TIDMPSN
RNS Number : 3820W
Persimmon PLC
18 August 2020
PERSIMMON PLC
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2020
This announcement contains inside information.
Persimmon Plc today announces its half year results for the six
months ended 30 June 2020.
Dave Jenkinson, Group Chief Executive, said:
" The Group, governed by its clear purpose and values, reacted
responsibly, swiftly and effectively to the challenges of the
Covid-19 pandemic, with the safety and wellbeing of our workforce,
customers and local communities our first priority. Taking an early
decision not to take advantage of the furlough scheme for any
colleagues, we maintained good momentum in the business, continuing
to serve our customers, making detailed preparations for a safe
return to work and, when it was appropriate, restarting our build
programmes efficiently. Build rates were back at pre-Covid levels
by the end of the period.
"Despite the significant disruption, the Group's preparedness,
agility and strength ensured a robust first half performance with
4,900 new home completions and further good progress made on our
customer care improvement plan.
"The Group has had an excellent start to the second half with a
c. 49% year on year increase in average weekly private sales rates
per site since the start of July and a current forward order book
of c. GBP2.5bn, a 21% increase on last year. Our strong opening
work in progress position and excellent build rate through the
summer give us confidence in a positive second half outturn. We
expect that by the end of September, we will have delivered c. 45%
of our anticipated second half new home legal completions.
"As a result of the continuing strong performance of the
business through this challenging period, together with our
cautious optimism on the Group's prospects for the second half, we
are pleased to announce that the Board is proposing a modest
interim dividend of 40p per share. Further dividend payments this
year will remain under close review.
"Our reaction to the Covid disruption showed very clearly the
exceptional quality of our colleagues throughout the business and
I'm very proud of their response to the recent challenges. Our
team, together with our strong balance sheet, high quality land
holdings, significant investment in work in progress, a transformed
customer care programme and a 5-star HBF rating now within reach,
gives Persimmon a strong platform from which to deliver the homes
the country needs, support the UK's economic recovery and drive
long-term sustainable value for all our stakeholders."
Highlights
H1 2020 H1 2019
Home completions 4,900 7,584
-------------- ---------------
New home average selling price GBP225,066 GBP216,942
-------------- ---------------
Total Group revenues GBP1,190m GBP1,754m
-------------- ---------------
New housing gross margins (1) 31.3% 33.8%
-------------- ---------------
Profit before tax GBP292.4m GBP509.3m
-------------- ---------------
Cash at 30 June GBP828.9m GBP832.8m
-------------- ---------------
Land holdings at 30 June - plots owned
and under control 89,232 95,086
-------------- ---------------
Current number of developments across c.340 c. 345
the UK
-------------- ---------------
Current forward sales position GBP2,483m GBP2,048m
-------------- ---------------
Current customer satisfaction score
(2) 89.6% 83.1%
-------------- ---------------
Dividend 40p per share 235p per share
in the year
-------------- ---------------
Entering the second half with a strong platform to deliver the
homes the country needs
- Strong market positioning across 31 businesses providing the
operational capacity to support future growth
- A range and choice of homes in the right locations at affordable
prices for our customers, with a private average selling price
of GBP246,208 (2019: GBP242,912) which is c. 17% below the UK
national average(3)
- Strong total forward sales, including legal completions in the
second half so far, 21% up on last year
- Substantial work in progress investment with c. 14% more equivalent
new home units over last year
- Strong liquidity with current cash of GBP821m
- High quality land holdings underpinning future production
- Customer care improvement plan operational within the business
- Highly experienced, agile and flexible management team
Continued careful management of housing cycle risk
- Persimmon's strong sense of purpose supports the Group's sustainable
business model that: delivers long-term sustainable benefits
in the best interest of all stakeholders through the cycle, maintains
high quality land holdings, judges capital deployment at the
right time in the cycle and minimises financial risk
- Land replacement over the last two years running at c. 55% of
consumption level, with all acquisitions meeting the Group's
strict criteria
Operational Highlights
Continuing to support our customers
- Customer care improvement plan initiatives continue to drive
improvements in our quality and service
- Throughout 2020, Persimmon's HBF survey rating(4) has been trending
ahead of the five star threshold
- 12 months since the successful launch of the Group's industry
leading Homebuyer Retention Scheme with over 40% of new customers
taking advantage of the Scheme in the first half of the year
- The 'Persimmon Way', the consolidation of the Group's approach
to new home construction, will be fully operational by the end
of the year
- FibreNest, the Group's internet service provider, unique in the
industry, is supporting over 8,000 customers with full fibre
to the home broadband service
Building and supporting our communities
- c. 50% of our private legal completions in the six months to
30 June 2020 were to first time buyers
- Persimmon is a signatory to the Covid-19 Business Pledge supporting
colleagues, customers and communities through the crisis
- Persimmon is industry lead to the Social Mobility Pledge which
encourages businesses to boost social mobility in the UK
- Invested over GBP675m in local communities over the last eighteen
months, including the delivery of 4,263 new homes for lower income
families to our housing association partners
- The Group supports c.50,000(5) jobs across our communities and
within our wider supply chain
- Dedicated resources focusing on reducing our environmental impact
with work underway to review setting a science-based carbon reduction
target
Covid-19 Update
- The wellbeing of the Group's workforce, customers and local communities
remains a key priority
- Effective Covid-19 safe operating procedures, maintaining the
stringent two metre social distancing rules, are fully embedded
across all Group operations
- All colleagues were retained on full pay, without recourse to
Government funding, throughout the lockdown period continuing
to drive the business forward, serving our customers, progressing
site preparation works and completing remote training courses
Outlook
- Short term outlook robust with strong start to the second half
and healthy level of forward orders, well supported by a strong
work in progress position
- Potential medium term risks to demand associated with Covid-19,
rising unemployment and Brexit remain but long-term housing market
fundamentals continue to be strong
- Persimmon is well placed to navigate potential future challenges
and deliver superior long-term sustainable returns in the best
interests of all its stakeholders
Footnotes
1 Stated on new housing revenues of GBP1,102.8m (2019:
GBP1,645.3m) and gross profits of GBP345.2m (2019: GBP555.5m)
2 The Group participates in a National New Homes Survey, run by
the Home Builders Federation. The Survey year covers the period
from 1 October to 30 September. The rating system is based on the
number of customers who would recommend their builder to a friend.
The current customer satisfaction score is based on the results
from 1 October 2019 to 17 August 2020.
3 National average selling price for newly built homes sourced
from the UK House Price Index as calculated by the Office for
National Statistics from data provided by HM Land registry.
4 Based on the results from the National New Homes Survey, run
by the Home Builders Federation from January 2020.
5 Estimated using an economic toolkit
For further information please contact:
Dave Jenkinson, Group Chief Executive Kevin Smith Tel: +44 (0) 7710 815
924
Mike Killoran, Group Finance Director Jos Bieneman: Tel: + 44 (0) 7834
336 650
Persimmon Plc Ellen Wilton Tel: +44 (0) 7921 352
851
Enquiries via Citigate Dewe Rogerson
on the day
Tel: +44 (0) 1904 642199 (thereafter)
A presentation to analysts and investors will be available from
07.00 am on 18 August 2020. To view the presentation, please use
the webcast link below:
Webcast link: https://edge.media-server.com/mmc/p/r32xzfb7
There will also be a Q&A session with management, hosted by
Group Chief Executive, Dave Jenkinson and Group Finance Director,
Mike Killoran via conference call at 8.30am. Analysts may join the
call by using the details below:
Dial in: +44 (0) 20 3003 2666
Passcode: Persimmon
An audiocast of the call will be available on
www.persimmonhomes.com/corporate from this afternoon.
HALF YEAR REPORT - TUESDAY 18 AUGUST 2020
CHAIRMAN'S STATEMENT
Persimmon's agile and comprehensive response to the Covid-19
pandemic has delivered a resilient first half performance, putting
the safety of our workforce, our customers and our local
communities first. The strength of the Group coming into the
pandemic, the result of a long established strategy which
recognises the cyclical nature of the housing market, has enabled
it to respond effectively to the current challenges continuing to
deliver the homes the country needs and supporting its local
communities and the UK economy.
Our decision not to take advantage of the furlough scheme for a
single member of staff enabled us to maintain an effective
workforce, on full pay without recourse to Government assistance,
which has been instrumental in ensuring we were able to continue to
support all our stakeholders, including our suppliers and
subcontractors, and serve our customers. During the lockdown period
we were able to deliver homes to customers who would otherwise have
been left in a vulnerable position, to support our teams working
from home and continue to take sales reservations remotely and to
perform site preparation work while we continued to drive our
customer care improvement plan initiatives forward, embedding them
within the business. Investment in workforce training has also
continued with c. 5,700 training days delivered in the period
including over 330,000 minutes of online training courses.
Strategy
Persimmon's strong sense of purpose supports the Group's
sustainable business model. With the interests of customers and the
communities they live in at the centre of the business, the Group
will continue to pursue its strategy of maintaining high quality
land holdings, minimising financial risk, and carefully judging
capital deployment at the right time in the housing market cycle.
This strategy recognises the risks associated with the cyclical
nature of the housing market and ensures that the business
generates superior sustainable returns in the best interests of all
its stakeholders over the long-term. Over the last 20 years, the
Group's average return on capital has been 21.9% reflecting the
sustainable performance of the business. Total shareholder returns
have been 2,711% over the same extended period (FTSE 100:
101%).
Results and Outlook
The Group had a strong start to the year, with the decisive
December 2019 General Election providing improved market sentiment
after a number of years of instability following the EU referendum
on leaving the European Union in 2016. The Group had a c. GBP1.4bn
forward order book at the start of the year and its first 11 weeks
of sales showed a c. 10% increase on the average private sales rate
per site compared with the same period in 2019. The build delays
caused by the onset of the Covid-19 pandemic resulted in a 35%
reduction in the Group's first half new home legal completions
compared with last year. The disruption was mitigated by the
Group's ability to maintain a good degree of operational continuity
throughout the period and Persimmon ultimately delivered a robust
performance for the period despite the unprecedented
circumstances.
Profit before tax was GBP292.4m (2019: GBP509.3m). As
anticipated, the Group's new housing gross margin remained
resilient at 31.3% (1) (2019: 33.8%). This reflects the quality of
the Group's development sites whilst including the impact of
reduced build and site overhead cost efficiencies caused by legal
completion and build delays during the period of reduced production
due to the Covid-19 response measures. Similarly, with the Group
continuing to maintain its investment in its operational
infrastructure, the Group's industry leading new housing operating
margin was 26.6% (2) (2019: 31.0%) which includes the lower
indirect overhead efficiencies resulting from the period of
disruption.
The Group continues to invest in its work in progress levels
supporting our strong forward order book and ensuring our
construction teams are able to manage build and quality assurance
programmes effectively, with c. 14% more equivalent units carried
forward at 30 June 2020 compared with last year. At the end of
June, the Group had strong liquidity with a cash balance of
GBP828.9m (2019: GBP832.8m) and its owned and controlled land
holdings totalled 89,232 plots (December 2019: 93,246 plots).
The Group has a strong platform moving into the second half of
the year with an experienced and agile management team, excellent
levels of forward build, a healthy forward order book and strong
average weekly private sales rates. Our strong opening work in
progress position and excellent build rate through the summer give
us confidence in a positive second half outturn. We expect that by
the end of September, we will have delivered c. 45% of our
anticipated second half new home legal completions.
As we look further ahead, a number of factors make it unusually
difficult to assess the outlook beyond the short term. Uncertainty
related to the future impact of Covid-19 on UK economic conditions
persists with, in particular, concerns over a potential second wave
and over UK employment levels following the end of the Government's
furlough scheme in the Autumn. Uncertainties also remain with
respect to the outcome of negotiations on a future trade deal with
the European Union. Each of these has the potential to impact
negatively on customer confidence and the demand for new homes in
the medium term.
However, the Group's successful strategy and strong operating
platform place it in an excellent position to continue to drive the
business forward and manage a range of future economic
scenarios.
Capital Return Plan
A key element of the Board's strategy remains the return of any
capital that is surplus to the reinvestment needs of the business
to shareholders through the Group's Capital Return Plan. With the
major social and economic disruption resulting from the action
taken to mitigate the onset of the Covid-19 pandemic, after careful
assessment of the capital needs of the business, the Board
concluded that the return of surplus capital by way of a 125p per
share interim dividend previously scheduled to be paid to
shareholders on 2 April 2020 would be cancelled. In addition, the
Board postponed the payment of the final dividend for the 2019
financial year of 110p per share that was previously scheduled to
be paid on 6 July 2020. This preserved the Company's ability to
re-invest this capital in the business should appropriate
opportunities arise, generating enhanced value over the longer term
in the best long-term interests of all stakeholders.
As indicated at the Company's AGM on 29 April 2020, in relation
to the final dividend for 2019, the Board has continued to assess
the Group's capital requirements in the context of the progress
made by the business through this challenging period, together with
the outlook for the market and the wider UK economy. Given the
strong progress the business has made, together with our cautious
optimism on the Group's prospects for the second half, the Board is
pleased to announce a modest interim dividend of 40p per share
which will be paid on 14 September 2020 to shareholders on the
register on 28 August 2020. Recognising the importance of dividend
receipts to pension schemes in supporting retired workers and their
families, the Board will continue to assess whether a further
dividend may be paid prior to the end of the current financial year
in satisfaction of the Board's previously indicated final dividend
for 2019.
Board changes
The Board would like to welcome Joanna Place, Chairman of the
Sustainability Committee, and Annmarie Durbin, Chairman of the
Remuneration Committee, who joined the Board on 1 April and 1 July
2020 respectively. Marion Sears resigned from the Board on 30 June
2020 and the Board would like to thank her for her significant
contribution to Persimmon during her tenure with the Company.
The Board announced the appointment of Dean Finch as the Group's
next Group Chief Executive on 24 June 2020 and look forward to
welcoming him to the Group later in the year when he will succeed
Dave Jenkinson.
The Board would also like to take this opportunity to thank all
of the Group's employees, workers, sub-contractors and suppliers
for their commitment, determination and resilience during this
challenging time. The Group is well placed to deliver long-term
success for all our stakeholders. Persimmon's fundamental
strengths: placing customers at the centre of our business, our
strong liquidity position, robust balance sheet and high quality
land holdings will ensure that we continue to play an important
role in providing the good quality, affordable family homes that
the country needs over future years.
Roger Devlin
Chairman
17 August 2020
Footnotes
1 Stated on new housing revenues of GBP1,102.8m (2019: GBP1,645.3m)
and gross profits of GBP345.2m (2019: GBP555.5m).
2 Stated before goodwill impairment (2020 : GBP1.6m, 2019 : GBP4.1m)
TRADING PERFORMANCE
Total revenues for the first half of the year were GBP1.19bn
(2019: GBP1.75bn), with new housing revenues of GBP1.10bn being 33%
lower than the prior period (GBP1.65bn). The Group completed 4,900
new homes (2019: 7,584) in the first six months at an average
selling price of GBP225,066 (2019: GBP216,942).
4,029 of the Group's completions (2019: 5,963) were to private
owner occupiers at an average selling price of GBP246,208, an
increase of 1.4% (2019: GBP242,912). 51% of our private completions
were across our northern businesses (2019: 56%). The Group's
Persimmon brand completed 3,655 new homes (2019: 5,470) and the
Charles Church brand completed 374 homes (2019: 493) in the
period.18% of the Group's new home completions (2019: 21%), at a
value of over GBP110m (2019: over GBP196m), were delivered to our
housing association partners in the first half with an average
selling price of GBP127,266 (2019: GBP121,413).
The Group's new housing gross profit for the first half was
GBP345.2m (2019: GBP555.5m) generating a new housing gross margin
of 31.3% (1) (2019: 33.8%). The 2.5% reduction in margin includes
the impact of delays to both the legal completion of sales and
development site build progress, incurred as a result of the
operational disruption caused by the Covid-19 response measures. To
allow the introduction of new safe operating procedures, the Group
began an orderly shutdown of its sites from the end of March with
work focused on making all developments safe and secure and
completing homes for customers who would otherwise have been left
in a vulnerable position.
The total cost impact of this Covid-19 disruption was GBP11.3m,
GBP9.9m of which is included in the Group's work in progress
balance representing the direct costs and site overheads incurred
in completing site development. This treatment is consistent with
prior reporting periods under the Group's accounting policies where
we have suffered build delays under various circumstances, for
example during instances of particularly bad weather. This
consistent treatment is currently estimated to reduce the Group's
future gross margins over the remaining current active site cycle
by c. 17 basis points. In the ordinary course of business, we will
seek to mitigate this future gross margin erosion.
The strength of the Group's new housing gross margins is
supported by high quality consented land holdings with land cost
recoveries of 14.1% of housing revenues (2019: 13.9%). At 30 June,
the Group's cost to revenue ratio (2) for its owned land holdings
of 70,208 plots (2019: 75,444 plots) was 12.5% (2019: 13.1%).
The Group has seen a c. 1% increase in build costs in the period
compared with the last six months of 2019. The Group's off-site
manufacturing capabilities mitigate the impact of supply chain and
build cost pressures. Tileworks, the Group's own concrete roof
plant, began supplying roof tiles to our sites in March 2020.
Underlying operating profit (3) for the Group was GBP293.2m
(2019: GBP510.1m). The Group's underlying new housing operating
margin (3) of 26.6% was 4.4% below last year (2019: 31.0%)
reflecting Persimmon's continuing investment in all of its
workforce and operations throughout the period.
The Group generated a profit before tax of GBP292.4m in the
period (2019: GBP509.3m).
Balance Sheet
The Group's balance sheet is strong, supported by high quality
land holdings, a reduction in deferred land commitments of GBP60.7m
(December 2019: GBP435.2m) and further investment in work in
progress carried at GBP1,223.7m (December 2019: GBP1,094.6m). The
Group's defined benefit net pension asset has reduced to GBP23.1m
at 30 June 2020 (December 2019: GBP77.6m) largely due to the fall
in corporate bond yields over the period. Total equity increased to
GBP3,450.6m from GBP3,258.3m at 31 December 2019. Reported net
assets per share of 1,081.9p represents a 5.9% increase from
1,021.7p at 31 December 2019. Underlying return on average capital
employed(4) as at 30 June was 27.8% (2019: 40.5%) mainly reflecting
the consequences of the increase in capital invested in the
business due to the impact of the Covid-19 disruption. Underlying
basic earnings per share(3) for the first six months of 2020 of
75.1p reduced by 42.5% compared to the prior year (2019:
130.6p).
Our land holdings
At 30 June 2020, the Group owned and controlled 89,232 plots in
its consented land holdings (December 2019: 93,246). 70,208 of
these plots are owned with an estimated gross margin of GBP5.1bn.
47,053 of these owned plots, have detailed planning consent and are
all under development. In addition to its consented land the Group
owns and controls c. 15,900 acres of strategic land.
The Group has visibility over a further c. 43,800 plots, c.
29,300 being plots held under option that are proceeding through
planning and an additional c. 14,500 plots which are controlled and
allocated in local plans.
During the last couple of years, in recognition of the cyclical
nature of the housing market, the Group has been increasingly
cautious in its assessment of potential land opportunities and has
continued to judge each opportunity on its own merits and against
our strict viability assessments. The Group has maintained this
approach over the last six months, bringing 886 new plots of land
into the business. The Group's land spend in the first half was
GBP167m (2019: GBP239m), including GBP107m of land creditors.
Cash and liquidity
The Group held GBP828.9m of cash at 30 June 2020 (December 2019:
GBP843.9m) and had deferred land commitments of GBP374.5m (December
2019: GBP435.2m). Of the Group's current land creditors, c. GBP130m
is to be paid by 31 December 2020 (2019: GBP115m paid in the six
months to 31 December 2019) resulting in an estimated GBP245m to
remain at the end of the year supporting the Group's strong
liquidity.
In addition, in March, the Group renewed its GBP300m Revolving
Credit Facility which has a five year term out to 31 March 2025.
This facility has not been utilised in the period.
OPERATIONAL REVIEW
Continuing to support our customers
The Group is committed to providing good quality, affordable
family homes in places where people wish to live and work across
the UK. Our customer care improvement plan initiatives, aimed at
driving through improvements in build quality and customer care,
are now operating within the business and are delivering the
anticipated results.
The Persimmon Way, the consolidation of the Group's 'end to end'
approach to new home construction, aims to ensure we consistently
provide good quality homes to all of our customers. It is a
comprehensive programme covering pre-start programmes, standardised
Group wide technical specifications and build processes,
complimentary technology, detailed quality assurance processes and
workforce training and support. All aspects of its development have
significantly progressed this year. The pilot study has
successfully completed and the process is now being rolled out
across the Group. Once established, an external audit of the
process will be performed to provide further quality assurance.
Our industry leading Homebuyer Retention Scheme, utilised by
over 40% of our private new home customers from 1 January 2020, has
further driven behavioural change throughout the business. Prior to
the onset of the Covid-19 outbreak, the Scheme and the Group's
investment in customer care resource and training had led to a c.
20% reduction in the time taken to resolve snagging items for our
customers.
The Group has invested an additional GBP129.1m in work in
progress since the end of 2019, as we continue to strive to provide
our customers with improved availability of new homes at more
advanced stages of construction and ensure that our improved
quality assurance programmes and inspection regimes can be
effectively implemented, whilst also anticipating an increase in
customer activity as the current Help to Buy scheme approaches its
conclusion. Our work in progress levels at 30 June 2020 represented
7,015 new homes of construction inventory, an increase of c. 14%
than at the same point last year.
The Group has continued to invest in improving communication
with our customers and our comprehensive customer portal, which
will support customers from the point of reserving their new home,
will be introduced in early Q4.
These initiatives have led to demonstrable improvements. In
March 2020, Persimmon was awarded a Four Star rating (5) for the
year to 30 September 2019 by the Home Builders Federation ('HBF')
and, since the start of 2020, has been trending ahead of the Five
Star threshold.
The Group's ultrafast, full fibre broadband service, FibreNest,
which aligns with current Government strategy to deliver modern
technology to new homes, now serves over 8,000 of our homeowners
across 154 of our developments. The service is highly rated and we
will continue to roll it out across our new homes and sites for the
benefit of our customers.
Our workforce
The flexibility, diligence and commitment of our workforce have
been key to generating the Group's robust six month performance.
The Group employs 5,155 people, including c. 2,000 tradespeople,
across the UK. The welfare of the Group's workforce has been
paramount during this time. Effective Covid-19 safe operating
procedures were implemented across all Group operations. Persimmon
has also provided additional mental health support and resources to
colleagues over this challenging period.
Over the last year, the Group had c. 750 trainees and
apprentices across the business maintaining its long-standing
commitment to provide career opportunities to talented people
wishing to enter the construction industry. The Group continues to
invest significantly in its training programmes and has delivered
c. 5,700 training days in the period including over 330,000 minutes
of on-line training since the start of April.
Building and supporting our communities
The Group provides 'homes for all' with a wide range and choice
of new homes across all of our developments. Our private average
selling price of GBP246,208 is c. 17% lower than the UK national
average (6) and we support more first time buyers into the housing
market than any other UK housebuilder with c. 50% of our new
private homes being sold to first time buyers in the first half of
the year.
Since the launch of the Group's long-term strategy in 2012, the
Group has delivered c. 118,000 new homes and invested c. GBP2.8bn
in local communities including delivering c. 20,600 homes to our
housing association partners. Our activities support approximately
50,000 (7) jobs across our communities and within our wider supply
chain. Our financial strength will ensure that we can play our part
in our communities' recovery from the impact of Covid-19. The Group
is a signatory to the Covid-19 Business Pledge supporting
colleagues, customers and communities through the crisis and is
industry lead to the Social Mobility Pledge which encourages
businesses to boost social mobility in the UK.
Guided by dedicated resource, Persimmon has adopted a measured
and structured approach to its sustainability strategy promoting
greater awareness across all Group operations and disciplines. The
Group continues to focus on carbon reduction and work is currently
underway to establish an appropriate science-based carbon reduction
target. In addition, the Group has appointed five regional
champions to implement and enhance its environmental policies and
processes across all developments, providing additional targeted
resource in this important area.
Persimmon places great importance on the wider support it offers
its communities. The Group's 'Building Futures' campaign, joining
forces with Team GB, is continuing for a second year and will
donate c. GBP1m in 2020 to local community projects which benefit
young people across the UK. In addition, our Community Champions
campaign has donated over GBP370,000 in the first half of the year
and, from 1 April 2020, began to target its support to charities
that assist the over-70s, a group that has been particularly
affected by the pandemic.
Covid-19 update
Our response to the Covid-19 pandemic was led by the overriding
responsibility of ensuring the wellbeing of our customers,
workforce and local communities. In addition, serving the best
interests of all stakeholders, the Group has ensured our customers
remained at the centre of our business and maintained strong
stewardship of the financial strength of the business.
At the initial onset of the pandemic, on 25 March 2020, the
Group announced a controlled and orderly shutdown of its sites,
sales offices, and off-site manufacturing facilities. Regional
offices also closed, with a skeleton staff supporting colleagues
working from home.
During the shutdown period, the Group successfully maintained
operational momentum, with colleagues working from home progressing
planning and construction management work. Our sales teams also
remained fully operational, serving our customers using online
resources, including virtual viewings and our digital sales
reservation platform. This momentum has proved crucial in securing
an efficient and effective re-start to our construction activities,
a strong forward order book and encouraging average weekly net
reservation rates.
The Group continued to support our communities throughout the
period, supplying personal protective equipment to local hospitals
and maintaining our charitable programmes through the Group's
Community Champions and Building Futures campaigns. In addition,
Persimmon has signed up to the Covid-19 Business Pledge as part of
our ongoing commitment to support our workforce, customers and
communities through the crisis.
By the end of April, the Group had introduced effective Covid-19
secure operating procedures, aligned with Government guidelines,
covering all of its sites, offices and manufacturing facilities.
Our sites in England and Wales commenced a phased re-opening on 27
April 2020 and on 15 June 2020 in Scotland for construction
operations and on 15 May 2020 in England, 22 June 2020 in Wales and
29 June 2020 in Scotland for site-based sales activity.
The Group's strong Covid-19 safety protocols, which continue to
maintain the stringent two metre social distancing rules set at the
height of the outbreak, are embedded within all of our operations.
Our current build programmes, incorporating these protocols, have
returned to normal levels. These robust processes will ensure that
we can maintain our build programmes and continue to provide the
homes the country needs and support the recovery of the UK
economy.
Outlook
The Group has strong market positioning provided by its current
network of c. 340 sites in great locations across the UK and its
range and choice of affordable homes for its customers. We plan to
start construction on c. 55 new sites in the second half of the
year adding to this strength. This large and geographically diverse
network, supported by the Group's 31 regional businesses, provides
the Group with the operational infrastructure and capacity to
deliver future growth.
The forward order book, including legal completions taken in the
second half, is 21% stronger year on year with new home forward
sales of c. GBP2.5bn. In the last seven weeks, since the start of
July, the average weekly net reservations per site is c. 49% higher
than the equivalent period last year. At 30 June 2020, the Group
was carrying a c. 14% increase in the number of equivalent new home
units built compared with the same point last year and build
programmes have continued to progress well throughout the summer.
This strong position, together with our current projection that c.
45% of our anticipated second half new home legal completions will
complete by the end of September, c. 25% of which have completed in
Q3 so far, provide confidence over the Group's ability to deliver a
second half legal completion outturn that will at least be in line
with the second half of 2019.
The continuing healthy level of Persimmon's trading through this
period of major disruption in the UK economy and housing market
serves to remind us that demand for high quality new homes in
sustainable communities remains resilient. Consistently low
interest rates, good mortgage availability and supportive
Government policies provide reassurance for the housing market.
However, we also recognise the potential risks over the medium term
posed by further Covid-19 disruption, rising unemployment and the
potential impact of the outcome of a future trade deal with the
European Union and the rest of the world.
The Group regularly monitors external market factors and their
impact on demand and pricing and manages its working capital
investment in mitigation of adverse economic events.
We are also closely engaging with our suppliers to manage our
supply chains and maintain stock levels where necessary. The
vertical integration afforded by our own Brickworks, Tileworks and
Space4 production mitigate availability and cost risks further.
The Group's strategy of minimising financial risks and deploying
capital at the right time in the cycle together with Persimmon's
dedicated, experienced and agile management team provides a strong
platform to continue to deliver superior long-term sustainable
returns for the benefit of all its stakeholders through the
cycle.
The person responsible for the release of this announcement on
behalf of the Group is Tracy Davison, Company Secretary.
Footnotes
1 Stated on new housing revenues of GBP1,102.8m (2019: GBP1,645.3m)
and gross profits of GBP345.2m (2019: GBP555.5m).
2 Land cost value for the plot divided by the anticipated future revenue
of the new home sold.
3 Stated before goodwill impairment (2020 : GBP1.6m, 2019 : GBP4.1m)
4 12 month rolling average stated before goodwill impairment and includes
land creditors.
5 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.
6 National average selling price for newly built homes sourced from
the UK House Price Index as calculated by the Office for National
Statistics from data provided by HM Land registry.
7 Estimated using an economic toolkit.
PERSIMMON PLC
Condensed Consolidated Statement of Comprehensive Income
For the six months to 30 June 2020
Six months Six months Year to 31
to 30 June to 30 June December 2019
2020 2019
Note Total Total Total
GBPm GBPm GBPm
---------------------------------------- ---------- -------- ------------ ---------------
Total revenue 3 1,190.5 1,754.0 3,649.4
Cost of sales (845.3) (1,198.5) (2,518.7)
---------------------------------------- ---------- -------- ------------ ---------------
Gross profit 345.2 555.5 1,130.7
Other operating income 3.4 5.1 8.8
Operating expenses (57.0) (54.6) (110.1)
Profit from operations before
impairment of intangible assets 293.2 510.1 1,036.7
Impairment of intangible assets (1.6) (4.1) (7.3)
---------------------------------------- ---------- -------- ------------ ---------------
Profit from operations 291.6 506.0 1,029.4
Finance income 5.1 8.5 20.5
Finance costs (4.3) (5.2) (9.1)
---------------------------------------- ---------- -------- ------------ ---------------
Profit before tax 292.4 509.3 1,040.8
Tax 4 (54.8) (98.1) (192.0)
---------------------------------------- ---------- -------- ------------ ---------------
Profit after tax (all attributable
to equity holders of the parent) 237.6 411.2 848.8
---------------------------------------- ---------- -------- ------------ ---------------
Other comprehensive expense
Items that will not be reclassified
to profit:
Remeasurement losses on defined
benefit pension schemes 11 (54.9) (3.6) (27.0)
Tax 4 8.9 0.6 4.6
---------------------------------------- ---------- -------- ------------ ---------------
Other comprehensive expense for
the period, net of tax (46.0) (3.0) (22.4)
---------------------------------------- ---------- -------- ------------ ---------------
Total recognised income for the
period 191.6 408.2 826.4
---------------------------------------- ---------- -------- ------------ ---------------
Earnings per share
Basic 5 74.6p 129.3p 266.8p
Diluted 5 74.4p 129.0p 266.3p
---------------------------------------- ---------- -------- ------------ ---------------
PERSIMMON PLC
Condensed Consolidated Balance Sheet
As at 30 June 2020 (unaudited)
30 June 30 June 31 December
2020 2019 2019
Note GBPm GBPm GBPm
--------------------------------- ----- ---------- ---------- ------------
Assets
Non-current assets
Intangible assets 184.5 189.3 186.1
Property, plant and equipment 86.7 74.3 82.0
Investments accounted for using
the equity method 2.1 2.1 2.1
Shared equity loan receivables 8 50.2 62.9 59.2
Trade and other receivables 7.1 7.1 7.1
Deferred tax assets 6.7 7.5 6.6
Retirement benefit assets 11 23.1 87.8 77.6
--------------------------------- ----- ---------- ---------- ------------
360.4 431.0 420.7
--------------------------------- ----- ---------- ---------- ------------
Current assets
Inventories 7 3,227.3 3,145.2 3,156.8
Shared equity loan receivables 8 12.5 10.8 9.4
Trade and other receivables 97.3 150.4 58.5
Cash and cash equivalents 10 828.9 832.8 843.9
--------------------------------- ----- ---------- ---------- ------------
4,166.0 4,139.2 4,068.6
--------------------------------- ----- ---------- ---------- ------------
Total assets 4,526.4 4,570.2 4,489.3
--------------------------------- ----- ---------- ---------- ------------
Liabilities
Non-current liabilities
Trade and other payables (173.7) (220.4) (178.0)
Deferred tax liabilities (17.8) (27.2) (25.2)
Partnership liability (27.0) (30.7) (31.6)
--------------------------------- ----- ---------- ---------- ------------
(218.5) (278.3) (234.8)
--------------------------------- ----- ---------- ---------- ------------
Current liabilities
Trade and other payables (848.8) (1,012.8) (911.7)
Capital Return liability - (350.1) -
Partnership liability (5.5) (5.5) (5.5)
Current tax liabilities (3.0) (86.0) (79.0)
--------------------------------- ----- ---------- ---------- ------------
(857.3) (1,454.4) (996.2)
--------------------------------- ----- ---------- ---------- ------------
Total liabilities (1,075.8) (1,732.7) (1,231.0)
--------------------------------- ----- ---------- ---------- ------------
Net assets 3,450.6 2,837.5 3,258.3
--------------------------------- ----- ---------- ---------- ------------
Equity
Ordinary share capital issued 31.9 31.8 31.9
Share premium 19.8 16.4 19.2
Capital redemption reserve 236.5 236.5 236.5
Other non-distributable reserve 276.8 276.8 276.8
Retained earnings 2,885.6 2,276.0 2,693.9
--------------------------------- ----- ---------- ---------- ------------
Total equity 3,450.6 2,837.5 3,258.3
--------------------------------- ----- ---------- ---------- ------------
PERSIMMON PLC
Condensed Consolidated Statement of Changes in Shareholders'
Equity
For the six months to 30 June 2020 (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 2020:
Balance at 1 January
2020 31.9 19.2 236.5 276.8 2,693.9 3,258.3
Profit for the period - - - - 237.6 237.6
Other comprehensive
expense - - - - (46.0) (46.0)
Transactions with owners:
Issue of new shares - 0.6 - - - 0.6
Exercise of share options/share
awards - - - - (0.2) (0.2)
Share-based payments - - - - 2.4 2.4
Net settlement of share-based
payments - - - - (2.3) (2.3)
Satisfaction of share
options from own shares
held - - - - 0.2 0.2
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Balance at 30 June
2020 31.9 19.8 236.5 276.8 2,885.6 3,450.6
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Six months ended 30
June 2019:
Balance at 1 January
2019 31.7 15.5 236.5 276.8 2,634.0 3,194.5
Profit for the period - - - - 411.2 411.2
Other comprehensive
expense - - - - (3.0) (3.0)
Transactions with owners:
Dividends on equity
shares - - - - (747.8) (747.8)
Issue of new shares 0.1 0.9 - - - 1.0
Exercise of share options/share
awards - - - - (0.5) (0.5)
Share-based payments - - - - 3.9 3.9
Net settlement of share-based
payments - - - - (22.3) (22.3)
Satisfaction of share
options from own shares
held - - - - 0.5 0.5
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Balance at 30 June
2019 31.8 16.4 236.5 276.8 2,276.0 2,837.5
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Year ended 31 December
2019:
Balance at 1 January
2019 31.7 15.5 236.5 276.8 2,634.0 3,194.5
Profit for the year - - - - 848.8 848.8
Other comprehensive
expense - - - - (22.4) (22.4)
Transactions with owners:
Dividends on equity
shares - - - - (747.8) (747.8)
Issue of new shares 0.2 3.7 - - - 3.9
Exercise of share options/share
awards - - - - (0.5) (0.5)
Share-based payments - - - - 8.2 8.2
Net settlement of share-based
payments - - - - (26.9) (26.9)
Satisfaction of share
options from own shares
held - - - - 0.5 0.5
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
Balance at 31 December
2019 31.9 19.2 236.5 276.8 2,693.9 3,258.3
--------------------------------- --------- --------- ------------ ------------------------ ---------- --------
PERSIMMON PLC
Condensed Consolidated Cash Flow Statement
For the six months to 30 June 2020 (unaudited)
Six months Six months Year to 31
to 30 June to 30 June December 2019
2020 2019
Note GBPm GBPm GBPm
--------------------------------------- ----- ------------ ------------ ---------------
Cash flows from operating activities:
Profit for the year 237.6 411.2 848.8
Tax charge 4 54.8 98.1 192.0
Finance income (5.1) (8.5) (20.5)
Finance costs 4.3 5.2 9.1
Depreciation charge 7.1 6.5 13.3
Impairment of intangible assets 1.6 4.1 7.3
Share-based payment charge 2.8 1.5 3.7
Net imputed interest income (0.6) 1.7 7.7
Other non-cash items (3.9) (3.6) (7.6)
--------------------------------------- ----- ------------ ------------ ---------------
Cash inflow from operating activities 298.6 516.2 1,053.8
Movement in working capital:
Increase in inventories (65.7) (80.9) (87.7)
(Increase)/Decrease in trade and
other receivables (41.8) (63.9) 6.3
Decrease in trade and other payables (70.0) (85.0) (225.6)
Decrease in shared equity loan
receivables 7.9 17.6 31.4
--------------------------------------- ----- ------------ ------------ ---------------
Cash generated from operations 129.0 304.0 778.2
Interest paid (2.5) (2.3) (4.2)
Interest received 2.6 3.2 5.6
Tax paid (129.7) (63.6) (159.6)
--------------------------------------- ----- ------------ ------------ ---------------
Net cash (outflow)/inflow from
operating activities (0.6) 241.3 620.0
--------------------------------------- ----- ------------ ------------ ---------------
Cash flows from investing activities:
Joint venture net funding movement - 0.9 0.9
Purchase of property, plant and
equipment (10.1) (13.1) (27.5)
Proceeds from sale of property,
plant and equipment 0.5 0.3 0.7
--------------------------------------- ----- ------------ ------------ ---------------
Net cash outflow from investing
activities (9.6) (11.9) (25.9)
--------------------------------------- ----- ------------ ------------ ---------------
Cash flows from financing activities:
Lease capital payments (1.8) (2.0) (3.8)
Payment of Partnership liability (3.6) (3.4) (3.4)
Net settlement of share-based
payments - (42.6) (47.2)
Share options consideration 0.6 1.0 3.9
Dividends paid 6 - (397.7) (747.8)
--------------------------------------- ----- ------------ ------------ ---------------
Net cash outflow from financing
activities (4.8) (444.7) (798.3)
--------------------------------------- ----- ------------ ------------ ---------------
Decrease in net cash and cash
equivalents 10 (15.0) (215.3) (204.2)
--------------------------------------- ----- ------------ ------------ ---------------
Cash and cash equivalents at the
beginning of the period 843.9 1,048.1 1,048.1
--------------------------------------- ----- ------------ ------------ ---------------
Cash and cash equivalents at the
end of the period 10 828.9 832.8 843.9
--------------------------------------- ----- ------------ ------------ ---------------
Notes
1. Basis of preparation
The half year condensed financial statements for the six months
to 30 June 2020 have been prepared in accordance with the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority and with International Accounting Standard 34 Interim
Financial Reporting, as adopted by the European Union. The half
year financial statements are unaudited, but have been reviewed by
the auditors whose report is set out at the end of this report.
This report should be read in conjunction with the Group's annual
financial statements for the year ended 31 December 2019, which
have been prepared in accordance with IFRSs as adopted by the
European Union.
The comparative figures for the financial year ended 31 December
2019 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 2019, as described in those financial
statements.
The following new standards and amendments to standards are
mandatory for the first time for the financial year beginning 1
January 2020:
-- Amendments to IFRS 3 Business Combinations
-- Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark
reform
-- Amendments to IAS 1 and IAS 8: Definition of Material
-- Amendments to References to the Conceptual Framework in IFRS Standards
The effects of the implementation of these amendments have been
limited to disclosure amendments.
There are no new standards or amendment to standards, which are
EU endorsed but not yet effective.
Going concern
The Group entered this challenging time from a position of
strength. Its long term-strategy, which focuses on the risks
associated with the housing cycle and on minimising financial risk
and maintaining financial flexibility, has equipped the business
with strong liquidity and a robust balance sheet.
Despite the significant disruption caused by the Covid-19
pandemic, the Group delivered a resilient trading performance in
the six months to 30 June 2020, completing 4,900 new homes (2019:
7,584) and generating a profit before tax of GBP292.4m (2019:
GBP509.3m). At 30 June 2020, the Group had a strong balance sheet
with GBP829m of cash (2019: GBP833m), high quality land holdings
and reduced land creditors of GBP374.5m (December 2019: GBP435.2m).
In addition, the Group has an undrawn Revolving Credit Facility of
GBP300m, which has a five year term out to 31 March 2025.
The Group's forward order book, including legal completions
taken in the second half, is 21% stronger year on year with new
home forward sales of c. GBP2.5bn. In the last seven weeks, since
the start of July, average weekly net reservations are c. 49%
higher than the equivalent period last year.
The Directors have carried out a robust assessment of the
principal risks facing the Group, as discussed in note 12 of this
announcement. The impact of the ongoing social distancing
restrictions, introduced by the UK and devolved Governments to
contain the spread of Covid-19 and the risk of a new pandemic, have
been included as a new principal risk for the Group. The Directors
have considered this risk and its potential impact on the other
principal risks facing the Group including how they may threaten
the Group's strategy, business model, future operational and
financial performance, solvency and liquidity. The Group has
considered the impact of these risks on the going concern of the
business by performing a range of sensitivity analyses including
severe but plausible scenarios materialising together with the
likely effectiveness of mitigating actions that would be executed
by Directors (1) .
The scenarios emphasise the potential impact of severe market
disruption, for example including the effect of the Covid-19
pandemic, on short to medium term demand for new homes. The
scenarios' emphasis on the impact on the cash inflows of the Group
through reduced new home sales is designed to allow the examination
of the extreme cash flow consequences of such circumstances
occurring. The Group's cash flows are less sensitive to supply side
disruption given the Group's sustainable business model, flexible
operations, agile management team and off-site manufacturing
facilities.
In the first scenario modelled, the combined impact is assumed
to cause a 44% reduction in volumes and a 15% reduction in average
selling prices through to 2021. As a result of these factors, the
Group's housing revenues were assumed to fall by c. 52% during this
period. The assumptions used in this scenario reflect the
experience management gained during the Global Financial Crisis
('GFC') from 2007 to 2010, it being the worse recession seen in the
housing market since World War Two. The scenario assumes a
subsequent recovery occurs over a similar extended period as in the
GFC.
A second, even more extreme, scenario assumes a significant and
enduring depression of the UK economy and housing market over the
next five years causing a reduction of 53% in new home sales
volumes and a 45% fall in average selling prices through to 2021.
As a result of these factors, the Group's housing revenues were
assumed to fall by c. 74% during this period. It assumes that
neither volumes nor average selling prices recover from this point
through to 2025.
In each of these scenarios cash flows were assumed to be managed
consistently ensuring all relevant land, work in progress and
operational investments were made in the business at the
appropriate time to deliver the projected legal completions. The
Directors assumed they would continue to make well judged decisions
in respect of capital return payments, ensuring that they
maintained financial flexibility throughout.
In addition, due to the level of uncertainty surrounding the
impact of the Covid-19 pandemic, the Directors have also assessed
the impact of a complete shutdown of the housing market for the
period to 31 December 2021. This extended "lockdown" scenario
assumes that the Group does not receive any further sales receipts
for the period whilst maintaining its current level of fixed
costs.
Throughout each of these scenarios, the Group maintains
substantial liquidity with a positive cash balance and no
requirement to access the Group's GBP300m Revolving Credit
Facility. The payment of the current proposed dividend of 40p per
share has been factored into the models.
Having considered the Group's forecasts, sensitivity analysis
and the Group's significant financial headroom, the Directors have
a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing these condensed consolidated half year financial
statements.
Footnote 1
See also Viability Statement on pages 64 and 65 of the Group's
annual financial statements for the year ended 31 December 2019,
which provides more detail regarding the approach and process the
Directors follow in assessing the long-term viability of the
business.
Estimates and judgements
The preparation of these half year condensed financial
statements requires management to make judgements and estimations
of uncertainty at the balance sheet date. The key areas where
judgements and estimates are significant to the financial
statements are land and work in progress (see note 7), shared
equity loan receivables (see note 9), goodwill, brand intangibles
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.
In light of the Covid-19 pandemic, at 30 June 2020, management
performed an impairment review of the Group's land and work in
progress portfolio (see note 7) and goodwill and brand intangibles
assets (see below) which indicated that no impairment was
required.
Goodwill and brand intangibles
The key sources of estimation uncertainty in respect of goodwill
and brand intangibles are disclosed in notes 3 and 13 of the
Group's annual financial statements for the year ended 31 December
2019.
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 GBP1.6m recognised during the
period. This regular impairment charge reflects ongoing consumption
of the acquired strategic land holdings and is consistent with
prior years.
2. Segmental analysis
The Group has only one reportable operating segment, being
housebuilding within the UK, under the control of the Executive
Board. The Executive Board has been identified as the Chief
Operating Decision Maker as defined under IFRS 8 Operating
Segments.
3. Revenue
Six months Six months Year to
to 30 to 30 June 31 December
June 2020 2019 2019
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Revenue from the sale of new
housing 1,102.8 1,645.3 3,420.1
Revenue from the sale of part
exchange
properties 86.7 108.7 228.6
Revenue from the provision of
internet
services 1.0 - 0.7
--------------------------------------------- -------------------- ----------------------- ------------------------
Revenue from the sale of goods
and services
as reported in the statement of
comprehensive
income 1,190.5 1,754.0 3,649.4
--------------------------------------------- -------------------- ----------------------- ------------------------
4. Tax
Analysis of the tax charge for the period
Six months Six months Year to
to 30 to 30 June 31 December
June 2020 2019 2019
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Tax charge comprises:
UK corporation tax in respect of
the
current period 56.7 97.4 196.7
Adjustments in respect of prior
years (2.3) - (8.2)
--------------------------------------------- -------------------- ----------------------- ------------------------
54.4 97.4 188.5
--------------------------------------------- -------------------- ----------------------- ------------------------
Deferred tax relating to
origination
and reversal of temporary
differences 0.4 0.7 3.2
Adjustments recognised in the
current
year in respect of prior years'
deferred
tax - - 0.3
--------------------------------------------- -------------------- ----------------------- ------------------------
0.4 0.7 3.5
--------------------------------------------- -------------------- ----------------------- ------------------------
54.8 98.1 192.0
--------------------------------------------- -------------------- ----------------------- ------------------------
Deferred tax recognised in other comprehensive income
Six months Six months Year
to 30 to 30 June to
June 2020 2019 31
December
2019
GBPm GBPm GBPm
------------------------------------------------ -------------------- ----------------------- ---------------------
Recognised on remeasurement charges
on
pension schemes (8.9) (0.6) (4.6)
------------------------------------------------ -------------------- ----------------------- ---------------------
Tax recognised directly in equity
Six months Six months Year to
to 30 to 30 June 31 December
June 2020 2019 2019
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Arising on transactions with
equity participants
Current tax related to equity
settled
transactions (0.6) (7.8) (9.9)
Deferred tax related to equity
settled
transactions 1.0 5.3 5.4
--------------------------------------------- -------------------- ----------------------- ------------------------
0.4 (2.5) (4.5)
--------------------------------------------- -------------------- ----------------------- ------------------------
At 30 June 2020, the Group has recognised deferred tax assets on
deductible temporary differences at 19%, the rate enacted at the
end of the reporting period.
5. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
period (excluding those held in the employee benefit trusts and any
treasury shares, all of which are treated as cancelled) which were
318.7m (June 2019: 317.9m; December 2019: 318.1m).
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 319.5m (June 2019:
318.9m; December 2019: 318.8m).
Underlying earnings per share excludes goodwill impairment. The
earnings per share from continuing operations were as follows:
Six months Six months Year to
to 30 to 30 June 31 December
June 2020 2019 2019
Basic earnings per share 74.6p 129.3p 266.8p
Underlying basic earnings per
share 75.1p 130.6p 269.1p
Diluted earnings per share 74.4p 129.0p 266.3p
Underlying diluted earnings per
share 74.9p 130.2p 268.6p
--------------------------------------------- -------------------- ----------------------- ------------------------
The calculation of the basic and diluted earnings per share is
based upon the following data:
Six months Six months Year to
to 30 to 30 June 31 December
June 2020 2019 2019
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Underlying earnings attributable
to shareholders 239.2 415.3 856.1
Goodwill impairment (1.6) (4.1) (7.3)
--------------------------------------------- -------------------- ----------------------- ------------------------
Earnings attributable to
shareholders 237.6 411.2 848.8
--------------------------------------------- -------------------- ----------------------- ------------------------
At 30 June 2020 the issued share capital of the Company was
318,941,892 ordinary shares (31 December 2019: 318,902,385 ordinary
shares).
6. Dividends/Return of capital
Six months Six months Year to
to 30 to 30 June 31 December
June 2020 2019 2019
GBPm GBPm GBPm
-------------------------------------------- --------------------- ----------------------- ------------------------
Amounts recognised as
distributions to
capital holders in the period:
2018 dividend to all
shareholders of
125p per share paid 2019 - 397.7 397.7
2018 dividend to all
shareholders of
110p per share paid 2019 - - 350.1
Total capital return to
shareholders - 397.7 747.8
-------------------------------------------- --------------------- ----------------------- ------------------------
After careful assessment of the capital needs of the business,
and in light of the major social and economic disruption resulting
from the action taken to introduce measures to mitigate the onset
of the Covid-19 pandemic, the Board concluded that the return of
surplus capital by way of a 125p per share interim dividend payment
previously scheduled to be paid to shareholders on 2 April 2020
would be cancelled. In addition, the Board postponed the payment of
the final dividend for the 2019 financial year of 110p per share
that was previously scheduled to be paid on 6 July 2020.
As indicated at the Company's AGM on 29 April 2020, in relation
to the final dividend for 2019, the Board has continued to assess
the Group's capital requirements in the context of the progress
made by the business through this challenging period, together with
the outlook for the market and the wider UK economy. Given the
strong progress the business has made, together with our cautious
optimism on the Group's prospects for the second half, the Board is
pleased to announce a modest interim dividend of 40p per share
which will be paid on 14 September 2020 to shareholders on the
register on 28 August 2020.
7. Inventories
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
------------------------------------- ------------------- ------------------- -----------------------
Land 1,896.6 2,013.0 1,938.6
Work in progress 1,223.7 1,024.0 1,094.6
Part exchange properties 55.2 61.8 71.8
Showhouses 51.8 46.4 51.8
------------------------------------- ------------------- ------------------- -----------------------
3,227.3 3,145.2 3,156.8
------------------------------------- ------------------- ------------------- -----------------------
The Group has conducted a further review of the net realisable
value of its land and work in progress portfolio at 30 June 2020.
Our approach to this review has been consistent with that conducted
at 31 December 2019 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 2020 were GBP29.6m (2019: GBP36.2m). Following the review,
GBP8.2m of inventories are valued at fair value less costs to sell
rather than historical cost (2019: GBP14.3m).
8. Shared equity loan receivables
Six months Six months Year to
to 30 to 30 June 31 December
June 2020 2019 2019
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Shared equity loan receivables at
beginning
of period 68.6 86.9 86.9
Settlements (7.9) (17.6) (31.4)
Gains 2.0 4.4 13.1
--------------------------------------------- -------------------- ----------------------- ------------------------
Shared equity loan receivables at
end
of period 62.7 73.7 68.6
--------------------------------------------- -------------------- ----------------------- ------------------------
All gains/losses have been recognised through finance income in
profit and loss for the period of which GBP0.9m was unrealised
(June 2019: GBP1.3m; December 2019: GBP7.1m).
9. Financial instruments
In aggregate, the fair value of financial assets and liabilities
are not materially different from their carrying value.
Financial assets and liabilities carried at fair value are
categorised within the hierarchical classification of IFRS 7
Revised (as defined within the standard) as follows:
30 June 30 June 31 December
2020 2019 2019
Level 3 Level 3 Level 3
GBPm GBPm GBPm
------------------------------------------- ------------------- ------------------- -----------------------
Shared equity loan receivables 62.7 73.7 68.6
------------------------------------------- ------------------- ------------------- -----------------------
Shared equity loan receivables
Shared equity loan receivables represent loans advanced to
customers secured by way of a second charge on their new home. They
are carried at fair value. The fair value is determined by
reference to the rates at which they could be exchanged by
knowledgeable and willing parties. Fair value is determined by
discounting forecast cash flows for the residual period of the
contract by a risk adjusted rate.
There exists an element of uncertainty over the precise final
valuation and timing of cash flows arising from these assets. As a
result, the Group has applied inputs based on current market
conditions and the Group's historic experience of actual cash flows
resulting from such arrangements. These inputs are by nature
estimates and as such, the fair value has been classified as level
3 under the fair value hierarchy laid out in IFRS 13 Fair Value
Measurement.
Significant unobservable inputs into the fair value measurement
calculation include regional house price movements based on the
Group's actual experience of regional house pricing and management
forecasts of future movements, weighted average duration of the
loans from inception to settlement of ten years (2019: ten years)
and a discount rate of 5% (2019: 9%). The reduction in discount
rate reflects the continued fall in interest rates and is based on
current observed market interest rates offered to private
individuals on secured second loans.
The discounted forecast cash flow calculation is dependent upon
the estimated future value of the properties on which the shared
equity loans are secured. Adjustments to this input, which might
result from a change in the wider property market, would have a
proportional impact upon the fair value of the asset. Furthermore,
whilst not easily accessible in advance, the resulting change in
security value may affect the credit risk associated with the
counterparty, influencing fair value further.
10. Reconciliation of net cash flow to net cash and analysis of
net cash
Six months Six months Year to
to 30 to 30 June 31 December
June 2020 2019 2019
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Decrease in net cash and cash
equivalents
in cash flow (15.0) (215.3) (204.2)
Cash and cash equivalents at
beginning
of period 843.9 1,048.1 1,048.1
--------------------------------------------- -------------------- ----------------------- ------------------------
Cash and cash equivalents at end
of period 828.9 832.8 843.9
Lease liabilities (9.3) (9.1) (8.9)
--------------------------------------------- -------------------- ----------------------- ------------------------
Net cash at end of period 819.6 823.7 835.0
--------------------------------------------- -------------------- ----------------------- ------------------------
Net cash is defined as cash and cash equivalents, bank
overdrafts, lease obligations and interest bearing borrowings.
11. Retirement benefit assets
The amounts recognised in the consolidated statement of
comprehensive income are as follows:
Six months Six months Year to
to 30 to 30 June 31 December
June 2020 2019 2019
GBPm GBPm GBPm
--------------------------------------------- -------------------- ----------------------- ------------------------
Current service cost 1.0 0.9 1.7
Administrative expense 0.2 0.5 0.9
--------------------------------------------- -------------------- ----------------------- ------------------------
Pension cost recognised as
operating
expense 1.2 1.4 2.6
--------------------------------------------- -------------------- ----------------------- ------------------------
Interest income on net defined
benefit
asset (0.7) (1.3) (2.7)
--------------------------------------------- -------------------- ----------------------- ------------------------
Pension cost recognised as a net
finance
credit (0.7) (1.3) (2.7)
--------------------------------------------- -------------------- ----------------------- ------------------------
Total defined benefit pension
cost recognised
in profit or loss 0.5 0.1 (0.1)
Remeasurement losses recognised
in other
comprehensive expense 54.9 3.6 27.0
--------------------------------------------- -------------------- ----------------------- ------------------------
Total defined benefit scheme loss
recognised 55.4 3.7 26.9
--------------------------------------------- -------------------- ----------------------- ------------------------
The amounts included in the balance sheet arising from the
Group's obligations in respect of the Pension Scheme are as
follows:
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
------------------------------------------------ ------------------- ------------------- -----------------------
Fair value of pension scheme assets 662.3 661.8 672.8
Present value of funded obligations (639.2) (574.0) (595.2)
------------------------------------------------ ------------------- ------------------- -----------------------
Net pension asset 23.1 87.8 77.6
------------------------------------------------ ------------------- ------------------- -----------------------
The reduction in the net pension asset to GBP23.1m (December
2019: GBP77.6m) is largely due to the continued fall in long-term
corporate bond yields reducing the discount rate assumption applied
to scheme obligations to 1.6% (December 2019: 2.0%).
12. Principal risks
Pandemic risk
Residual Impact Mitigation
Risk A potential increase During the current pandemic, the Group's
High in the Covid-19 transmission business continuity plans were deployed
rate or a new pandemic swiftly, with Board oversight. A Covid-19
Change occurring in the UK may Steering Committee continues to monitor
from prior lead to a requirement day to day progress.
year for our workforce and The Group has a highly experienced
New our customers to comply Group Health and Safety Department
with varying levels of with established Group policies and
social distancing measures procedures together with the ability
or other measures to to swiftly enhance or adapt safety
curb the spread of the operating protocols to mitigate against
disease. This action specific risks. For example, the Group's
may disrupt continuity recent development and implementation
of site construction of the Group's Covid-19 Risk Assessments
and access to labour and associated protocols to mitigate
and materials, leading the risk of transmission of the Covid-19
to significant delays infection.
to the Group's build (Also see Health and Safety risk below).
programmes and new home During the Covid-19 pandemic the Group
legal completions. The was able to rapidly transition to
magnitude of any impact increased levels of remote working
on the business will through enhanced use of technology.
depend on the extent The Group's sales teams provided a
of the measures introduced continuous service to our customers
as applied to our workforce, through our digital sales platform
our customers, and wider and other online tools which enabled
society. the business to continue to take sales
A new pandemic would reservations and legal completions
present an increased throughout the lockdown period.
health and safety risk Our remote working processes have
to the public, our workforce been strengthened further through
and our customers on a number of collaboration tools to
our sites, in our offices enable seamless home working.
and in our off-site manufacturing These enhancements to the Group's
facilities. remote working capabilities will support
Social distancing requirements increased numbers of our workforce
would be likely to result at home, should another 'lockdown'
in an increased number occur.
of our workforce working The risks of increased use of remote
remotely leading to additional working are mitigated through regular
IT and information security communication with all users reminding
risks. them of potential issues, particularly
A potential increase for example in relation to phishing
in the Covid-19 transmission emails. (Also see mitigation of Cyber
rate or a new pandemic and Data Risk).
may also adversely impact The impact of build delays caused
the wider economy resulting by the lockdown have been mitigated
in reduced consumer confidence, by our planned increase in levels
demand and pricing for of construction work in progress coming
new homes, thereby impacting into the pandemic. This was the result
revenues, margins, profits of a strategic decision to provide
and cash flows and may greater stock availability to our
give rise to impairment customers, to improve quality and
of asset values. service levels, and in anticipation
of increased demand ahead of the end
of the Government's current Help to
Buy scheme.
The Group's construction work in progress
remains at higher levels providing
an effective buffer to potential build
delays.
The vertical integration afforded
by use of our own Brickworks, Space4
and Tileworks production mitigates
the risk of potential supply chain
disruption.
The Group's long-term strategy implemented
from 2012 focuses on recognising the
risks associated with the cyclical
nature of the housing market by minimising
financial risk, maintaining operational
and financial flexibility and deploying
capital at the most appropriate time
in the cycle. This strategy and management's
preparedness, responsiveness and agility
provide us with the sound fundamentals
required to enter periods of demand,
volume or pricing downturns in a position
of strength with strong levels of
liquidity and a robust balance sheet.
------------------------------------ ------------------------------------------------
Strategy
Residual Impact Mitigation
Risk The Group's strategy The Group's strategy is agreed by
Low has been developed by the Board at an annual strategy meeting,
the Board as the most and undergoes a continuous and iterative
Change appropriate approach process of implementation, review
from prior to successfully deliver and adaptation at Board meetings and
year the Group's purpose and in response to the evolution of conditions
No change ambition and generate in which the Group operates.
optimal sustainable value The Board engages with all stakeholders
for all stakeholders. to ensure the strategy is communicated,
As political, economic understood and effective. For example,
and other conditions an Employee Engagement Panel, Gender
evolve, it is possible Diversity Panel and employee engagement
that the strategy currently surveys have been established to monitor
being pursued may cease the cultural health of the organisation
to be the most appropriate and ensure strategy is understood
approach. and implemented.
If the Group's strategy
is not effectively communicated
to our workforce and
/ or engagement and incentive
measures are inappropriate,
operational activities
may not successfully
deliver the Group's strategic
objectives.
------------------------------------ ------------------------------------------------
UK's exit from the EU
Residual Impact Mitigation
Risk The UK's exit from the We continue to monitor the political
High European Union may lead situation, the UK economy and the
to increased economic housing market through the review
Change uncertainty adversely of external information and changes
from prior impacting: consumer confidence, in the behaviour of our customer base.
year demand and pricing for We robustly manage and control our
No change new homes, revenues, work in progress and land investment
margins, profits and and our stringent investment appraisals
cash flows and may result will continue, aiming to ensure exposure
in the impairment of to market disruption is reduced.
asset values. We closely engage with our key suppliers
Should the UK's future and have obtained assurances over
trading arrangements the continuity of our material supply
with the EU not be finalised where relevant. We will continue to
before the end of the employ effective tendering processes
transition period in to ensure cost impacts are mitigated
December 2020, a 'no as far as possible.
deal' scenario will occur. The vertical integration afforded
The deadline for extending by use of our own Brickworks, Space4
the transition period and Tileworks production will mitigate
has now passed potentially the availability and cost risks further.
making a 'no deal' Brexit (Also see mitigation and review of
more likely. If a 'no Government policy and Labour and Resources)
deal' scenario does occur,
some of the Group's EU
imported materials may
be subject to tariffs
resulting in increased
material costs.
Potential legislative
changes on customs arrangements
could create bottlenecks
at ports and impact on
the availability and
cost of imported materials
and components within
our supply chain.
------------------------------------ ------------------------------------------------
National and regional economic conditions
Residual Impact Mitigation
Risk The housebuilding industry As noted above, the Group's long-term
High is sensitive to changes strategy recognises the cyclical nature
in the economic environment, of the housing market and focuses
Change including unemployment, on minimising financial risk, maintaining
from prior interest rates and consumer operational and financial flexibility
year confidence. Any deterioration and judging the timing of capital
No change in economic conditions deployment through the cycle.
may have an adverse impact We continually monitor lead indicators
on demand and pricing on the future direction of the UK
for new homes, which housing market so as to manage our
could have a material exposure to any future market disruption.
effect on our revenues, We regularly review our pricing structure
margins, profits and to ensure it reflects local market
cash flows and result conditions and continuously monitor
in the impairment of the Group's geographical spread.
asset values. Our diversity of geographical markets
Economic conditions in and our range of price points helps
the land market may adversely us mitigate the effects of regional
affect the availability economic fluctuations. In the current
of a sustainable supply climate, our strategy of providing
of land at appropriate 'homes for all' at more affordable
levels of return. price points has proved successful.
We control the level of build on site
by closely monitoring our stock and
work in progress levels. The Group's
strong land holdings provide continuity
of supply and disciplined and extensive
due diligence processes are always
undertaken prior to entering into
any land investment decisions. These
processes have regard to local market
demands and conditions, and the Group's
existing strategic and on market land
holdings. All land additions are reviewed
by the Executive Directors.
------------------------------------ ------------------------------------------------
Government policy
Residual Impact Mitigation
Risk Changes to government We monitor Government policy in relation
High policy have the potential to the housing market very closely.
to impact on several Consistency of policy formulation
Change aspects of our strategy and application is very supportive
from prior and operational performance. of the housebuilding industry, encouraging
year For example, changes continued substantial investment in
No change to the planning system, land, work in progress and skills
changes in the tax regime, to support output growth. Our strategic
or further amendment objectives, delivering homes for all,
of the Help to Buy scheme are aligned with government priorities
or other housing policies for increasing housing stock.
could have an adverse The UK Government continues to support
effect on revenues, margins the industry with the recent announcement
and asset values. Changes of a stamp duty holiday on property
to the planning system sales up to GBP500,000 until 31 March
may also adversely impact 2021 and its Help to Buy scheme, which
the Group's ability to is currently scheduled to remain in
source suitable land place until 2023.
to deliver appropriate We actively manage our land investment
levels of return. decisions and levels of work in progress
to mitigate exposure to external influences.
------------------------------------ ------------------------------------------------
Mortgage availability
Residual Impact Mitigation
Risk Any restrictions in the We monitor Bank of England commentary
High availability or affordability on credit conditions including the
of mortgages for customers monthly approvals for house purchases
Change could reduce demand for and UK Finance's monthly reports and
from prior new homes and affect lenders' announcements for trends
year revenues, profits, cash in lending. We ensure that our investment
No change flows, and asset values. in land and work in progress is appropriate
for our level of sales and our expectations
for market conditions. The Government's
Help to Buy scheme, which is currently
scheduled to remain in place until
2023, supports customers to gain access
to the housing market across the UK
with competitive mortgage rates.
------------------------------------ ------------------------------------------------
Health and safety
Residual Impact Mitigation
Risk The health and safety The Board has a very strong commitment
High of our employees, subcontractors, to health and safety and managing
customers and visitors the risks in this area effectively.
Change to our construction sites This is implemented by comprehensive
from prior is of paramount importance management systems and controls, managed
year to us. Accidents on our by our highly experienced Group Health
No change sites could also lead and Safety Department, which includes
to reputational damage detailed training and inspection programmes
and financial penalties. to minimise the likelihood and impact
of accidents on our sites. The Group's
established policies and procedures
can be quickly and effectively adapted
to evolving health and safety guidance
and regulation. This has been recently
demonstrated with the swift Group
wide adoption of Covid-19 safe operating
protocols.
While all reasonable steps are taken
to reduce the likelihood of an incident,
the potential impacts of any such
incident are considered to be high.
------------------------------------ ------------------------------------------------
Labour and resources: skilled workforce, retention and succession
Residual Impact Mitigation
Risk Access to an appropriately We closely monitor our build programmes
Medium skilled workforce is to enable us to manage our labour
a key requirement for requirements effectively. We operate
Change the Group. Rising UK in-house apprentice and training programmes,
from prior house building activity to support an adequate supply of skilled
year in recent years has increased labour. Our in-house Group Training
No change demand for skilled labour, Department has been established to
which has increased pressure standardise and more effectively coordinate
on costs. training activity.
A skilled management We are also committed to playing a
team is essential in full and active role in external initiatives
maintaining operational to address the skills shortage such
performance and the implementation as the Home Building Skills Partnership,
of the Group's strategy. a joint initiative of the Construction
Industry Training Board and the Home
Builders Federation.
Where appropriate, we also use the
Group's Space4 modern method of construction
which helps diversify resource requirements
on site.
The Group focuses on retaining its
key staff through a range of measures,
including the establishment of a Gender
Diversity Panel, an Employee Engagement
Panel, employee engagement surveys,
further development of performance
management frameworks, career management,
and incentives. At the most senior
level, the Nomination Committee oversees
these processes and promotes effective
succession planning.
------------------------------------ ------------------------------------------------
Labour and resources: materials and land purchasing
Residual Impact Mitigation
Risk Materials availability Materials availability
Medium Recent growth in UK housebuilding Our build programmes and our supply
and supply chain disruption chain are closely monitored to allow
Change caused by the Covid-19 us to manage and react to any supply
from prior pandemic has led to an chain issues and to help ensure consistent
year increased demand for high quality standards. We build strong
No change materials which is placing relationships with key suppliers over
greater pressure on the the long term to ensure consistency
supply chain. This may of supply and cost efficiency.
continue to cause availability We have invested in expanding our
constraints and increase off-site manufacturing hub at Harworth,
cost pressures. near Doncaster, to strengthen security
of supply. Our brick plant is providing
a significant proportion of the bricks
we use and our roof tile manufacturing
facility began delivering roof tiles
to our sites this year. This complements
our existing off-site manufacturing
capability at Space4, which produces
Build quality may be timber frames, highly insulated wall
compromised if unsuitable panels and roof cassettes as a modern
materials are procured method of constructing new homes.
leading to damage to
the Group's reputation Our procurement team ensures that
and customer experience. the Group's suppliers provide materials
to the expected specification. Materials
are inspected on receipt at site.
During build, each of our new homes
undergoes a seven stage internal quality
check process by our management teams,
supported with IT tools to enable
Land Purchasing monitoring. This process has been
Land may be purchased further strengthened during 2019 by
at too high a price, the introduction of a new team of
in the wrong location Independent Quality Inspectors across
and at the wrong time each of our regional businesses.
in the housing market
cycle. Land Purchasing
The Group has strong land holdings.
All land purchases undergo stringent
viability assessments performed by
our dedicated land and planning teams
and must meet specific levels of projected
returns.
The Board review and determine the
appropriate timing of land purchases
having regard to existing market conditions
and sales rates.
------------------------------------ ------------------------------------------------
Climate change
Residual Impact Mitigation
Risk Should the effects of We monitor our operational efficiency
Medium climate change and the and direct environmental impact in
UK's transition to a a number of ways including measuring
Change lower carbon economy our own CO (2e) emissions and the
from prior lead to increasing national amount of waste we generate for each
year regulation this could home we sell.
Increased cause additional planning The Group has developed a climate
delays, increase the change risk register which ensures
cost and accessibility that the management and mitigation
of materials required of the risk is embedded within the
within our construction Group's risk management process. We
process and potentially have also appointed a Group Sustainability
limit their supply or Manager bringing increased focus to
require additional features both the risks and opportunities surrounding
which could significantly climate change.
increase our costs. We systematically consider the potential
Changes in weather patterns impacts of climate change throughout
and the frequency of the land acquisition, planning and
extreme weather events, build processes and work closely with
particularly storms and planning authorities and other statutory
flooding, may increase bodies to manage and mitigate these
the likelihood of disruption risks. For example, we conduct full
to the construction process. environmental assessments for each
The availability of mortgages parcel of land we acquire for development
and property insurance to ensure our activities fulfil all
may reduce in response obligations, respecting the natural
to financial institutions environment and the communities for
considering the possible which we are delivering newly built
impacts relating to climate homes. We are keen to adopt Sustainable
change. Changes in weather Urban Drainage Systems on all our
patterns may increase new sites, subject to local planning
build costs and/or development requirements, to address the risk
timeframes. of flooding.
The impact and likelihood On 1 October 2019, the Government
of this risk has increased set out its plans for the 'Future
compared to the prior Homes Standard' including proposed
year as increasing awareness options to increase the energy efficiency
and desire for action requirements for new homes in 2020
is likely to result in as a 'stepping stone' to achieving
a more urgent transition the new standard. The Future Homes
to a lower carbon economy. Standard (to be introduced by 2025)
will require new build homes to be
future-proofed with low carbon heating
and world leading levels of energy
efficiency.
During 2019, the Group established
a low carbon homes working group (consisting
of members from across the Group's
various disciplines) to effectively
plan and manage the transition to
low carbon homes. The Group, which
collaborates with key suppliers, is
aiming to identify the most effective
solutions to developing low carbon
homes. It meets regularly and reports
its findings to the Board. The Group
is proactively engaging with the housing
industry and the Government to develop
industry wide solutions to meet the
requirements of the Future Homes Standard.
We continually seek to strengthen
our supply chain, for example, our
off-site manufacturing facilities
provide us with greater assurance
of quality and supply, and use modern
methods of construction and technology
to assist the mitigation of climate
change related risks. The Group procurement
team maintain strong links with our
suppliers delivering value through
our supply chain by regular engagement
and robust tendering processes
------------------------------------ ------------------------------------------------
Reputation
Residual Impact Mitigation
Risk Damage to the Group's Management Supervision
Medium reputation could adversely The Group has a strong commitment
impact on its ability to appropriate culture and maintaining
Change to deliver its strategic the high quality of its operations.
from prior objectives. Oversight from the Board seeks to
year For example, should governance, ensure key processes are robust and
No change build quality, customer any matters are promptly and effectively
experiences, operational addressed.
performance, management The Group's build quality and customer
of health and safety service processes are a key strategic
or local planning concerns priority and significant investment
fall short of our usual has been made in this area with the
high standards, this Customer Care Improvement Plan now
may result in damage embedded within the business. Persimmon's
to customer, commercial Homebuyer Retention scheme, introduced
and investor relationships on 1 July 2019 and which is unique
and lead to higher staff in the market, is proving to be both
turnover. popular with customers and a key driver
of behavioural change within the business.
Where management oversight identifies
inconsistencies in adherence to agreed
processes, correcting actions are
swiftly taken, for example in the
case of incorrect cavity barrier installations
where immediate action was taken through
inspections and remediation. As part
of the Customer Care Improvement Plan
actions also included additional training
and the introduction of "the Persimmon
Way" and associated initiatives described
below.
The Group has established a Construction
Working Group comprising senior experienced
construction professionals from across
the Group in order to strengthen Group
build processes and establish a consolidated,
consistent Group-wide approach to
construction ("the Persimmon Way").
A Group Construction Director has
also been appointed to strengthen
oversight of Group build processes
across all regions. The Group has
appointed a new team of Independent
Quality Inspectors who undertake regular
inspections on all aspects of construction
activity on our sites as well as continually
assessing the finished quality of
our new homes in addition to our existing
7-stage checks prior to legal completion.
The Persimmon Way will be fully operational
by the end of 2020 and there will
be an external audit of this process.
Other senior appointments have been
made at Group level to promote and
enforce compliance with policies and
procedures as well as to provide the
Board with assurance that they are
being implemented properly.
Stakeholder Relationships
We take actions to maintain positive
relationships with all of our stakeholders
to minimise the risks of reputational
damage and aim to comply with best
practice in corporate governance.
During 2019 the Group further developed
engagement activities with all stakeholders.
For example, improved engagement with
our employees is facilitated through
the Employee Engagement and Gender
Diversity Panels which meet regularly
and report to the Board. The Group
has also invested in a number of measures
to improve customer experience through
the Group's Customer Care Improvement
Plan by putting customers before volume.
For example, significant investment
in increased work in progress levels,
the introduction of a Home Buyer Retention
Scheme for customers with cover to
include any faults identified during
the first week of occupation, and
investment in the development of a
customer portal which will be rolled
out during the second half of 2020.
In addition, the Group continues to
foster long term, mutually beneficial
relationships with its suppliers.
We actively support local communities
in addressing housing needs, in creating
attractive neighbourhoods and employing
local people, both on our sites and
in the supply chain. Significant contributions
are made to local infrastructure and
good causes within the communities
in which the Group operates.
------------------------------------ ------------------------------------------------
Regulatory compliance
Residual Impact Mitigation
Risk The housebuilding industry We operate comprehensive management
Low is subject to extensive systems to ensure regulatory and legal
and complex laws and compliance, including a suite of policies
Change regulations, particularly and procedures covering key areas
from prior in areas such as land of legislation and regulation. Where
year acquisition, planning these systems identify inconsistencies
Increased and the environment. in adherence to agreed processes,
Ensuring compliance in correcting actions are swiftly taken.
these areas can result For example, our response to the incorrect
in delays in securing cavity barrier installations where
the land required for immediate action was taken through
development and in construction. inspections and remediation.
Any failure to comply
with regulations could We engage extensively with planning
result in damage to the authorities and other stakeholders
Group's reputation and to reduce the likelihood and impact
potential imposition of any delays or disruption. Also,
of financial penalties. the Group controls sufficient land
The potential risk impact holdings to provide security of supply
in this area has increased for medium term trading requirements.
during the year, reflecting
increasing regulatory
requirements, and the
scale of potential penalties
under recent legislation
(for example those under
the General Data Protection
Regulation "GDPR").
------------------------------------ ------------------------------------------------
Cyber and Data Risk
Residual Impact Mitigation
Risk Failure of any of the We operate centrally maintained IT
Medium Group's IT systems, particularly systems with a fully tested disaster
those in relation to recovery programme.
Change customer information All infrastructure is highly resilient,
from prior and customer service with geographically diverse datacentres
year could result in significant that have a series of backups.
New financial costs and reputational The Group has detailed and robust
damage and business disruption, systems development and implementation
due to the loss, theft processes in place and a Cyber Incident
or corruption of data Response Plan. The Group has strengthened
either inadvertently its cyber security resource to manage
or via a targeted cyber-attack. and oversee security controls.
Periodic penetration testing is carried
out through security partners to test
the security of our perimeter network.
Training and regular communications
are delivered to all users to increase
awareness of cyber-risks.
Specialists within the Group's IT
Department provide oversight on the
suite of controls in place to ensure
they are continually updated to mitigate
evolving threats.
An externally led review of the Group's
cyber security measures has been commissioned
to validate the Group's approach.
Established GDPR compliant business
processes and data management are
maintained and regularly reviewed.
------------------------------------ ------------------------------------------------
Statement of Directors' responsibilities in respect of the Half
Year Report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial reporting
as adopted by the EU
-- the Half Year Report includes a fair review of the information
required by:
o DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that
have occurred during the first six months of the financial
year and their impact on the condensed set of financial
statements and a description of the principal risks
and uncertainties for the remaining six months of
the year; and
o DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have
taken place in the first six months of the current
financial year and that have materially affected the
financial position or performance of the entity during
that period; and any changes in the related party
transactions described in the last annual report that
could do so.
The Directors of Persimmon Plc and their function are listed
below:
Roger Devlin Chairman
David Jenkinson Group Chief Executive
Mike Killoran Group Finance Director
Nigel Mills Senior Independent
Director
Rachel Kentleton Non-Executive Director
Simon Litherland Non-Executive Director
Joanna Place Non-Executive Director
Annemarie Durbin Non-Executive Director
By order of the Board
David Jenkinson Mike Killoran
Group Chief Executive Group Finance Director
17 August 2020
The Group's Annual financial reports, half year reports and
trading updates are available from the Group's website at
www.persimmonhomes.com/corporate
INDEPENDENT REVIEW REPORT TO PERSIMMON PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2020 which comprises the Condensed
Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Balance Sheet, the Condensed Consolidated Statement of
Changes in Shareholders' Equity, the Condensed Consolidated Cash
Flow Statement and the related Notes 1 to 12. We have read the
other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
17 August 2020
This information is provided by RNS, the news service of the
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Authority to act as a Primary Information Provider in the United
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contact rns@lseg.com or visit www.rns.com.
END
IR PRMMTMTMBTMM
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August 18, 2020 02:00 ET (06:00 GMT)
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