain more challenging and
reduced to 34% of private completions in the first half, reflecting
stretched affordability and reduced mortgage availability at higher
loan-to values, particularly in regions with higher house prices.
The Group also delivered 968 homes to our housing association
partners (2022: 1,099) at an average selling price of GBP148,382
(2022: GBP135,813), with the investment in a new housing
association team proving very valuable to the Group.
As mentioned earlier, the greater proportion of housing
association delivery along with the impact of lower volumes and
build cost inflation of around 8-9% in the period, resulted in a
decrease in the Group's housing gross margin(2) to 21.5% (2022:
31.0%).
The Group's gross profit for the period of GBP234.0m (2022:
GBP506.2m) continues to be supported by the Group's well
established land replacement strategy, with land cost recoveries(3)
of 11.2% of new housing revenue for the period (2022: 11.9%).
Underlying housing operating margin of 14.0% has been impacted
by operating deleverage due to the reduced levels of completions,
along with higher operating expenses and inflationary pressures
(2022: 27.0%). Underlying operating profit for the Group was
GBP152.2m (2022: GBP440.7m).
The Group generated a profit before tax of GBP151.0m in the
period (2022: GBP439.7m).
Land
Since Q4 2022, we have taken a highly selective approach to
land. As of 30 June 2023, we had 273 active sales outlets, up from
257 a year ago, with an average of 267 in the first half. As
highlighted at our 2022 full year results in March, the average
number of outlets is expected to be broadly similar to last year,
reflecting selective investment and the ongoing effect of a slow
planning system.
During the period the Group reduced our owned and under control
land holdings to 84,751, from 87,190 plots at 31 December 2022,
with 35,086 of these plots benefitting from detailed planning
consents and are under development.
The Group brought 3,245 plots into the business across 15
locations throughout the country with 370 of these plots converted
from our strategic land portfolio. At 30 June 2023, Persimmon's
owned land holdings of 68,461 plots (2022: 72,036 plots) have an
overall pro forma gross margin(6) of c. 31% and a cost to revenue
ratio of 11.4% (7) (2022: 11.8%).
To supplement these land holdings, the Group has c.13,100 acres
of strategic land in its portfolio with the potential to deliver up
to 100,000 new homes. This includes excellent visibility over
c.20,500 plots that are held under option and proceeding through
planning.
During the period the Group incurred land spend of GBP240.4m,
including GBP181.8m of payments in satisfaction of deferred land
commitments.
Building safety
During the period, we signed both the UK Government's Self
Remediation Contract (in England) and also the Welsh Government's
Developers' Pact, which turn the respective Building Safety Pledges
into binding commitments. On 1 August, the Department for Levelling
Up, Housing and Communities announced that we had joined the
associated Responsible Actors Scheme; failure to join the scheme
threatens the use of planning and building control sanctions on
relevant developers who are not meeting their remediation
commitments. Alongside other developers we signed the Scottish
Safer Buildings Accord in May and discussions are on-going between
the industry and Scottish Government to agree a long form contract.
While these discussions are on-going, we continue to make progress
on Scottish developments to deliver on our previously stated
commitments.
Across our programme as a whole we continue our proactive
approach of working with Management Companies, factors (in
Scotland) and their agents to carry out necessary remediation as
soon as possible. The table below sets out our detailed position at
4 August 2023, compared to 1 March 2023. The total number of
eligible developments has increased to 80 from 73, as new buildings
we were not aware of on 1 March 2023 came in to our programme. Very
recently, 5 developments have come into our programme and are
currently being assessed for the scope of eligible works. Initial
investigations suggest 4 of these buildings will only require
minimal works.
Of the total of 80 developments in our programme 36 (45%) have
already seen any necessary works completed (an increase of 3 since
the start of the year). Of the remaining 44, 14 currently have work
on site and 25 are at varying stages of pre-tender, live tender,
contractualisation or agreed contract and works starting very soon.
As the pre-tender and on site lines in the table below demonstrate
in particular, developments are actively progressing through the
programme.
Identified developments As of 4 Aug As of 1 March
2023 2023
------------
Recently made aware and under investigation 5 -
--------------------------------------------- ------------ --------------
Pre-tender preparation on-going 9 21
--------------------------------------------- ------------ --------------
Live tender process 3 2
--------------------------------------------- ------------ --------------
Sub-total: progressing through tender 17 23
------------ --------------
Progressing to contract 12 8
--------------------------------------------- ------------ --------------
Contracted but works yet to start 1 -
--------------------------------------------- ------------ --------------
Sub-total: pre-works starting 30 31
------------ --------------
Currently on site 14 9
--------------------------------------------- ------------ --------------
Sub-total: to complete 44 40
------------ --------------
Completed developments 36 33
--------------------------------------------- ------------ --------------
Total identified developments 80 73
------------ --------------
In the period we spent GBP16m on the programme, with total
expenditure so far now just over GBP30m. The next 18 months, and
2024 especially, are projected to be the peak period of cash
expenditure on this programme. We guided at the beginning of the
year that we expect the programme to be concentrated over three
years and that remains the case. Our ambition remains to be on site
on all currently known developments by the end of this year. Given
our own proactive approach and the sustained and significant
publicity around cladding and building safety, we do not anticipate
significant new building additions into the programme. We believe
our existing provision remains sufficient.
Disciplined investment and spending
During the period, we continued targeted investment into the
business to enhance quality, efficiency and returns as we build a
more sustainable business. While the market remains uncertain in
the near-term, we are ensuring that our business is ready for the
recovery when it comes, retaining key capabilities and enhancing
our processes to enable best practice to be shared across the
Group.
Within our ongoing disciplined approach, the Group has applied
additional cost control measures, including stronger central
oversight and the expanded use of frameworks agreements in
procurement. As part of these measures, the Group has also
implemented a hiring freeze, unless business critical. We continue
to retain our key capabilities to ensure readiness for upturn.
Our focus is on maintaining disciplined investment to enhance
quality, efficiency and returns, through our vertical integration,
capabilities of our sales teams and targeted nature of our build
programmes.
Robust balance sheet and active cash management
The Group had a cash balance of GBP357.0m at 30 June 2023
(December 2022: GBP861.6m) with land creditors of GBP355.9m
(December 2022: GBP472.8m), of which GBP85.8m is expected to be
paid by the end of the year and a further GBP93.1m due in the first
half of 2024. The Group generated GBP155.3m of cash from operating
activities in the period (2022: GBP451.1m), before returning
GBP191.5m of capital to shareholders in respect of a dividend for
full year 2022 and investing GBP418.4m in working capital (being
principally c.GBP117m in net land and GBP213m in net work in
progress). This investment in land and work in progress along with
the Group's healthy liquidity will provide further opportunity to
continue to support the future growth of the business as we
position the Group for growth in outlets in 2024.
At 30 June 2023, the Group had work in progress of c.4,700
equivalent units of new home construction an increase on the low
position at the start of the year (December 2022: c.3,900). We
remain disciplined in regard to work in progress investment,
managing appropriate levels of build against customer demand,
facing into the continuing operational challenges within the
industry and whilst securing the availability of key build
components through our in-house manufactured bricks, roof tiles,
closed panel timber frame kits and pre-manufactured roof cassettes.
Overall, build rates tracked at 195 equivalent units per week
versus 264 in the first half of 2022 and 288 in the second half of
2022.
The Group has a robust balance sheet with high quality land
holdings, strong levels of work in progress investment and healthy
levels of liquidity. We continue to exert disciplined control over
work in progress while investing to strengthen our platform for
future growth. At 30 June 2023 the Group had land holdings of
GBP2.09bn and work in progress of GBP1.48bn, an increase of
GBP213.0m compared to 31 December 2022.
As at 30 June 2023, we owned 451 part exchange properties
(December 2022: 286 properties) at a value of GBP85.8m (December
2022: GBP61.0m). Part exchange continues to be a key sales
incentive for our customers and we are progressing sales of any
part exchange properties promptly and around expected values.
In July the Group signed a new undrawn Revolving Credit Facility
(RCF) of GBP700m which has a 5 year term out to July 2028. This
facility replaced the Group's existing GBP300m revolving credit
facility which was due to expire on 31 March 2026. We had good
support from banking partners, with a consortium of 5 participating
banks. The RCF is a 'Sustainability Linked' facility within the
banks' finance frameworks, with ESG targets covering the facility's
term. The targets are consistent with the Group's science based
operational carbon reduction targets, our commitment to deliver net
zero homes in use by 2030 and our long standing ambition to deliver
excellent development opportunities for our colleagues.
The Group's defined benefit net pension asset has decreased to
GBP149.4m at 30 June 2023 (December 2022: GBP155.9m) mainly
reflecting the underperformance of asset returns when compared to
the standard expected returns at the start of the year and an
increase in inflation assumptions offset in part by an increase in
the discount rate assumption applied to the scheme obligations.
Total equity decreased to GBP3,356.1m from GBP3,439.3m at 31
December 2022. Reported net assets per share of 1,050.7p represents
a 2.4% decrease from 1,077.0p at 31 December 2022. Underlying
return on average capital employed(8) as at 30 June was 21.1%
(December 2022: 30.4%), demonstrating the resilience of the
business and the investment made to support future growth.
Underlying basic earnings per share(5) for the first six months of
2023 was 36.2p, a 66.3% decrease compared to the prior period
(2022: 107.5p).
Capital Allocation
The Group's capital allocation policy is to deliver sustainable
returns to shareholders while investing in future growth through
disciplined expansion of our land portfolio.
For 2023, the Board has declared an interim dividend of 20p per
share, which will be payable on 3 November, to shareholders on the
register on 13 October. The Board's intention is to maintain the
2022 dividend of 60p per share, with a view to growing this over
time.
As the Group invests in further growth, our long-standing
financial discipline will continue in all land appraisals and
decisions to open outlets. We do expect cash balances to reduce,
but the Group will continue to maintain a robust balance sheet,
with low leverage. We currently anticipate cash at year end will be
between GBP300m and GBP500m.
Jason Windsor
Chief Financial Officer
Footnotes
1 The Group's total revenues include the fair value of
consideration received or receivable on the sale of part exchange
properties and income from the provision of broadband internet
services. New housing revenues are the revenues generated on the
sale of newly built residential properties only.
2 Stated on new housing revenues of GBP1,089.6m (2022:
GBP1,633.7m) and gross profits of GBP234.0m (2022: GBP506.2m).
3 Land cost value for the plot divided by the revenue of the new home sold.
4 Stated on new housing revenue of GBP1,089.6m (2022:
GBP1,633.7m) and underlying profit from operations of GBP152.2m
(2022: GBP440.7m) calculated before goodwill impairment of GBP5.8m
(2022: GBP3.2m).
5 Stated before goodwill impairment of GBP5.8m (2022: GBP3.2m).
6 Estimated weighted average gross margin based on assumed
revenues and costs at 30 June 2023 and normalised output
levels.
7 Land cost value for the plot divided by the anticipated future revenue of the new home sold.
8 12 month rolling average calculated on underlying operating
profit and total capital employed (including land creditors).
Underlying operating profit is stated before goodwill impairment of
GBP9.2m (2022: GBP5.5m).
Appendices
2023 quarterly performance HY 22 FY 22 Q1 23 Q2 23 HY 23
Completions (homes) 6,652 14,868 1,136 3,113 4,249
Private (homes) 5,553 12,174 902 2,379 3,281
Housing Association
(homes) 1,099 2,694 234 734 968
Net private sales rate 0.91 0.69 0.62 0.58 0.59
FTB(1) % (private completions) 42% 42% 38% 33% 34%
Average sales outlets 250 259 266 268 267
(1 First time buyers)
Forward sales position
30 June 2023 30 June 2022 Variance
Forward sales Value Homes Value Homes Value Homes
--------------------- ---------- ------ --------- ------ ----------- --------
Private GBP0.7bn 2,516 GBP1.3bn 4,682 GBP(0.6)bn (2,166)
Housing Association GBP0.7bn 4,209 GBP0.6bn 4,148 +GBP0.1bn +61
--------------------- ---------- ------ --------- ------ ----------- --------
Total GBP1.4bn 6,725 GBP1.9bn 8,830 GBP(0.5)bn (2,099)
--------------------- ---------- ------ --------- ------ ----------- --------
PERSIMMON PLC
Condensed Consolidated Statement of Comprehensive Income
For the six months to 30 June 2023 (unaudited)
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31
December 2022
Note Total Total Total
GBPm GBPm GBPm
------------------------------------- ---------------- --------------- --------------------------- ---------------
Total revenue 3 1,188.5 1,688.6 3,815.8
Cost of sales (954.5) (1,182.4) (2,948.3)
------------------------------------- ---------------- --------------- --------------------------- ---------------
Gross profit 234.0 506.2 867.5
Other operating income 4.1 6.2 10.3
Operating expenses (91.7) (74.9) (152.9)
------------------------------------- ---------------- --------------- --------------------------- ---------------
Profit from operations 146.4 437.5 724.9
Analysed as:
Underlying operating profit 152.2 440.7 1,006.5
Legacy buildings provision - - (275.0)
Impairment of intangible assets (5.8) (3.2) (6.6)
------------------------------------- ---------------- --------------- --------------------------- ---------------
Finance income 11.2 4.6 9.9
Finance costs (6.6) (2.4) (4.1)
------------------------------------- ---------------- --------------- --------------------------- ---------------
Profit before tax 151.0 439.7 730.7
Analysed as:
Underlying profit before tax 156.8 442.9 1,012.3
Legacy buildings provision - - (275.0)
Impairment of intangible assets (5.8) (3.2) (6.6)
------------------------------------- ---------------- --------------- --------------------------- ---------------
Tax 5 (41.3) (99.9) (169.7)
------------------------------------- ---------------- --------------- --------------------------- ---------------
Profit after tax (all attributable
to equity holders of the parent) 109.7 339.8 561.0
------------------------------------- ---------------- --------------- --------------------------- ---------------
Other comprehensive (expense)/income
Items that will not be reclassified
to profit:
Re-measurement (losses)/gains
on defined benefit pension schemes 13 (9.7) 59.4 5.2
Tax 5 2.7 (16.7) (7.6)
------------------------------------- ---------------- --------------- --------------------------- ---------------
Other comprehensive (expense)/income
for the period, net of tax (7.0) 42.7 (2.4)
------------------------------------- ---------------- --------------- --------------------------- ---------------
Total recognised income for
the period 102.7 382.5 558.6
------------------------------------- ---------------- --------------- --------------------------- ---------------
Earnings per share
Basic 6 34.4p 106.5p 175.8p
Diluted 6 34.1p 105.9p 174.3p
------------------------------------- ---------------- --------------- --------------------------- ---------------
PERSIMMON PLC
Condensed Consolidated Balance Sheet
As at 30 June 2023 (unaudited)
30 June 30 June 31 December
2023 2022 2022
Note GBPm GBPm GBPm
--------------------------------- ----- ---------- ---------- ------------
Assets
Non-current assets
Intangible assets 167.2 176.2 173.0
Property, plant and equipment 133.0 107.6 118.6
Investments accounted for using
the equity method 1 1.0 0.3 0.3
Shared equity loan receivables 9 27.8 32.4 29.1
Trade and other receivables 1 7.1 0.6 0.3
Deferred tax assets 11.8 9.7 10.5
Retirement benefit assets 13 149.4 209.4 155.9
--------------------------------- ----- ---------- ---------- ------------
497.3 536.2 487.7
--------------------------------- ----- ---------- ---------- ------------
Current assets
Inventories 8 3,705.1 3,402.7 3,462.9
Shared equity loan receivables 9 6.3 7.9 6.9
Trade and other receivables 144.2 151.5 193.2
Current tax assets 1.4 32.5 21.8
Cash and cash equivalents 12 357.0 782.0 861.6
--------------------------------- ----- ---------- ---------- ------------
4,214.0 4,376.6 4,546.4
--------------------------------- ----- ---------- ---------- ------------
Total assets 4,711.3 4,912.8 5,034.1
--------------------------------- ----- ---------- ---------- ------------
Liabilities
Non-current liabilities
Trade and other payables (184.7) (267.6) (214.8)
Deferred tax liabilities (70.8) (74.0) (72.1)
Partnership liability (14.6) (18.9) (19.6)
Legacy buildings provision 10 (146.2) - (196.8)
--------------------------------- ----- ---------- ---------- ------------
(416.3) (360.5) (503.3)
--------------------------------- ----- ---------- ---------- ------------
Current liabilities
Trade and other payables (767.1) (863.6) (949.4)
Partnership liability (5.6) (5.6) (5.6)
Legacy buildings provision 10 (166.2) (69.3) (136.5)
(938.9) (938.5) (1,091.5)
--------------------------------- ----- ---------- ---------- ------------
Total liabilities (1,355.2) (1,299.0) (1,594.8)
--------------------------------- ----- ---------- ---------- ------------
Net assets 3,356.1 3,613.8 3,439.3
--------------------------------- ----- ---------- ---------- ------------
Equity
Ordinary share capital issued 31.9 31.9 31.9
Share premium 25.6 25.6 25.6
Capital redemption reserve 236.5 236.5 236.5
Other non-distributable reserve 276.8 276.8 276.8
Retained earnings 2,785.3 3,043.0 2,868.5
--------------------------------- ----- ---------- ---------- ------------
Total equity 3,356.1 3,613.8 3,439.3
--------------------------------- ----- ---------- ---------- ------------
PERSIMMON PLC
Condensed Consolidated Statement of Changes in Shareholders'
Equity
For the six months to 30 June 2023 (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 2023:
Balance at 1 January
2023 31.9 25.6 236.5 276.8 2,868.5 3,439.3
Profit for the period - - - - 109.7 109.7
Other comprehensive expense - - - - (7.0) (7.0)
Transactions with owners:
Dividends on equity shares - - - - (191.5) (191.5)
Own shares purchased - - - - (1.2) (1.2)
Share-based payments
(net of tax) - - - - 6.8 6.8
Balance at 30 June 2023 31.9 25.6 236.5 276.8 2,785.3 3,356.1
---------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Six months ended 30
June 2022:
Balance at 1 January
2022 31.9 24.9 236.5 276.8 3,055.1 3,625.2
Profit for the period - - - - 339.8 339.8
Other comprehensive income - - - - 42.7 42.7
Transactions with owners:
Dividends on equity shares - - - - (399.0) (399.0)
Issue of new shares - 0.7 - - - 0.7
Share-based payments
(net of tax) - - - - 4.4 4.4
---------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Balance at 30 June 2022 31.9 25.6 236.5 276.8 3,043.0 3,613.8
---------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Year ended 31 December
2022:
Balance at 1 January
2022 31.9 24.9 236.5 276.8 3,055.1 3,625.2
Profit for the year - - - - 561.0 561.0
Other comprehensive expense - - - - (2.4) (2.4)
Transactions with owners:
Dividends on equity shares - - - - (750.1) (750.1)
Issue of new shares - 0.7 - - - 0.7
Own shares purchased - - - - (0.7) (0.7)
Exercise of share options/share (1.0) (1.0)
awards
Share-based payments - - - - 5.6 5.6
(net of tax)
Satisfaction of share - - - - 1.0 1.0
options from own shares
held
Balance at 31 December
2022 31.9 25.6 236.5 276.8 2,868.5 3,439.3
---------------------------------- --------- --------- ------------ ------------------------ ---------- --------
PERSIMMON PLC
Condensed Consolidated Cash Flow Statement
For the six months to 30 June 2023 (unaudited)
Six months to 30 June Six months to 30 Year to 31 December
2023 June 2022 2022
Note GBPm GBPm GBPm
--------------------------- ----- -------------------------- -------------------------- --------------------------
Cash flows from operating
activities:
Profit for the period 109.7 339.8 561.0
Tax charge 5 41.3 99.9 169.7
Finance income (11.2) (4.6) (9.9)
Finance costs 6.6 2.4 4.1
Depreciation charge 8.6 7.5 15.8
Impairment of intangible
assets 5.8 3.2 6.6
Legacy buildings provision 10 - - 275.0
Share-based payment charge 6.6 5.9 9.0
Net imputed interest
(expense)/income (4.4) 1.2 2.1
Other non-cash items (7.7) (4.2) (7.9)
--------------------------- ----- -------------------------- -------------------------- --------------------------
Cash inflow from operating
activities 155.3 451.1 1,025.5
Movement in working
capital:
Increase in inventories (240.7) (477.2) (532.5)
Decrease/(increase) in
trade and
other receivables 72.0 (31.2) (81.1)
(Decrease)/increase in
trade and
other payables (252.5) 113.3 141.1
Decrease in shared equity
loan receivables 2.8 7.4 13.3
--------------------------- ----- -------------------------- -------------------------- --------------------------
Cash (absorbed)/generated
from operations (263.1) 63.4 566.3
Interest paid (2.2) (2.6) (3.3)
Interest received 7.8 1.4 3.5
Tax paid (20.7) (109.5) (164.2)
--------------------------- ----- -------------------------- -------------------------- --------------------------
Net cash (outflow)/inflow
from operating
activities (278.2) (47.3) 402.3
--------------------------- ----- -------------------------- -------------------------- --------------------------
Cash flows from investing
activities:
Investment in an associate (0.7) - -
Acquisition of loan notes (6.8) - -
Acquisition of a
subsidiary - (0.2) (0.2)
Purchase of property,
plant and equipment (20.3) (13.7) (30.5)
Proceeds from sale of
property, plant
and equipment 0.4 0.7 0.9
--------------------------- ----- -------------------------- -------------------------- --------------------------
Net cash outflow from
investing
activities (27.4) (13.2) (29.8)
--------------------------- ----- -------------------------- -------------------------- --------------------------
Cash flows from financing
activities:
Lease capital payments (2.0) (1.8) (3.3)
Payment of Partnership
liability (4.3) (4.0) (4.1)
Own shares purchased (1.2) - (0.7)
Share options
consideration - 0.7 0.7
Dividends paid 7 (191.5) (399.0) (750.1)
--------------------------- ----- -------------------------- -------------------------- --------------------------
Net cash outflow from
financing
activities (199.0) (404.1) (757.5)
--------------------------- ----- -------------------------- -------------------------- --------------------------
Decrease in net cash and
cash equivalents 12 (504.6) (464.6) (385.0)
--------------------------- ----- -------------------------- -------------------------- --------------------------
Cash and cash equivalents
at the
start of the period 861.6 1,246.6 1,246.6
--------------------------- ----- -------------------------- -------------------------- --------------------------
Cash and cash equivalents
at the
end of the period 12 357.0 782.0 861.6
--------------------------- ----- -------------------------- -------------------------- --------------------------
Notes
1. Basis of preparation
The half year condensed financial statements for the six months
to 30 June 2023 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 2022, which have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and UK
adopted IFRS.
The comparative figures for the financial year ended 31 December
2022 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 2022, as described in those financial
statements.
The following relevant UK endorsed new amendments to standards
are mandatory for the first time for the financial year beginning 1
January 2023:
-- Amendments to IAS 12 Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
-- Amendments to IAS 8 Definition of Accounting Estimates
-- Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting policies
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 16 Lease Liability in a Sale and Leaseback
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's performance in the six months ended 30 June 2023 has
been resilient when faced by a number of challenges and a period of
uncertainty. 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 4,249 new homes (2022: 6,652) and generated
profit before tax of GBP151.0m (2022: GBP439.7m) in the period. At
30 June 2023, the Group had a strong balance sheet with GBP357.0m
of cash (2022: GBP782.0m), high quality land holdings and land
creditors of GBP355.9m (December 2022: GBP472.8m). In addition, on
5 July the Group renewed its Revolving Credit Facility increasing
it from GBP300m to GBP700m, with a five year term out to 5 July
2028. The facility was undrawn during the period and remains
undrawn at this time.
The Group's forward order book, including legal completions
recognised in the second half, stands at c. GBP1.6bn.
The Directors have reviewed the Group's principal risks, see
note 14 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 2022. 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 against the challenges it faced, together with
its robust 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 2022 remains
relevant and valid.
The Directors consider the going concern assessment to be to 31
December 2024 and have assessed the impact of a severe but
plausible downside scenario for the housing market, from the date
of this announcement to 31 December 2024, on the resilience of the
Group. This downside scenario models a fall in housing revenue,
when compared to full year 2022, of c. 37% for full year 2023 with
a further c. 44% fall in housing revenue in full year 2024, when
compared to the forecast 2023 revenue, along with the likely
effectiveness of mitigating actions that would be executed by the
Directors. The fall in housing revenue factors in both volumes and
average selling price in arriving at the housing revenue value
modelled. The assumption used in this scenario reflects the
experience management gained during the Global Financial Crisis
from 2007 to 2010, it being the worst recession seen in the housing
market since World War Two. Throughout this scenario, the Group is
assumed to manage cash flows to ensure all relevant land, work in
progress and operational investments were made in the business at
the appropriate time to deliver the projected new home legal
completions. The scenario also fully reflects the current estimate
of cash outflows, value and timing, associated with the legacy
buildings provision.
In addition the Group has been increasingly assessing climate
related risk and opportunities that may be presented to the Group.
During the period assessed for going concern no significant risk
has been identified that would materially impact the Group's
ability to generate sufficient cash and continue as a going
concern.
Having considered the inherent strength of the UK housing
market, the resilience of the Group's average selling prices, the
Group's scenario analysis, 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 8), shared
equity loan receivables (see note 9 and note 11), 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 14 of the
Group's annual financial statements for the year ended 31 December
2022.
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 GBP1.8m recognised during the
period. This impairment charge reflects ongoing consumption of the
acquired strategic land holdings and is consistent with prior
years.
During the period Horsebridge Network Systems Limited ceased
trading. As a result, the GBP4.0m of goodwill that arose on the
acquisition of Horsebridge Network Systems Limited in 2022 has been
written off in the period.
Investments in associates
During the period the Group has invested GBP0.7m in the equity
of a new associate, TopHat Enterprises Limited (TopHat). This
investment is reported under the equity method of accounting. In
addition to this equity investment the Group has acquired GBP6.8m
of interest bearing long-term loan notes issued by TopHat. These
are reported within non-current trade and other receivables at 30
June 2023. The Group has also committed to acquire a further
GBP17.5m of interest bearing long-term loan notes from TopHat in
January 2024.
2. Segmental analysis
The Group has only one reportable operating segment, being
housebuilding within the UK, under the control of the Executive
Board. The Executive Board has been identified as the Chief
Operating Decision Maker as defined under IFRS 8 Operating
Segments.
3. Revenue
Six months Six months Year to
to 30 to 30 June 31 December
June 2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Revenue from the sale of new
housing 1,089.6 1,633.7 3,696.4
Revenue from the sale of part
exchange
properties 93.3 50.9 110.6
Revenue from the provision of
internet
services 5.6 4.0 8.8
--------------------------------------------- -------------------- ----------------------- ------------------------
Revenue from the sale of goods
and services
as reported in the statement of
comprehensive
income 1,188.5 1,688.6 3,815.8
--------------------------------------------- -------------------- ----------------------- ------------------------
4. Exceptional Items
During 2022 the Group recognised an exceptional charge of
GBP275.0m in relation to the increase in the anticipated costs of
the Group's commitments to support leaseholders in buildings we had
developed with the costs of removal of combustible cladding and
other fire related remediation works. This reflected the extended
commitment of the government long form contract, the identification
of further developments for which we are now responsible, and a
greater understanding of remediation costs. Further detail on this
matter is provided in note 10 to this announcement.
This was disclosed as an exceptional item due to the
non-recurring nature and scale of the charge, in order to aid
understanding of the financial performance of the Group and to
assist in the comparability of financial performance between
accounting periods.
5. Tax
The tax charge for the period includes both current and deferred
tax. The tax charge is based upon the expected tax rate for the
full year, which is applied to taxable profits for the period,
together with any charge or credit in respect of prior years.
Current tax, includes both UK corporation tax and Residential
Property Developer Tax (RPDT). Deferred Tax is calculated as the
tax payable or recoverable in future accounting periods in respect
of temporary differences which may be taxable or allowed as
deductible. Temporary differences represent the difference between
the carrying amount of an asset or liability in the financial
statements and the relevant tax base. The effective rate of tax for
the period was 27.3% which was higher than in previous periods (31
December 2022: 23.2%; 30 June 2022: 22.2%) and reflects the
increased rates of corporation tax and RPDT noted below.
Analysis of the tax charge for the period
Six months Six months Year to
to 30 to 30 June 31 December
June 2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Tax charge comprises:
UK corporation tax in respect of
the
current period 35.6 98.6 138.8
RPDT in respect of the current
year 5.5 - 28.7
Adjustments in respect of prior
years - - (2.8)
--------------------------------------------- -------------------- ----------------------- ------------------------
41.1 98.6 164.7
--------------------------------------------- -------------------- ----------------------- ------------------------
Deferred tax relating to
origination
and reversal of temporary
differences 0.6 1.3 -
Impact of introduction of RPDT on
deferred
tax (0.4) - 3.9
Adjustments recognised in the
current
year in respect of prior years'
deferred
tax - - 1.1
--------------------------------------------- -------------------- ----------------------- ------------------------
0.2 1.3 5.0
--------------------------------------------- -------------------- ----------------------- ------------------------
Tax charge for the year
recognised in
Statement of Comprehensive
Income 41.3 99.9 169.7
--------------------------------------------- -------------------- ----------------------- ------------------------
The tax charge for the period can be reconciled to the
accounting profit as follows:
Six months Six months Year to
to 30 to 30 June 31 December
June 2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Profit from continuing operations 151.0 439.7 730.7
--------------------------------------------- -------------------- ----------------------- ------------------------
Tax calculated at UK corporation
tax
rate (inclusive of RPDT) 41.5 99.0 160.8
Accounting base cost not - 0.1 -
deductible for
tax purposes
Goodwill impairment losses that
are not
deductible 0.8 0.6 1.2
Expenditure not allowable for tax
purposes 0.5 0.1 0.8
Introduction of RPDT (0.2) 1.2 3.9
Items not deductible for RPDT (0.5) (0.6) 6.8
Enhanced tax reliefs (0.8) (0.5) (2.1)
Adjustments in respect of prior
years - - (1.7)
--------------------------------------------- -------------------- ----------------------- ------------------------
Tax charge for the period
recognised
in Statement of Comprehensive
Income 41.3 99.9 169.7
--------------------------------------------- -------------------- ----------------------- ------------------------
The UK corporation tax rate increased from 19% to 25% with
effect from 1 April 2023. The legislation to increase the
corporation tax rate was enacted on 10 June 2021 and accordingly
the impact on deferred tax was included in the tax charge in the
2021 financial reporting periods and in the re-measurement of the
relevant deferred tax assets and liabilities in the Balance Sheet
at 31 December 2021. RPDT came into effect on 1 April 2022 and
taxes residential property development profits in excess of an
annual allowance of GBP25m at a rate of 4%. The legislation to
introduce the RPDT was enacted on 24 February 2022 and accordingly
the impact on deferred tax was included in the tax charge in the
2022 financial reporting periods and in the re-measurement of the
relevant deferred tax assets and liabilities in the Balance Sheet
at 31 December 2022.
Deferred tax recognised in other comprehensive income
Six months Six months Year
to 30 to 30 June to
June 2023 2022 31
December
2022
GBPm GBPm GBPm
------------------------------------------------ -------------------- ----------------------- ---------------------
Recognised on re-measurement charges
on pension schemes (2.7) 16.7 7.6
------------------------------------------------ -------------------- ----------------------- ---------------------
Tax recognised directly in equity
Six months Six months Year to
to 30 to 30 June 31 December
June 2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Arising on transactions with
equity
participants
Current tax related to equity
settled
transactions (0.1) - (0.8)
Deferred tax related to equity
settled
transactions (0.1) 1.5 4.2
--------------------------------------------- -------------------- ----------------------- ------------------------
(0.2) 1.5 3.4
--------------------------------------------- -------------------- ----------------------- ------------------------
With regard to the UK adoption of OECD Pillar 2 there is no
impact from the implementation of the UK's domestic top-up tax as
the Group does not have any profits arising in any entities which
are located in a non-UK jurisdiction and which are taxed below the
minimum rate of tax of 15%.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
period (excluding those held in the employee benefit trust) which
were 319.2m (June 2022: 319.2m; December 2022: 319.2m).
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 321.7m (June 2022:
320.8m; December 2022: 321.8m).
Underlying earnings per share excludes the legacy buildings
provision charge and goodwill impairment. The earnings per share
from continuing operations were as follows:
Six months Six months Year to
to 30 to 30 June 31 December
June 2023 2022 2022
Basic earnings per share 34.4p 106.5p 175.8p
Underlying basic earnings per
share 36.2p 107.5p 247.3p
Diluted earnings per share 34.1p 105.9p 174.3p
Underlying diluted earnings per
share 35.9p 106.9p 245.3p
--------------------------------------------- -------------------- ----------------------- ------------------------
The calculation of the basic and diluted earnings per share is
based upon the following data:
Six months Six months Year to
to 30 to 30 June 31 December
June 2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Underlying earnings attributable
to shareholders 115.5 343.0 789.5
Legacy buildings provision (net
of tax) - - (221.9)
Goodwill impairment (5.8) (3.2) (6.6)
--------------------------------------------- -------------------- ----------------------- ------------------------
Earnings attributable to
shareholders 109.7 339.8 561.0
--------------------------------------------- -------------------- ----------------------- ------------------------
At 30 June 2023 the issued share capital of the Company was
319,419,494 ordinary shares (30 June 2022: 319,317,641; 31 December
2022: 319,323,432 ordinary shares).
7. Dividends
Six months Six months Year to
to 30 to 30 June 31 December
June 2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Amounts recognised as
distributions to
capital holders in the period:
2021 dividend to all shareholders
of
125p per share paid 2022 - 399.0 399.0
2021 dividend to all shareholders
of
110p per share paid 2022 - - 351.1
2022 dividend to all shareholders 191.5 - -
of
60p per share paid 2023
Total capital return to
shareholders 191.5 399.0 750.1
--------------------------------------------- -------------------- ----------------------- ------------------------
On 5 May 2023 60p per share (or GBP191.5m) of surplus capital
was returned to shareholders as a final cash dividend in respect of
the financial year 31 December 2022.
On 10 August 2023, the Board announced their intention to pay
20p per share (or GBP63.9m) of surplus capital to shareholders as
an interim cash dividend in respect of the financial year 31
December 2023.
8. Inventories
30 June 2023 30 June 2022 31 December 2022
GBPm GBPm GBPm
------------------------------------- ------------------------ ------------------------ -------------------
Land 2,090.5 2,102.8 2,091.7
Work in progress 1,476.9 1,226.1 1,263.9
Part exchange properties 85.8 27.2 61.0
Showhouses 51.9 46.6 46.3
------------------------------------- ------------------------ ------------------------ -------------------
3,705.1 3,402.7 3,462.9
------------------------------------- ------------------------ ------------------------ -------------------
The Group has conducted a further review of the net realisable
value of its land and work in progress portfolio at 30 June 2023.
Our approach to this review has been consistent with that conducted
at 31 December 2022 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 2023 were GBP5.3m (30 June 2022: GBP15.0m; 31 December 2022:
GBP5.5m). Following the review, GBP2.4m of inventories are valued
at fair value less costs to sell rather than historical cost (30
June 2022: GBP3.8m; 31 December 2022: GBP2.9m).
9. Shared equity loan receivables
Six months Six months Year to
to 30 to 30 June 31 December
June 2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Shared equity loan receivable at
start
of period 36.0 45.6 45.6
Settlements (2.7) (7.4) (13.3)
Gains 0.8 2.1 3.7
Shared equity loan receivable at
end
of period 34.1 40.3 36.0
--------------------------------------------- -------------------- ----------------------- ------------------------
All gains/losses have been recognised through finance income in
profit and loss for the period of which GBP0.2m was unrealised
(June 2022: GBP0.2m; December 2022: GBP0.3m).
10. Legacy buildings provision
Six months Six months Year to
to 30 to 30 June 31 December
June 2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Legacy buildings provision at
start of
period 333.3 72.7 72.7
Additions to provision in the
period - - 275.0
Imputed interest on provision in 2.2 - -
the
period
Provision released in the period (6.6) - -
Provision utilised in the period (16.5) (3.4) (14.4)
Legacy buildings provision at end
of
period 312.4 69.3 333.3
--------------------------------------------- -------------------- ----------------------- ------------------------
During 2022 we signed the Building Safety Pledge (England) and
worked constructively with the government to agree the 'Long Form
Contract' that turns the pledge into a legal agreement. The Self
Remediation Contract was signed on 13 March 2023.
In the period we have been informed by a number of management
companies of potential liability for fire remediation costs, and we
have added 7 developments to the total number of developments. The
number of developments we are now responsible for stands at 80, of
which 36 have now either secured EWS1 certificates or concluded any
necessary works. Furthermore, there are a small number of
developments that are under investigation, where we have yet to
determine if we have any liability to remediate, and if so the cost
of that remediation.
During the period GBP16.5m of the provision has been utilised
for works undertaken whilst GBP2.2m of imputed interest has been
charged to the Income Statement through Finance Costs. Due to the
increase in gilt and interest rates during the first half of the
year, the discount rate used to estimate the future value of the
provision at the period end date has been increased. The change in
discount rate has resulted in a reduction in the fair value of the
provision. This has resulted in a GBP6.6m release to the Income
Statement through Cost of Sales.
The assessment of the provision remains a highly complex area
with judgments and estimates in respect of the cost of the remedial
works, with investigative surveys ongoing to determine the full
extent of those required works. Where remediation works have not
yet been fully tendered we have estimated the likely scope and
costs of such works based on experience of other similar sites.
Whilst we have exercised our best judgement of these matters, there
remains the potential for variations to this estimate from multiple
factors such as material, energy and labour cost inflation, limited
qualified contractor availability and abnormal works identified on
intrusive surveys. Should a 10% variation in the costs of
untendered projects occur then the overall provision would vary by
+/- GBP7.4m.
11. 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 2023 30 June 2022 31 December 2022
Level 3 Level 3 Level 3
GBPm GBPm GBPm
------------------------------------------- ------------------------ ------------------------ -------------------
Shared equity loan receivables 34.1 40.3 36.0
------------------------------------------- ------------------------ ------------------------ -------------------
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 (2022: ten years)
and a discount rate of 7% (June 2022: 5%; December 2022: 7%) 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.
12. Reconciliation of net cash flow to net cash and analysis of
net cash
Six months Six months Year to
to 30 to 30 June 31 December
June 2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Cash and cash equivalents at
start of
period 861.6 1,246.6 1,246.6
Decrease in net cash equivalents
in cash
flow (504.6) (464.6) (385.0)
--------------------------------------------- -------------------- ----------------------- ------------------------
Cash and cash equivalents at end
of period 357.0 782.0 861.6
IFRS 16 lease liability (12.0) (9.8) (10.9)
--------------------------------------------- -------------------- ----------------------- ------------------------
Net cash at end of period 345.0 772.2 850.7
--------------------------------------------- -------------------- ----------------------- ------------------------
Net cash is defined as cash and cash equivalents, bank
overdrafts, lease obligations and interest bearing borrowings. At
30 June 2023, GBP9.8m (2022: GBP16.2m) of cash recognised was held
at third party solicitors with an undertaking.
On 5 July 2023 the Group renewed its Revolving Credit Facility
increasing it from GBP300m to GBP700m, with a five year term out to
5 July 2028. The facility remains undrawn at this time.
13. Retirement benefit assets
As at 30 June 2023 the Group operated four employee pension
schemes, being two Group personal pension schemes and two defined
benefit pension schemes. Re-measurement 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
to 30 to 30 June 31 December
June 2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Current service cost 0.5 0.9 1.9
Administrative expense 0.1 0.2 0.6
--------------------------------------------- -------------------- ----------------------- ------------------------
Pension cost recognised as
operating
expense 0.6 1.1 2.5
--------------------------------------------- -------------------- ----------------------- ------------------------
Interest income on net defined
benefit
asset (3.6) (1.4) (2.8)
--------------------------------------------- -------------------- ----------------------- ------------------------
Pension cost recognised as a net
finance
credit (3.6) (1.4) (2.8)
--------------------------------------------- -------------------- ----------------------- ------------------------
Total defined benefit pension
income
recognised in profit or loss (3.0) (0.3) (0.3)
Re-measurement loss/(gain)
recognised
in other comprehensive expense 9.7 (59.4) (5.2)
--------------------------------------------- -------------------- ----------------------- ------------------------
Total defined benefit scheme
loss/(gain)
recognised 6.7 (59.7) (5.5)
--------------------------------------------- -------------------- ----------------------- ------------------------
The amounts included in the balance sheet arising from the
Group's obligations in respect of the Pension Scheme are as
follows:
30 June 2023 30 June 2022 31 December 2022
GBPm GBPm GBPm
--------------------------------------------- ------------------------ ------------------------ -------------------
Fair value of pension scheme
assets 535.1 658.4 555.6
Present value of funded
obligations (385.7) (449.0) (399.7)
--------------------------------------------- ------------------------ ------------------------ -------------------
Net pension asset 149.4 209.4 155.9
--------------------------------------------- ------------------------ ------------------------ -------------------
The decrease in the net pension asset to GBP149.4m (June 2022:
GBP209.4m; December 2022: GBP155.9m) is largely due to the
underperformance of asset returns when compared to the standard
expected returns at the start of the year and an increase in
inflation assumptions offset in part by an increase in the discount
rate assumption applied to scheme obligations to 5.2% (December
2022: 4.8%).
14. Principal risks
1. UK economic conditions Residual risk rating
Very high
--------------------------------------------------------------
Risk Approach to risk How we monitor the
description mitigation risk
-------------------------------------------------------------- --------------------------------------------------------------
The In order to minimise
housebuilding risk and maintain financial * The Board closely monitors sales activity and UK
industry flexibility, the Group economic trends closely.
is sensitive pursues a highly disciplined
to changes approach to investments
in the in land and work in * The Principal Risk Lead Indicator reports issued to
economic progress, ensuring each meeting of the Board includes analysis of
environment, these are appropriate economic indicators, using both internal and external
including and reflective of current sources.
unemployment and anticipated levels
levels, of demand.
interest rates
and consumer As a result the Group
confidence. renewed its Revolving
A Credit Facility in
deterioration July 2023, increasing
in economic it to GBP700m with
conditions a five year term out
could to July 2028.
adversely
affect demand Pricing structures
and pricing are regularly reviewed
for new homes, to reflect local market
which conditions. The Group
could in turn benefits from a UK-wide
impact network (with no significant
upon our presence in London),
revenues, mitigating the effects
margins, of regional economic
profits and fluctuations.
cash flows
and potential
impairment
of asset
values.
Economic
conditions in
the land
market may
adversely
affect the
availability
of a
sustainable
supply
of land at
appropriate
levels of
return.
-------------------------------------------------------------- --------------------------------------------------------------
2. Government policy and political Residual risk rating
risk
--------------------------------------------------------------
High
--------------------------------------------------------------
Risk Approach to risk How we monitor the
description mitigation risk
-------------------------------------------------------------- --------------------------------------------------------------
Changes to Our mission and our
government five key priorities * Likely evolutions in government policy in relation to
policy have are aligned with the the housing market are monitored closely by our
the potential government's stated External Affairs, Technical and Land and Planning
to impact on ambition to increase departments, with regular feedback to the Executive
several housing stock. Committee and Board.
aspects of our
strategy Investment decisions
and in land and work in * We routinely engage with industry bodies to review
operational progress are tightly the impact of any anticipated legislative or
performance. controlled in order regulatory changes.
Recent to mitigate exposure
examples to external influences,
include including potential
the impacts of changes in Government
the withdrawal policy.
of the Help to
Buy scheme, The Group has experienced
the teams with expertise
introduction in managing and responding
of the to relevant areas subject
Residential to Government involvement,
Property including our Group
Developer Tax, Planning, Technical
and proposed and External Affairs
changes in departments.
planning
regulations.
Further policy
changes
may arise in
response
to the ongoing
CMA market
study into the
housebuilding
sector. Such
changes
have the
potential to
adversely
affect
revenues,
margins, tax
charges
and asset
values, and
potentially
impact on
the viability
of land
investments.
-------------------------------------------------------------- --------------------------------------------------------------
3. Health, safety and environment Residual risk rating
--------------------------------------------------------------
High
--------------------------------------------------------------
Risk Approach to risk How we monitor the
description mitigation risk
-------------------------------------------------------------- --------------------------------------------------------------
In addition to The Board retains a
the human very strong commitment * Data from inspections by the Group Health, Safety and
impacts of any to health and safety Environment department feed into management reports
health, and managing the risks at all levels of the Group.
safety or in this area effectively.
environmental Operationally, this
breach or commitment is implemented * The Principal Risk Lead Indicator reports issued to
incident, by a range of measures, each meeting of the Board includes analysis of
there including: inspection metrics provided by the Group Health,
is the Safety and Environment department.
potential for * Comprehensive policies and procedures to manage
reputational construction activities safely.
damage, * The Group Health, Safety and Environment Director is
construction a member of the Group Executive Committee, and
delays and * Training programmes to embed the Group's policies provides additional periodic reports and updates to
financial effectively. both the Board and the Audit & Risk Committee.
penalties.
* Inspection regime led by our Group Health, Safety
and
Environment department, with additional specialis
t
assurance provided by the Group Internal Audit
department.
* Engagement with industry forums and best practice
groups.
-------------------------------------------------------------- --------------------------------------------------------------
4. Skilled workforce, retention Residual risk rating
and succession
--------------------------------------------------------------
High
--------------------------------------------------------------
Risk Approach to risk How we monitor the
description mitigation risk
-------------------------------------------------------------- --------------------------------------------------------------
Recruiting and The Group has deployed
retaining a range of measures * The Group HR department provides reporting, including
a highly to maintain an appropriately metrics such as training hours, to management at all
skilled skilled workforce, levels of the Group.
workforce including:
and supporting * Comprehensive range of training programmes managed by
management the Group Training department, including * The Group HR Director is a member of the Group
teams is apprenticeships, graduate scheme and the Persimmon Executive Committee, and provides additional periodic
essential to Pathways in core disciplines. reports and updates to both the Board on employment
the delivery trends.
of the Group's
strategy. * Talent management and succession planning programmes.
Heightened * Feedback from the employee engagement panel is
competition reviewed by the Board.
for skilled * Remuneration benchmarking to ensure reward is
labour creates appropriate to attract and retain talent at all
risks levels. * The Principal Risk Lead Indicator reports issued to
of increased each meeting of the Board includes staff turnover
costs, data and commentary from the Group HR department.
operational * Utilisation of our Space4 products, which improve
disruption and build efficiency and require less on-site labour than
potential traditional construction.
delays to
build
programmes. * Increased focus on employee engagement measures.
* Deployment of hybrid working practices, where
appropriate.
-------------------------------------------------------------- --------------------------------------------------------------
5. Materials and land purchasing Residual risk rating
--------------------------------------------------------------
High
--------------------------------------------------------------
Risk Approach to risk How we monitor the
description mitigation risk
-------------------------------------------------------------- --------------------------------------------------------------
Availability Availability of materials Availability of materials
of materials Various mitigations * The Group Procurement department provides routine
Ensuring are in place to ensure monitoring of trends and supplier performance.
access to consistent sourcing
materials of materials and cost
of the efficiency: * Site budgets and performance, including availability
requisite * Vertical integration through the Brickworks, and pricing of materials, are assessed through the
quantity Tileworks and Space4. bi-monthly valuation process.
and
specifications
is * Strategic approach to procurement, led by our Group * The Principal Risk Lead Indicator reports issued to
critical in Procurement team. each meeting of the Board include commentary from the
delivering Group Commercial Director on materials purchasing
high quality trends and issues.
homes. * Supply chain engagement, including robust processes
Heightened for appointing suppliers and reviewing their
levels of performance thereafter.
demand for
materials may
cause * Detailed forecasting and planning of material
availability requirements to inform supplier negotiations.
constraints Land purchasing
and increase The Group's Land Committee
cost * Support for our supply chain through adherence to the meets regularly to review
pressures. Prompt Payment Code. the Group's current land
Build holdings and future needs,
quality may be and to assess potential
compromised land transactions.
if unsuitable Land purchasing
materials The Group maintains
are procured strong land holdings.
leading All land purchases
to damage to undergo comprehensive
the Group's viability assessments
reputation and and must meet specific
overall levels of projected
customer returns, taking into
experience. account anticipated
market conditions and
sales rates.
Land
purchasing
Maintaining an
appropriate
supply of
suitable land
is crucial to
the Group's
strategy.
Failure to
maintain a
sufficient
supply of land
at the
appropriate
levels of
return could
adversely
affect sales,
margins
and return on
capital
employed.
-------------------------------------------------------------- --------------------------------------------------------------
6. Climate change Residual risk rating
--------------------------------------------------------------
Medium
--------------------------------------------------------------
Risk Approach to risk How we monitor the
description mitigation risk
-------------------------------------------------------------- --------------------------------------------------------------
The effects of The potential impacts
climate of climate change are * The Sustainability Committee meets regularly to
change and the considered systematically review progress on the Group's climate related
UK's in key business decisions, initiatives.
transition from land acquisition
to a lower through to planning
carbon economy and build processes. * Key indicators including CO(2) emissions and waste
could lead to In response, the Group generation are monitored and reported on.
increasing has established a range
levels of of measures to improve
regulation its operational efficiency * External review of our Scope 1, Scope 2, Scope 3
and and direct environmental Category 1 (Purchased goods and services) and Scope 3
legislation, impact, including: Category 11 (Use of sold products) emissions.
as seen
with the * Maintaining a detailed climate change risk register.
Future Homes
Standard.
These may in * Setting science based carbon reduction targets,
turn result in accredited by the Science Based Targets Initiative.
planning
delays,
increased * Targets to deliver 'net zero' homes in use to our
costs customers by 2030 and become 'net zero' in our
and operations by 2040.
competition
for some
materials. * Regular meetings of the low carbon homes working
group, comprising senior employees from various
Changes in disciplines, including preparation for the
weather implementation of the Future Homes Standard.
patterns
and the
frequency of * Introduction of electric vehicle options into the
extreme Group's fleet.
weather
events,
particularly * Procurement of 100% renewable energy for our offices
storms and and manufacturing facilities.
flooding, may
increase
the likelihood
of disruption
to the
construction
process.
The
availability
of mortgages
and property
insurance
may reduce in
response
to financial
institutions
considering
the possible
impacts
relating to
climate
change.
-------------------------------------------------------------- --------------------------------------------------------------
7. Reputation Residual risk rating
Medium
--------------------------------------------------------------
Risk description Approach to risk How we monitor the
mitigation risk
-------------------------- --------------------------------------------------------------
Failure to live up to The Group is committed
our expected high to ensuring an * Operational performance, including build quality and
standards appropriate customer experience, are subject to routine
in governance, build culture and maintaining management oversight, with reporting to the Executive
quality (including high quality in all Committee and Board.
remediation aspects of its
of legacy issues), operations.
customer This is subject to * The Board also oversees stakeholder engagement,
experiences, operational oversight from the including monitoring feedback from shareholders, and
performance, management Board. the results of our employee engagement surveys and
of health and safety the Employee Engagement Panel.
or local planning We have made significant
concerns investments in build
could damage stakeholder quality, through The * The Principal Risk Lead Indicator reports issued to
relationships and have Persimmon Way and the each meeting of the Board includes analysis of media
a detrimental impact supporting IQC regime, coverage and trends that could be indicative of the
on financial performance. and in addressing legacy Group's overall reputation.
issues.
We formally commenced
the registration process
for the New Homes Quality
Code (NHQC) within
2022. The Group supports
the NHQC's focus on
driving quality and
customer service
improvement
across the industry.
The Group also
proactively
works to build positive
relationships with
all of our stakeholders.
This includes supporting
communities in addressing
housing needs, creating
attractive neighbourhoods
and employing local
people, both on our
sites and in the supply
chain. We make
significant
contributions to local
infrastructure and
good causes within
the communities in
which the Group operates.
-------------------------- --------------------------------------------------------------
8. Regulatory compliance Residual risk rating
--------------------------------------------------------------
Medium
--------------------------------------------------------------
Risk description Approach to risk How we monitor the
mitigation risk
-------------------------- --------------------------------------------------------------
The housebuilding The Group maintains
industry comprehensive management * The Board and Audit & Risk Committee are provided
is subject to systems to ensure with regular updates on core areas of regulatory
increasingly regulatory compliance and preparation for upcoming regulatory
complex regulations, and legal compliance, change.
particularly in areas including policies
such as land acquisition, and procedures for
planning, building key areas of regulation.
regulations Additional oversight
and the environment. is in place through
Further regulatory the Group-level functions
evolutions and cross-functional
are expected in the steering groups for
short-term, key areas, such as
such as the activation GDPR compliance.
of the NHQC and measures
on audit and corporate In respect of land
governance reform, which and planning, experienced
will affect aspects of management teams are
our operations. There in place at Group and
may also be potential local level. These
for regulatory changes enable effective
arising from the ongoing engagement
CMA market study. Failure with planning authorities
to comply with and other stakeholders
regulations to reduce the likelihood
could result in and impact of any delays
imposition or disruption.
of financial penalties
and potential damage
to the Group's
reputation.
-------------------------- --------------------------------------------------------------
9. Cyber and data risk Residual risk rating
--------------------------------------------------------------
High
--------------------------------------------------------------
Risk description Approach to risk How we monitor the
mitigation risk
-------------------------- --------------------------------------------------------------
In common with most The Group has dedicated
modern cyber security resource, * In recognition of the serious nature of cyber risk to
businesses, the Group led by the Chief modern businesses, the Board receives reports from
is reliant on the Information the Group's Chief Information Officer (CIO) at each
consistent Security Officer, in of its meetings. The CIO also serves as a member of
availability and security order to manage and the Group Executive Committee, ensuring IT and cyber
of its IT systems. oversee security risks are a consideration in all key business
Failure controls. decision making.
or significant disruption This includes use of
to the Group's core IT third party expertise
systems, particularly to ensure implementation * Routine reporting on cyber security and IT
those in relation to of good-practice developments is presented to the Audit & Risk
customer information controls. Committee.
and customer service Cyber and IT security
could result in enhancements form part
significant of an ongoing strategy * The Principal Risk Lead Indicator reports issued to
financial costs, of improvement to the each meeting of the Board include a section on IT
reputational Group's IT provision. developments.
damage and business
disruption. External partners are
used to support the * The Group has an internal GDPR Steering Group to
As the Group's use of Group, both through monitor all processes, risks and controls associated
technology to support cyber security with personal data.
operational processes assessments
continues to develop, and periodic penetration
cyber and data risks testing.
have become an area of
increased focus for the In the event of an
Group. This is reflected incident, the Group
in the elevation of this has a defined Cyber
risk from 'medium' to Incident Response Plan.
'high'.
Training and regular
communications are
delivered to all users
to increase awareness
of cyber risks, with
particular focus on
risks associated with
remote and hybrid
working.
-------------------------- --------------------------------------------------------------
10. Mortgage availability Residual risk rating
--------------------------------------------------------------
Very high
--------------------------------------------------------------
Risk description Approach to risk How we monitor the
mitigation risk
-------------------------- --------------------------------------------------------------
Sustained periods of The Group closely
higher interest rates monitors * The Board closely monitors sales activity and UK
or tightening of bank the economic outlook economic trends, including Bank of England commentary
lending criteria could for the UK, including on credit conditions, lenders' announcements and
reduce both the indicators on mortgage reports from UK Finance commentators.
affordability availability and
and availability of affordability.
mortgages Investments in land * The Principal Risk Lead Indicator reports issued to
for our customers. This and work in progress each meeting of the Board includes analysis of
could reduce demand for are moderated to align lending trends and mortgage approval rates.
new homes and affect with our level of sales
sales prices, revenues, and expectations of
profits, cash flows, the current market
and asset values. conditions.
Incentive schemes to
support sales are kept
under review by
management,
and can be flexed
according
to underlying market
conditions.
-------------------------- --------------------------------------------------------------
11. Legacy buildings Residual risk rating
--------------------------------------------------------------
High
--------------------------------------------------------------
Risk description Approach to risk How we monitor the
mitigation risk
-------------------------- --------------------------------------------------------------
In line with our The Group has a dedicated
commitments Special Projects team, * A report on the progress of the works is provided to
under the Developer responsible for the every Board meeting.
Pledge, identification of
the Group remains affected
committed buildings, assessment * All identified buildings are assessed and, where
to undertaking any of any remediation necessary, interim measures carried out to ensure the
cladding required, and ensuring residents safety until remedial works are carried
or life-critical fire that the work is out.
safety remediation works completed
for buildings it has as quickly as
constructed, and to practicable. * The Finance team monitors costs incurred and provides
protecting assurance on the utilisation and appropriateness of
leaseholders. Provisions Detailed investigations the Group's provision.
have been made to cover are undertaken on all
the anticipated costs identified buildings
of these works; however, and independent fire
the works are complex risk assessments
and could be protracted completed.
in nature. As such, the
value may be subject The Group's assumptions
to revision if on the estimated
legislation financial
or regulation evolve, costs associated with
further properties are the remediation works
identified, or costs have been subject to
prove to be greater than comprehensive challenge.
anticipated.
-------------------------- --------------------------------------------------------------
Statement of Directors' responsibilities in respect of the Half
Year Report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with UK adopted International Accounting Standard
("IAS") 34 Interim Financial Reporting
-- the Half Year Report includes a fair review of the information required by:
o DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
o DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The Directors of Persimmon Plc and their function are listed
below:
Roger Devlin Chairman
Dean Finch Group Chief Executive
Jason Windsor Chief Financial Officer
Nigel Mills Senior Independent Director
Annemarie Durbin Non-Executive Director
Andrew Wyllie Non-Executive Director
Shirine Khoury-Haq Non-Executive Director
Alexandra Depledge Non-Executive Director
Colette O'Shea Non-Executive Director
By order of the Board
Dean Finch Jason Windsor
Group Chief Executive Chief Financial Officer
9 August 2023
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 2023 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 14. 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 2023 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Victoria Venning
Ernst & Young LLP
Leeds
9 August 2023
, 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 PLMLTMTIMBRJ
(END) Dow Jones Newswires
August 10, 2023 02:04 ET (06:04 GMT)
Persimmon (LSE:PSN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Persimmon (LSE:PSN)
Historical Stock Chart
From Apr 2023 to Apr 2024
