Building for tomorrow, today
Persimmon Plc Annual Report 2022
Contents
Strategic report | Governance | Financial statements | ||||||
Our mission and vision | 1 | Group Chief Executive's statement | 14 | Directors' Report | 86-125 | Statement of Directors' Responsibilities | 154 | |
Chairman's statement | 2 | Our five key priorities | - Chairman's introduction | Independent Auditor's Report | 155 | |||
The strength of our business | - Build quality and safety | 21 | to corporate governance | 86 | Consolidated Statement | |||
- Three strong brands | 4 | - Reinforcing trust: customers at the | - Board leadership | 88 | of Comprehensive Income | 161 | ||
- Key attributes | 5 | heart of our business | 25 | - Corporate governance statement | 92 | Balance sheets | 162 | |
- Vertical integration | - Disciplined growth: | - Composition, succession and evaluation | Statement of changes | |||||
high quality land investment | 28 | in shareholders' equity | 163 | |||||
Space4, Brickworks, Tileworks, FibreNest | 6 | - Nomination Committee Chair's statement | 106 | |||||
- Clear priorities with sustainability at the heart | 7 | - Industry-leading financial performance | 31 | - Nomination Committee report | 108 | Cash flow statements | 164 | |
Our marketplace | 8 | - Supporting sustainable communities | 33 | - Audit, Risk and Internal control | Notes to the financial statements | 165 | ||
Our business model | Our people | 36 | - Audit & Risk Committee Chair's statement | 116 | ||||
- Overview | 10 | Sustainability | 42 | - Audit & Risk Committee report | 118 | |||
- What we do | 11 | Financial review | 53 | - Other disclosures | 123 | |||
How we performed | How we manage risk | |||||||
- Financial KPIs | 12 | - Protecting long-term value creation | 56 | Remuneration | 126-153 | Other information | ||
- Non-financial KPIs | 13 | - Principal risks and material issues | 57 | - Remuneration Committee Chair's statement | 126 | |||
Shareholder Information | 198 | |||||||
Task force on climate related financial | ||||||||
- Remuneration at a glance | 130 | |||||||
disclosures (TCFD) | 64 | Financial Calendar 2023 | 198 | |||||
Viability statement | 75 | - Directors' future Remuneration Policy | 132 | Five Year Record | 198 | |||
Section 172 statement | 78 | - Annual report on Remuneration | 140 | |||||
Non-financial information statement | 85 | |||||||
For further information
www.persimmonhomes.com/corporate
Strategic report
About Persimmon
Corporate governance | Financial statements | Other information |
Our mission
To build homes with quality our customers can rely on at a price they can afford.
Our vision
To be Britain's leading homebuilder, with quality and customer service at its heart, building the best value homes on the market in sustainable and inclusive communities.
We will invest in innovation and technology to extend our low cost strengths and enhance our five-star capabilities to enable as many people as possible to buy the homes we build.
Persimmon Plc | Annual Report | December 2022
- Estimated using an economic toolkit.
- The value of homes delivered to housing associations, the value of discounted open market value homes plus the value of planning contributions we have made over the last five years.
- 12-monthrolling average calculated on operating profit before legacy buildings provision charge (2022: £275.0m, 2021: £nil) and goodwill impairment (2022: £6.6m, 2021: £6.2m) and total capital employed. Capital employed being the Group's net assets less cash and cash equivalents plus land creditors.
Highlights
Number of homes sold
14,868
2021: 14,551
Average selling price 2022
£248,616
2021: £237,078
Construction and supply chain jobs supported1
c.92,000
2021: c.92,000
Investment in local communities2
c.£2.4bn
2021: c.£2.3bn
Owned land holdings (plots)
70,768
2021: 67,089
Return on capital employed ('ROCE')3
30.4%
2021: 35.8%
01
Chairman's statement
A more challenging period but opportunities ahead
We have a strong platform to prepare for a new growth phase when market conditions permit.
Roger Devlin
Chairman
1. Stated before legacy buildings provision charge (2022: £275.0m, 2021: £nil) and goodwill impairment
(2022: £6.6m, 2021: £6.2m).
Persimmon Plc | Annual Report | December 2022
I am pleased to report that Persimmon had a strong year in 2022. For the first time in our 50 year history we delivered five-star quality and service while also achieving underlying pre-tax profits1 in excess of £1 billion.
By contrast 2023 promises to be a tough year, albeit largely for reasons beyond our control. While I am confident that our attention to build quality and customer care will remain undimmed, we will inevitably see a sharp fall in the number of completions as well as a decline in profitability as a consequence of the nationwide diminution in demand for housing arising from higher mortgage rates and challenging economic circumstances.
However, I remain very confident of the exciting long-term prospects for Persimmon. We are constantly reminded by the political classes of the national need for 300,000 homes to be built every year. I expect the outturn for 2023 may not be much more than half this number. Therefore we anticipate that our company will be a beneficiary of strong pent up demand when the economic and housing cycles turn in our favour eventually.
When I joined the company as Chairman in 2018 I quickly commissioned an Independent Review of our approach to build quality. I am delighted that Dean and his team have responded to the challenge so vigorously and diligently to deliver better homes built right first time.
Many colleagues have commented to me that 2022 was perhaps the most difficult year they have known in the building trade. The combination of material and labour shortages, significant inflation and the stark drop-off in sales rates in the fourth quarter presented myriad challenges that my colleagues have navigated with impressive skill and commitment. Our mission is to build homes with quality our customers can rely on at a price they can afford and 2022's results demonstrate the company has done just that.
02
Strategic report | Corporate governance | Financial statements | Other information |
A more challenging period but opportunities ahead
Following the swift rise in interest rates the Group acted quickly to enhance its already strong investment discipline and working capital cost controls, to protect our cash position and in the longer-term provide the flexibility to pursue new growth opportunities.
We have a strong platform to prepare for a new growth phase when market conditions permit. Although 2023 will be a difficult year, Persimmon has the opportunity to expand our outlet network at the right time through disciplined and targeted investment and a more sophisticated approach to securing planning to expedite approvals. We are hopeful that by next year we will be expanding once more, delivering more new homes for customers and sustainable returns for shareholders.
Industry leadership
Although the national political environment has become more challenging as backbench anti-new housing forces have gained strength, we are pleased to continue to lead the industry with cladding and fire safety remediation.
We were proud to be first with our initial commitment in February 2021 to protect leaseholders from the costs of remediation in any multi-storey development we built. The government's developer remediation contract seeks to contractualise our existing commitment; a commitment we are already making good progress on. We expect to sign the contract imminently. We are also engaged in similarly positive discussions with the Welsh and Scottish governments.
Persimmon Plc | Annual Report | December 2022
As announced in November 2022, the Group increased our provision for building safety remediation across the UK to £350m (before spend to date), resulting in a £275m exceptional charge for the year. This increase reflects the extensive work we have done to get a more detailed understanding of costs over the last year. The government has also broadened the scope of works required this year to include non-cladding fire related build defects, resulting in both an increase in the amount of work required and in the number of eligible buildings. This has also happened against a background
of significant build cost inflation during the period. We expect the work to be largely completed
- with the associated cash impact - over the next three years.
Capital allocation policy
Persimmon remains a fundamentally strong business, with industry-leading financial performance through the cycle. The actions we are currently taking will strengthen our capabilities to grow and deliver sustainable returns over time to shareholders.
A new capital allocation policy was announced in November to deliver sustainable returns to shareholders while investing in future growth through disciplined expansion of our industry- leading land portfolio and enhancing our quality and service capabilities. Alongside this the Board considers our current assessment of prevailing market conditions, the sector's increased tax contribution and building safety remediation costs.
For 2022, the Board proposes a final dividend of 60p per share to be paid on 5 May 2023 to shareholders on the register on 14 April 2023, following shareholder approval at the AGM.
This dividend is the final and only dividend in respect of financial year 2022. The Board's intention is to at least maintain the 2022 dividend per share in 2023, with a view to growing this over time.
As previously announced, payments will be made semi-annually with an interim dividend paid in the second half of this year in relation to 2023.
Board changes
The only Board change during the year was Jason Windsor joining on 11 July 2022 as Chief Financial Officer, replacing Mike Killoran following his retirement in January 2022. The Board warmly welcomes Jason to the business.
Finally, on behalf of the whole Board I would like to thank our colleagues, subcontractors and suppliers for their hard work and determination to deliver
a good performance in 2022. This year will not be easy. Sometimes in life you have to go backwards in order to move forwards. I am convinced our long-term future is bright and we all look forward to working together to maintain Persimmon's industry-leading position and deliver more quality homes for our customers and sustainable returns for our shareholders through the cycle.
Roger Devlin
Chairman
28 February 2023
Revenue
£3.82bn
2021: £3.61bn
Dividend per share paid in the year
235p
2021: 235p
Underlying new housing operating margin1
27.2%
2021: 28.0%
Forward sales2
£1.52bn
2021: £2.21bn
Affordable homes3
2,868
2021: 2,759
-
Based on new housing revenue (2022: £3,696.4m,
2021: £3,449.7m) and underlying operating profit
(2022: £1,006.4m, 2021: £966.7m) (stated before legacy
buildings provision charge (2022: £275.0m, 2021: £nil)
and goodwill impairment (2022: £6.6m, 2021: £6.2m)). - As at 28 February 2023 (2021 figure as at 1 March 2022).
- Homes provided to our housing association partners and discounted open market value homes.
03
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Persimmon plc published this content on 22 March 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 March 2023 15:42:02 UTC.