REG - Persimmon Plc - Half Year Results
08/08/2024 07:00
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RNS Number : 6299Z Persimmon PLC 08 August 2024
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024
Full year completions expected at the top end of guidance, well positioned for
improving market conditions
Persimmon Plc today announces its half year results for the six months ended
30 June 2024.
Financial highlights
H1 2024 H1 2023
New home completions 4,445 4,249
New home average selling price £263,288 £256,445
Total Group revenue £1.32bn £1.19bn
Underlying operating profit(1) £152.3m £152.2m
Underlying operating margin(1) 13.0% 14.0%
Reported operating profit £149.4m £146.4m
Reported profit before tax £146.3m £151.0m
Reported basic earnings per share 34.7p 34.4p
Interim dividend per share 20p 20p
Net cash at 30 June £350.2m £357.0m
Operational highlights
· 4,445 new home completions in H1, up 5%, including a 14% increase in
private completions to 3,742 homes; on track for completions of c.10,500 for
the full year, at the top end of previous guidance.
· Underlying operating profit and margin in line with expectations,
impacted by embedded build cost inflation and private sales mix in the forward
order book at the start of the year, as expected.
· Net private sales rate of 0.71 per outlet per week up from 0.59 in
H1 2023. Excluding bulk sales, net private sales rate of 0.59, up 5% (2023:
0.56) on the prior year reflecting improvement in the Spring selling season.
· Maintained five-star customer satisfaction for third successive year
alongside further improvements to build quality, achieving more than double
the number of NHBC Pride in the Job awards than in 2023.
· Continuing to invest in future growth through £195m spend on land
in H1.
· Achieved detailed planning on c.6,000 plots year to date (135% of H1
completions). Encouragingly, c.1,000 of these were achieved in July following
the new government taking office.
· Our landbank is strong with 81,545 plots owned and under control, of
which 38,067 are owned with detailed planning, supporting our ambition to grow
outlets; up 3% from the start of the year to 266 at 30 June.
· Current private forward order book up 28% year on year to
£1.12bn.
· Prototype house with facade built in 5 days at our Space4
factory.
Current trading and outlook
We are encouraged by the early announcements of the new government,
particularly around planning. Consumer confidence continues to improve leading
to a strong pick up in enquiries and visitors, which will be further supported
by the recent cut to the Bank of England base rate. Since 1 July, our net
private sales rate is 0.69 which is up 68% on last year, providing us with
good confidence on delivering c.10,500 homes for the full year, at the top end
of previous guidance and we continue to expect our full year housing margin to
be in line with the prior year. Our current private forward order book(2) is
up 28% at £1.12bn, with a private ASP of c.£289,150, up 2% on the prior
year.
Our recent successes on planning, combined with our continued activity in the
land market over the past 12 months has further strengthened our land bank and
provides us with confidence for further growth of outlets and volume into
2025. Although we recognise that the government's welcome planning reforms
will take some time to come through, our ambition remains to grow our outlet
base to over 300 in the medium-term.
Dean Finch, Group Chief Executive, said:
"Persimmon is a growing company with growing opportunities. The first half of
the year has been strong with improved sales rates and robust average selling
prices, despite ongoing affordability challenges. Strengthening consumer
sentiment, improving macro-economic conditions and the government's welcome
and ambitious planning reforms that demand more of the high quality,
affordable homes that are Persimmon's core strength, are all supportive of our
ambition to grow this year and in the future.
We are opening more sites this year and will do the same next year,
demonstrating the benefit of our continued land investment in recent years.
This growing and strong platform means we are ready to deliver more of the
homes our country requires while securing industry-leading returns over the
medium-term."
Footnotes
1 Stated before net exceptional charge of £2.0m (2023: £nil), as
set out in note 4 and goodwill impairment (2024: £0.9m, 2023: £5.8m). Margin
based on new housing revenue (2024: £1.17bn, 2023: £1.09bn).
2 2024 figure as at 4 August 2024; 2023 figure as at 6 August 2023.
For further information please contact:
Victoria Prior, Group IR Director Olivia Peters
Anthony Vigor, Group Director of Strategic Partnerships and External Affairs Teneo
Persimmon Plc persimmon@teneo.com
Tel: +44 (0) 1904 642199 Tel: +44 (0) 7902 771 008
There will be an analyst and investor presentation at 09.00 today, hosted by
Dean Finch, Group Chief Executive and Andrew Duxbury, Chief Financial Officer.
Analysts unable to attend in person may listen live via webcast using the link
below. All participants must pre-register to join the webcast. Once
registered, an email will be sent with important details for this event, as
well as a unique Registrant ID. This ID is to be kept confidential and not
shared with other participants.
Live webcast: https://edge.media-server.com/mmc/p/f4d8srd7/
(https://edge.media-server.com/mmc/p/f4d8srd7/)
An archived webcast of today's analyst presentation will be available from
this afternoon on www.persimmonhomes.com/corporate
(http://www.persimmonhomes.com/corporate) .
CHIEF EXECUTIVE'S REVIEW
Strengthened platform; positioned for growth
Overview
Our three brands align well with current market demands. In a climate where
affordability and value are vital for our customers, we are uniquely placed
through our core Persimmon and Westbury Partnerships brands, offering
high-quality homes with simple, efficient to build designs supported by our
vertically integrated model. Our core Persimmon homes continue to be priced
over 20% below the new build market average(1); through our Westbury
Partnerships brand we are well placed to deliver affordable homes in line with
the government's ambitions; and our Charles Church brand is successfully
capturing demand at higher price points, with an enhanced specification, and
providing diversification for our business.
Performance in the first half has been encouraging. Private average selling
prices on reservations were higher than achieved in the autumn selling season
and sales rates have been good, improving through spring and ahead of the
equivalent period last year. Our enhanced sales and marketing capabilities
enabled us to achieve a net sales rate of 0.71 per outlet per week in the
six-month period and we completed the sale of 4,445 new homes. Bulk sales to
investors continue to be used in a disciplined way, and these contributed 0.12
per outlet per week within the overall sales rate referred to above (2023:
0.03). We have continued to use incentives in a very controlled manner at
around 4.5% per gross reservation (2023: 3.2%). Importantly, the increased
sales were achieved while continuing to provide exceptional service to our
customers and delivering consistently high-quality homes reinforced by our
vertically integrated model. This outcome reflects the dedication of
colleagues throughout the Group and illustrates the significant progress the
business has made in recent years.
As expected, our underlying operating housing margin is slightly lower than in
the first half of last year. This reflects the lower embedded margin in our
carried forward sales at 1 January 2024 given the pressure on pricing last
autumn, the sales mix and build cost inflation during 2023. These cost
pressures have now eased and overall, we continue to expect our full year
housing margin to be in line with the prior year.
In the five weeks since the period closed, sales rates have been 0.69,
compared to 0.41 for the same period last year. The private average selling
price in the current forward order book is up 9% since the start of the year.
Our current private forward sales position(2) is £1.12bn, 28% higher year on
year (2023: £0.88bn), positioning us well as we enter the second half of the
year. Overall, our view is that the market outlook is encouraging and we are
well positioned to grow. We are now expecting to deliver c.10,500 completions,
at the top end of previous guidance in the current year with margins in line
with the prior year.
Trading performance
We delivered 4,445 completions in the first half year, up 5% on the same
period last year (2023: 4,249) reflecting the strength of the order book as we
entered the year along with an increase in sales rates. The Group's average
selling price of £263,288 (2023: £256,445) is up 3% year on year, largely
reflecting a greater proportion of private home completions compared with the
prior year. Private average selling prices on reservations were up 6% in the
period compared to the second half last year and we are encouraged by the
levels of demand across the country.
As anticipated, the relatively low level of house price inflation was more
than offset by embedded build cost inflation seen in 2022 and 2023 which,
together with higher levels of incentives, impacted the Group's housing
margins in the period. Pleasingly, build cost inflation seen in previous years
has eased and prices in 2024 have been broadly flat. The Group generated an
underlying housing operating margin(3) of 13.0% (2023: 14.0%), in line with
expectations.
Vertical integration providing efficiency and resilience in supply
Our Brickworks, Tileworks and Space4 factories continue to supply
cost-effective, high-quality materials to the business, positioning us to
quickly react as our volumes increase. The ability to adjust production at our
factories to meet demand ensures greater flexibility and reduced downtime on
site as well as increased cost efficiency, compared to sourcing from
third-party suppliers. In the first half we delivered 21.9m bricks, 3.5m tiles
and 1,738 timber frame kits and roof systems from our factories to the
business.
We are starting preparation works for one of our new robotic lines to be
installed in January 2025 at our existing Space4 factory in Birmingham. This
new line is an exciting development for the business and will increase the
level of automation within the production process, further improving
productivity, efficiency, safety and quality of our timber frame product. In
time, our new Space4 factory in Loughborough will further increase our
capacity and range of timber frame products. This supports our ambition to
deliver c.50% of our homes using timber frame by 2027, reducing build times by
c.8 weeks compared to traditional build as well as reducing the embodied
carbon of our homes.
We continue to seek further opportunities for innovation. We originally
invested in the TopHat business because of its industry-leading facade
product. While the broader market challenges for volumetric modular
manufacture has led us to take the prudent decision to write down our original
investment, we continue to work with TopHat as they reposition the business to
focus on the facade product. During the first half, we trialled building a
timber frame house using the facade at our Space4 factory. This trial saw the
house built to roof, with the facade installed, within five days,
demonstrating the clear opportunity for build efficiency and key supply chain
resilience in the coming years.
Improving sales effectiveness
We continue to work hard to convert enquiries into reservations and our
enhancements in quality, customer service, sales and digital marketing have
been vital. Our enhanced marketing efforts led to a 35% increase in website
visitors and a 13% increase in website enquiries in the first half, with
growth seen in all divisions, compared with the prior year. We are also
investing in our sales force, offering training and enhancing efficiency to
allow sales advisors to focus more on sales activities and customer experience
to drive reservations.
Overall, this has led to a weekly sales rate of 0.71 up 20% in the period
(2023: 0.59). Excluding bulk sales the net private sales rate was up 5% to
0.59 (2023: 0.56).
We completed a total of 524 bulk sales to investors in the period, up from 124
in the first half of last year. We continue to utilise bulk sales on a
case-by-case basis, where it is appropriate and where it complements future
years' delivery. This could be where there are opportunities for accelerated
return on capital, accelerated delivery of homes or where it makes commercial
sense. We see this as an ongoing market opportunity and continue to work with
various partners on developing long-term relationships.
We have three strong brands across the business in Persimmon Homes, Charles
Church and Westbury Partnerships, providing a diversified pool of customers to
sell our homes to. Over the past year we have been optimising the market
positioning of these brands to maximise value from each development, ensuring
that we are offering the right mix of product for the site location and
customer base.
To ensure we drive maximum value from our developments, we took the decision
last year to review the specifications for our Charles Church brand
recognising the strength in this segment of the market. We enhanced the
specification of homes on our Berry Hill Manor site in Lichfield which has
delivered consistently higher values. So far, we have sold 20 plots on the
site, 7 of which achieved values in excess of £750,000 with improved margins.
We have since replicated this at other Charles Church sites across the
business, including at Bristol which has been well received by customers and
is selling ahead of expectations. This demonstrates the breadth of our market
reach both in terms of customers and the quality of our land, providing
further opportunities to diversify into higher average selling prices on some
of our larger strategic sites.
Land and planning success
Achieving implementable planning permissions has been a challenge across the
industry in recent years. We welcome the new government's proposals to address
this and have already started to see some positive momentum. We have remained
active in the land market through the course of this financial year to
position ourselves for future growth.
Overall, land spend in the period was £195m, (2023: £240m) of which £113m
related to the settlement of land creditors (2023: £182m). In addition, we
brought 4,625 plots across 21 sites into our owned and under control land
holdings in the period (2023: 3,245 plots) with sites balanced across the
country. This included 445 plots at a site in Bedworth, Warwickshire, a 379
plot site in Mansfield, Nottinghamshire and a 200 plot site at Deeside in
North Wales.
Our strategy of continuing to be active in the land market over the past 12
months in a disciplined way will allow us to grow our outlet base in the short
to medium-term, a key differentiator for our business. Land prices have fallen
3.2%(4) over the past 12 months albeit have remained relatively stable since
the start of the year, demonstrating the benefit of our continued activity in
the market. At 30 June 2024, our owned and under control land holdings stood
at 81,545 plots (December 2023: 82,235).
Since 30 June we have also completed the purchase of the first phase of a
large strategic site in Dallington on the edge of Northampton. Persimmon plans
to deliver c.2,000 plots across the 3,500 home urban extension, which provides
the opportunity to use a mix of our brands. We have already started
infrastructure works on site, with the first legal completion scheduled for
mid-2025.
With our enhanced planning approach, we secured full or reserved matters
planning permissions for 5,012 plots in the first half of the year, 13% above
our completions in the same period (2023: 5,102 plots). From the start of the
year to 31 July 2024 we have now achieved permission on c.6,000 plots
including at Newcourt, Exeter where we achieved planning in just over 13
weeks. We have also continued to find innovative ways to address site-specific
planning issues and, for example, achieved reserved matters planning for 353
plots at Leominster, Herefordshire through the purchase of phosphate credits
from Herefordshire Council who have built an integrated wetland as a source of
mitigation.
We are now actively selling, with a show home presence, at our flagship net
zero carbon ready site at Didcot where we achieved planning last year. As the
first phase of a much larger site, we are delivering 172 net zero carbon ready
homes, fitted with air source heat pumps, electric vehicle charging points and
solar panels ahead of the Future Homes Standard. Similarly, we are on site and
building at our net zero homes site at Cheltenham, where homes are also fitted
with air source heat pumps and solar panels, with sales due to launch during
the Summer.
We continue to enhance our platform for future growth with a gross 44 outlets
opened in the first half and we have a nationwide network of well-located
outlets to meet an increase in demand. At 30 June 2024 we had 266 selling
outlets (December 2023: 258).
Continued focus on build quality, safety and sustainability
Persimmon's focus on consistent delivery of high-quality homes through Build
Right, First Time, Every Time in recent years has been crucial for both
customer service and cost-efficiency. We are delighted to have maintained our
5-star HBF rating, awarded to us for the third year running in March. This
demonstrates our improved culture of delivering consistently high-quality
homes through our Persimmon Way build quality programme, an important aspect
of preparing the Group for future growth. For the new survey year, our HBF
8-week customer satisfaction score(5) is currently 96.2%, reflecting our
on-going focus on the quality of our customers' experience.
We also observed significant build quality improvements during the period,
thanks to our ongoing focus on excellence. Reportable Items(6) decreased to
0.23 in the first half, an 8% improvement compared to the first half of 2023.
Our efforts are being recognised and were acknowledged in the Pride in the Job
Awards, where we excelled with 19 sites receiving awards in 2024, more than
double the achievement in 2023 and with all divisions achieving at least one
award.
This is all being achieved while increasing efficiency on site through greater
use of technology. To date we have successfully deployed around 500 tablets to
site managers and assistant site managers which has enhanced productivity and
customer service on site. Our Persimmon Way App enables induction, H&S
training and checking of competency cards for sub-contractors to be carried
out before they arrive on site. The system also acts as a digital sign in/out
system, triggering tasks if they remain outstanding at point of sign in. It
ensures we know who exactly is on site, at all times, and that our workforce
have the right skills and they understand health and safety procedures.
Separately, we have also improved controls on site, with greater visibility on
key metrics. This has resulted in a halving of the value of losses per build
equivalent unit from lost, stolen or damaged goods.
Current trading and outlook
We are encouraged by the early announcements of the new government,
particularly around planning. In addition, our customers are benefiting from
improving mortgage rates which has led to a strong pick up in enquiries and
visitors. Since 1 July, our net private sales rate is 0.69 which is up 68% on
last year, providing us with good confidence on delivering c.10,500 homes for
the full year, at the top end of previous guidance. Our current private
forward order book(2) is up 28% at £1.12bn, with a private ASP of
c.£289,150, up 2% on the prior year.
Our recent successes on planning, combined with our continued activity in the
land market over the past 12 months, provide us with confidence for further
growth of outlets and volume into 2025.
Dean Finch
Group Chief Executive
7 August 2024
Footnotes
1. National average selling price for new build homes sourced from the UK
House Price Index as calculated by the Office for National Statistics from
data provided by HM Land Registry.
2. As at 4 August 2024 for 2024 figure, as at 6 August 2023 for 2023
figure.
3. Stated before net exceptional charge of £2.0m (2023: £nil), as set
out in note 4 and goodwill impairment (2024: £0.9m, 2023: £5.8m) and margin
based on new housing revenue (2024: £1.17bn, 2023: £1.09bn).
4. Savills report 'Market in Minutes: Residential Development Land -
Q2 2024'
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. A Reportable Item is an area of non-compliance with NHBC standards.
The item is rectified fully before completion of the home.
FINANCIAL REVIEW
Trading
The Group generated total revenue¹ of £1.32bn (2023: £1.19bn), with new
housing revenue of £1.17bn (2023: £1.09bn).
The Group delivered 4,445 new homes (2023: 4,249) at an average selling price
of £263,288 (2023: £256,445) which is 3% higher year on year, reflecting a
greater proportion of private homes than the prior year period.
The Group delivered 3,742 new homes to its private owner occupier customers,
up 14% (2023: 3,281) at an average selling price of £281,859 (2023:
£288,327), reflecting the lower selling prices achieved in the autumn selling
season along with geographic and sales mix. We saw a pickup in interest for
homes of all sizes in the period although affordability continues to be a
challenge for customers, particularly first-time buyers, which represented 31%
of private completions in the first half (2023: 34%). We continue to use
investor deals where it makes commercial sense to do so, and these represented
524 homes of our private delivery in the first half (2023: 124). Although we
are aware that some Registered Providers are facing financial challenges
impacting on their ability to bid for s106 housing plots, this has not
impacted our performance in the period and most of our housing association
homes for the current financial year are already contracted. In the period, we
completed 703 homes for our housing association partners (2023: 968) at an
average selling price of £164,432 (2023: £148,382).
The impact of lower private average selling prices and residual embedded build
cost inflation in the period, resulted in a decrease in the Group's underlying
housing gross margin² to 20.1% (2023: 21.5%), as expected.
The Group's underlying gross profit(3) for the period of £235.4m (2023:
£234.0m) continues to be supported by the Group's well-established land
replacement strategy, with land cost recoveries(4) of 12.1% of new housing
revenue for the period (2023: 11.2%). The Group's reported gross profit for
the period of £258.4m (2023: £234.0m) is stated after an exceptional release
of £23.0m (2023: £nil) in relation to the anticipated costs of the Group's
commitments to the costs of removal of combustible cladding and other fire
related remediation works. The Group has also recognised an exceptional charge
of £25.0m in relation to its investment and long-term loan notes in TopHat
Enterprises Limited which writes down the value of the investment and
long-term loan notes to £nil. In total there is a net exceptional cost of
£2.0m (2023: £nil) going through the Income Statement in the period. Further
detail is provided in note 4 to the financial information.
As expected, underlying housing operating margin(5) of 13.0% has been impacted
by the residual impact of last year's inflationary pressures on build costs
(2023: 14.0%). Underlying operating profit(6) for the Group was flat on the
prior year at £152.3m (2023: £152.2m). On a reported basis operating profit
increased by 2% to £149.4m (2023: £146.4m).
Net interest costs increased in the period to £3.1m (2023: £4.6m net
interest income) as a result of lower average cash balances as we continue to
invest in land and work in progress, positioning the business for future
growth. As a result of this investment, reported profit before tax reduced to
£146.3m in the period (2023: £151.0m), after net exceptional costs of £2.0m
(2023: £nil).
Reported basic earnings per share was 34.7p , 1% higher than the prior period
last year (2023: 34.4p). Underlying basic earnings per share(6) was 35.7p, a
1% decrease compared to the prior period reflecting the higher interest charge
(2023: 36.2p).
Land
Persimmon's disciplined and expert land buying is a core strength of the
business. We maintained our selective land purchase strategy during the last
two years, positioning us well for the future as we look to grow our outlet
position. As of 30 June 2024, we had 266 active sales outlets, up from 258
outlets at the start of the year. We remain on track to open around 50 gross
new outlets in the second half as we position the business for growth into
2025.
At 30 June, the Group had owned and under control land holdings of 81,545,
from 82,235 plots at 31 December 2023, with 38,067 of these plots benefitting
from detailed planning consents, equivalent to c.4 years of supply at 2023
volumes.
The Group brought 4,625 plots into the business across 21 locations throughout
the country with 41% of these plots converted from our strategic land
portfolio. At 30 June 2024, the Group's owned land holdings of 66,417 plots
(December 2023: 66,742 plots) have an overall pro forma gross margin(7) of c.
29% (December 2023: 29%) and a cost to revenue ratio of 11.6%(4) (December
2023: 11.5%).
The Group incurred land spend of £194.5m in the first half (2023: £240.4m),
including £113.3m of payments in satisfaction of deferred land commitments
(2023: £181.8m).
Disciplined investment and robust balance sheet
During the period, we continued our targeted investment into the business to
enhance quality, efficiency and returns as we build a more sustainable
business. We are ensuring that our business is ready for growth in the housing
market, enhancing our processes to enable best practice to be shared across
the Group.
As the Group invests in further growth, our long-standing financial discipline
will continue in all land appraisals and decisions to open outlets. The Group
will continue to maintain a robust balance sheet, with low leverage. We
currently anticipate net cash at year end will be between £100m and £200m.
The Group had a cash balance of £350.2m at 30 June 2024 (December 2023:
£420.1m) with land creditors of £317.2m (December 2023: £372.0m), of which
c.£110m is expected to be paid by the end of this year. The Group generated
£164.7m of cash from operating activities in the period (2023: £155.3m),
before investing £151.8m in working capital (being principally £80.5m in net
work in progress and a net £56.3m reduction in land creditors). This
investment in work in progress along with the Group's healthy liquidity will
provide further opportunities to continue to support the future growth of the
business.
At 30 June 2024, the Group had work in progress of c. 4,440 equivalent units
of new home construction an increase on the position at the start of the year
(December 2023: 4,170) reflecting the stronger delivery expected in the second
half of the year. Our disciplined work in progress investment aligns build
levels with customer demand and addresses industry challenges. Our in-house
production of essential materials, including bricks, roof tiles and timber
frame kits is a key strength of the business and will allow us to increase
output quickly when needed.
The Group has a robust balance sheet with high quality land holdings, strong
levels of work in progress investment and healthy levels of liquidity. We
continue to exert disciplined control over work in progress while investing to
strengthen our platform for future growth. At 30 June 2024 the Group had land
holdings of £2.10bn and work in progress of £1.51bn, an increase of £80.5m
compared to 31 December 2023.
As at 30 June 2024, we owned 593 part exchange properties (December 2023: 591
properties) at a carrying value of £122.4m (December 2023: £114.6m). Part
exchange continues to be a key sales incentive for our customers, and we are
progressing sales of part exchange properties promptly at around expected
values.
Our £700m 'Sustainability Linked' Revolving Credit Facility (RCF) was
extended in the period to July 2029, with ESG targets covering the facility's
term. The targets are consistent with the Group's science-based operational
carbon reduction targets, our commitment to deliver net zero carbon homes in
use by 2030 and our long-standing ambition to deliver excellent development
opportunities for our colleagues.
The Group's defined benefit net pension asset has increased to £129.2m at 30
June 2024 (December 2023: £127.1m) mainly reflecting an increase in the
discount rate assumption applied to the scheme obligations partially offset by
underperformance of asset returns when compared to the standard expected
returns at the start of the year.
Total equity decreased to £3,408.2m from £3,418.5m at 31 December 2023.
Reported net assets per share of 1,066p represents a small decrease from
1,070p at 31 December 2023. Underlying return on average capital employed(8)
as at 30 June 2024 was 10.0% (December 2023: 10.5%), demonstrating the
resilience of the business and the continued investment made to support future
growth.
Building safety
During the period, we continued our proactive approach of working with
management companies, factors (in Scotland) and their agents to carry out
necessary remediation as soon as possible. The table below sets out our
detailed position at 30 June 2024, compared to 31 December 2023.
Of the total of 83 developments in our programme 39 (47%) have already seen
any necessary works completed. Of the remaining 44, 20 currently have work on
site and 12 are at varying stages of pre-tender, live tender, contract
negotiation or agreed contract and works commencing soon. As the table below
demonstrates, developments are actively progressing through the programme.
During the period, £23.0m of the provision has been released following a
review of the projected costs to complete rectification work, which includes
the recoverability of VAT applicable to such costs. Due to the non-recurring
nature of these changes, they have been disclosed as exceptional items to
support the understanding of financial performance and improve the
comparability between reporting periods.
Identified developments As of 30 June 2024 As of 31 Dec 2023
Recently made aware and under investigation 1 2
Pre-tender preparation on-going 11 8
Live tender process 0 6
Sub-total: progressing through tender 12 16
Progressing to contract 9 7
Contracted but works yet to start 3 3
Sub-total: pre-works starting 24 26
Currently on site 20 17
Sub-total: to complete 44 43
Completed developments 39 39
Total identified developments 83 82
In the period we spent £24.7m on the programme, with total expenditure so far
of £89.3m. Given our own proactive approach and the sustained and significant
publicity around cladding and building safety, we do not anticipate
significant new building additions into the programme. We believe our existing
provision remains sufficient.
Capital Allocation
The Group's capital allocation policy is to deliver sustainable returns to
shareholders, investing in future growth through disciplined expansion of our
land portfolio while maintaining a strong balance sheet.
For 2024, the Board has declared an interim dividend of 20p per share, which
will be payable on 8 November 2024, to shareholders on the register on 18
October 2024. The Board's intention is, as a minimum, to maintain the 2023
dividend of 60p per share, with a view to growing this over time.
Andrew Duxbury
Chief Financial Officer
7 August 2024
Footnotes
1. The Group's total revenues include the fair value of consideration
received or receivable on the sale of part exchange properties and income from
the provision of broadband internet services. New housing revenues are the
revenues generated on the sale of newly built residential properties only.
2. Stated before an exceptional release of £23.0m (2023: £nil), as
set out in note 4 and based on new housing revenue (2024: £1.17bn, 2023:
£1.09bn).
3. Stated before an exceptional release of £23.0m (2023: £nil), as
set out in note 4.
4. Land cost value for the plot divided by the revenue of the new home
sold.
5. Stated before net exceptional charge of £2.0m (2023: £nil), as set
out in note 4 and goodwill impairment (2024: £0.9m, 2023: £5.8m) and based
on new housing revenue (2024: £1.17bn, 2023: £1.09bn).
6. Stated before net exceptional charge of £2.0m (2023: £nil), as
set out in note 4 and goodwill impairment (2024: £0.9m, 2023: £5.8m).
7. Estimated weighted average gross margin based on assumed revenues
and costs at 30 June 2024 and normalised output levels.
8. 12 month rolling average calculated on underlying operating profit and
total capital employed (including land creditors). Underlying operating profit
is stated before net exceptional charge of £2.0m (2023: £275.0m), as set out
in note 4 and goodwill impairment (2024: £2.7m, 2023: £9.2m).
Appendices
2024 quarterly performance Q1 24 Q2 24 HY 24 HY 23 FY 23
Completions (homes) 1,027 3,418 4,445 4,249 9,922
Private (homes) 852 2,890 3,742 3,281 7,681
Housing Association (homes) 175 528 703 968 2,241
Net private sales rate 0.66 0.81 0.71 0.59 0.58
FTB(1) % (private completions) 28% 32% 31% 34% 31%
Average sales outlets 256 266 261 267 266
(1 First time buyers)
Forward sales position
30 June 2024 30 June 2023 Variance
Forward sales Value Homes Value Homes Value Homes
Private £863m 2,971 £710m 2,516 +22% +18%
Housing Association £555m 3,477 £663m 4,209 -16% -17%
Total £1,418m 6,448 £1,373m 6,725 +3% -4%
PERSIMMON PLC
Condensed Consolidated Statement of Comprehensive Income
For the six months to 30 June 2024 (unaudited)
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
Note Total Total Total
£m £m £m
Total revenue 3 1,316.5 1,188.5 2,773.2
Cost of sales (1,058.1) (954.5) (2,253.1)
Gross profit 258.4 234.0 520.1
Analysed as:
Underlying gross profit 235.4 234.0 520.1
Exceptional - Legacy buildings provision (through Cost of sales) 4 23.0 - -
Other operating income 5.6 4.1 8.6
Operating expenses (89.6) (91.7) (181.8)
Exceptional - Impairment of a financial asset 4 (25.0) - -
Profit from operations 149.4 146.4 346.9
Analysed as:
Underlying operating profit 152.3 152.2 354.5
Exceptional items (2.0) - -
Impairment of intangible assets (0.9) (5.8) (7.6)
Finance income 5.6 11.2 19.7
Finance costs (8.7) (6.6) (14.8)
Profit before tax 146.3 151.0 351.8
Analysed as:
Underlying profit before tax 149.2 156.8 359.4
Exceptional items (2.0) - -
Impairment of intangible assets (0.9) (5.8) (7.6)
Tax 5 (35.6) (41.3) (96.4)
Profit after tax (all attributable to equity holders of the parent) 110.7 109.7 255.4
Other comprehensive expense
Items that will not be reclassified to profit:
Re-measurement losses on defined benefit pension schemes 13 (0.3) (9.7) (35.1)
Tax 5 - 2.7 9.8
Other comprehensive expense for the period, net of tax (0.3) (7.0) (25.3)
Total recognised income for the period 110.4 102.7 230.1
Earnings per share
Basic 6 34.7p 34.4p 80.0p
Diluted 6 34.3p 34.1p 79.5p
PERSIMMON PLC
Condensed Consolidated Balance Sheet
As at 30 June 2024 (unaudited)
30 June 2024 30 June 2023 31 December 2023
Note £m £m £m
Assets
Non-current assets
Intangible assets 164.5 167.2 165.4
Property, plant and equipment 145.7 133.0 140.5
Investments accounted for using the equity method 0.3 1.0 1.0
Shared equity loan receivables 9 26.4 27.8 27.2
Trade and other receivables - 7.1 6.9
Deferred tax assets 12.2 11.8 11.5
Retirement benefit assets 13 129.2 149.4 127.1
478.3 497.3 479.6
Current assets
Inventories 8 3,795.4 3,705.1 3,701.2
Shared equity loan receivables 9 4.3 6.3 4.9
Trade and other receivables 159.9 144.2 182.0
Current tax assets 9.9 1.4 -
Cash and cash equivalents 12 350.2 357.0 420.1
4,319.7 4,214.0 4,308.2
Total assets 4,798.0 4,711.3 4,787.8
Liabilities
Non-current liabilities
Trade and other payables (151.8) (184.7) (178.7)
Deferred tax liabilities (66.6) (70.8) (64.9)
Partnership liability (9.9) (14.6) (15.1)
Legacy buildings provision 10 (104.8) (146.2) (161.7)
(333.1) (416.3) (420.4)
Current liabilities
Trade and other payables (789.5) (767.1) (821.7)
Partnership liability (5.6) (5.6) (5.6)
Current tax liabilities - - (0.1)
Dividend liability 7 (127.9) - -
Legacy buildings provision 10 (133.7) (166.2) (121.5)
(1,056.7) (938.9) (948.9)
Total liabilities (1,389.8) (1,355.2) (1,369.3)
Net assets 3,408.2 3,356.1 3,418.5
Equity
Ordinary share capital issued 32.0 31.9 31.9
Share premium 25.6 25.6 25.6
Capital redemption reserve 236.5 236.5 236.5
Other non-distributable reserve 276.8 276.8 276.8
Retained earnings 2,837.3 2,785.3 2,847.7
Total equity 3,408.2 3,356.1 3,418.5
PERSIMMON PLC
Condensed Consolidated Statement of Changes in Shareholders' Equity
For the six months to 30 June 2024 (unaudited)
Share capital Share premium Capital redemption reserve Other non-distributable reserve Retained earnings Total
£m £m £m £m £m £m
Six months ended 30 June 2024:
Balance at 1 January 2024 31.9 25.6 236.5 276.8 2,847.7 3,418.5
Profit for the period - - - - 110.7 110.7
Other comprehensive expense - - - - (0.3) (0.3)
Transactions with owners:
Dividends on equity shares - - - - (127.9) (127.9)
Issue of new shares 0.1 - - - - 0.1
Own shares issued - - - - 0.4 0.4
Share-based payments (net of tax) - - - - 6.7 6.7
Balance at 30 June 2024 32.0 25.6 236.5 276.8 2,837.3 3,408.2
Six months ended 30 June 2023:
Balance at 1 January 2023 31.9 25.6 236.5 276.8 2,868.5 3,439.3
Profit for the period - - - - 109.7 109.7
Other comprehensive expense - - - - (7.0) (7.0)
Transactions with owners:
Dividends on equity shares - - - - (191.5) (191.5)
Own shares purchased - - - - (1.2) (1.2)
Own shares purchased - - - - - -
Exercise of share options/share awards - - - - - -
Share-based payments (net of tax) - - - - 6.8 6.8
Balance at 30 June 2023 31.9 25.6 236.5 276.8 2,785.3 3,356.1
Year ended 31 December 2023:
Balance at 1 January 2023 31.9 25.6 236.5 276.8 2,868.5 3,439.3
Profit for the year - - - - 255.4 255.4
Other comprehensive expense - - - - (25.3) (25.3)
Transactions with owners:
Dividends on equity shares - - - - (255.4) (255.4)
Own shares purchased - - - - (1.2) (1.2)
Share-based payments - - - - 5.7 5.7
Balance at 31 December 2023 31.9 25.6 236.5 276.8 2,847.7 3,418.5
PERSIMMON PLC
Condensed Consolidated Cash Flow Statement
For the six months to 30 June 2024 (unaudited)
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
Note £m £m £m
Cash flows from operating activities:
Profit for the period 110.7 109.7 255.4
Tax charge 5 35.6 41.3 96.4
Finance income (5.6) (11.2) (19.7)
Finance costs 8.7 6.6 14.8
Depreciation charge 9.8 8.6 18.7
Impairment of intangible assets 0.9 5.8 7.6
Exceptional items (non-cash) 2.0 - -
Profit on disposal of assets (0.3) - -
Share-based payment charge 6.7 6.6 4.5
Net imputed interest expense (4.0) (4.4) (8.7)
Other non-cash items 0.2 (7.7) (8.9)
Cash inflow from operating activities 164.7 155.3 360.1
Movement in working capital:
Increase in inventories (93.6) (240.7) (235.3)
Decrease in trade and other receivables 21.5 72.0 37.5
Decrease in trade and other payables (81.6) (252.5) (233.6)
Decrease in shared equity loan receivables 1.9 2.8 5.7
Cash generated/(absorbed) from operations 12.9 (263.1) (65.6)
Interest paid (4.6) (2.2) (4.3)
Interest received 3.0 7.8 11.7
Tax paid (44.5) (20.7) (71.6)
Net cash outflow from operating activities (33.2) (278.2) (129.8)
Cash flows from investing activities:
Investment in an associate - (0.7) (0.7)
Acquisition of loan notes (17.5) (6.8) (6.8)
Purchase of property, plant and equipment (13.6) (20.3) (36.4)
Proceeds from sale of property, plant and equipment 0.6 0.4 1.0
Net cash outflow from investing activities (30.5) (27.4) (42.9)
Cash flows from financing activities:
Lease capital payments (1.7) (2.0) (3.0)
Payment of Partnership liability (4.6) (4.3) (4.3)
Bank fees paid - - (4.9)
Own shares purchased - (1.2) (1.2)
Share options consideration 0.1 - -
Dividends paid 7 - (191.5) (255.4)
Net cash outflow from financing activities (6.2) (199.0) (268.8)
Decrease in net cash and cash equivalents 12 (69.9) (504.6) (441.5)
Cash and cash equivalents at the start of the period 420.1 861.6 861.6
Cash and cash equivalents at the end of the period 12 350.2 357.0 420.1
Notes
1. Basis of preparation
The half year condensed financial statements for the six months to 30 June
2024 have been prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority and with UK adopted
International Accounting Standard ("IAS") 34 Interim Financial Reporting. The
half year financial statements are unaudited but have been reviewed by the
auditors whose report is set out at the end of this report. This report should
be read in conjunction with the Group's annual financial statements for the
year ended 31 December 2023, which have been prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006 and UK adopted IFRS.
The comparative figures for the financial year ended 31 December 2023 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 2023,
as described in those financial statements.
The following relevant UK endorsed new amendments to standards are mandatory
for the first time for the financial year beginning 1 January 2024:
· Amendments to IAS 1 Presentation of Financial Statements
· Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements
· Amendments to IFRS 16 Lease Liability in a Sale and Leaseback
The effects of the implementation of these amendments have been limited to
disclosure amendments where applicable.
The Group has not applied the following new amendments to standards which are
endorsed but not yet effective:
· Amendments to IAS 21 Lack of Exchangeability
The Group is currently considering the implication of these amendments with
the expected impact upon the Group being limited to disclosures if applicable.
Going concern
The Group's performance in the six months ended 30 June 2024 was in line with
the Board's expectations. Persimmon's long-term strategy, which recognises the
risks associated with the housing cycle by maintaining operational
flexibility, investing in high quality land, minimising financial risk and
deploying capital at the right time in the cycle, has equipped the business
with strong liquidity and a robust balance sheet.
The Group delivered 4,445 new homes (2023: 4,249) and generated profit before
tax of £146.3m (2023: £151.0m) in the period. At 30 June 2024, the Group had
a strong balance sheet with £350.2m of cash (2023: £357.0m), high quality
land holdings and land creditors of £317.2m (December 2023: £372.0m). The
Group has a Revolving Credit Facility of £700m which was extended by a
further year during the period out to 5 July 2029. The facility was undrawn
at 30 June 2024.
The Group's forward order book, including legal completions recognised in the
second half, stands at c.£1.7bn.
The Directors have reviewed the Group's principal risks, see note 15 of this
announcement, and determined that there was one new principal risk facing the
business to those disclosed in the financial statements for the year ended 31
December 2023. The Directors considered the impact of these risks on the going
concern of the business when approving these full year financial statements
for the Group.
Given the Group's trading performance during the first six months of the year
together with its robust sales rates and forward sales position, the Directors
believe that the comprehensive review performed for the viability statement
included in the Group's Annual Report 2023 remains relevant and valid.
The Directors consider the going concern assessment to be to 31 December 2025
and includes severe but plausible scenarios materialising together with the
likely effectiveness of mitigating actions that would be executed by the
Directors.
Starting from the position at 30 June 2024, the scenarios emphasise the
potential impact of severe market disruption, including for example the effect
of economic disruption from a cost-of-living crisis or a war, 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.
The Directors have also considered a 'Reverse Stress Test' to demonstrate the
point at which the Group runs out of liquid funds or breaches covenants but
note the likelihood of this is less than remote.
Having considered the inherent strength of the UK housing market, the
resilience of the Group's average selling prices and the Group's scenario
analysis, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis in
preparing these condensed consolidated half year financial statements.
Goodwill and brand intangibles
The key sources of estimation uncertainty in respect of goodwill and brand
intangibles are disclosed in note 14 of the Group's annual financial
statements for the year ended 31 December 2023, other than set out below no
trigger events have been identified.
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 £0.9m recognised during the
period. This impairment charge reflects ongoing consumption of the acquired
strategic land holdings and is consistent with prior years.
Investments in associates
During the period, the Group acquired £17.5m of interest bearing long-term
loan notes from TopHat Enterprises Limited in January 2024. As at the 30 June
2024, a review of both the investment of £0.7m and the £24.3m of long-term
loan notes was undertaken and the value was written down to £nil. The write
down being due to a re-assessment of risks within the modular build sector.
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 to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£m £m £m
Revenue from the sale of new housing - private 1,054.7 946.0 2,195.1
Revenue from the sale of new housing - housing association 115.6 143.6 342.5
Revenue from the sale of new housing - total 1,170.3 1,089.6 2,537.6
Revenue from the sale of part exchange properties 138.9 93.3 223.7
Revenue from the provision of internet services 7.3 5.6 11.9
Revenue from the sale of goods and services as reported in the statement of 1,316.5 1,188.5 2,773.2
comprehensive income
4. Exceptional Items
During the period the Group recognised an exceptional charge of £25.0m in
relation to its investment and long-term loan notes in TopHat Enterprises
Limited which writes down the value of the investment and long-term loan notes
to £nil. The write down being due to a re-assessment of risks within the
modular build sector.
There has also been an exceptional release of £23.0m in relation to the
anticipated costs of the Group's commitments to support leaseholders in
buildings we had developed with the costs of removal of combustible cladding
and other fire related remediation works. Further detail on this matter is
provided in note 10 to this announcement.
Both items have been disclosed as exceptional due to the non-recurring nature
and scale of the charge to aid understanding of the financial performance of
the Group and to assist in the comparability of financial performance between
accounting periods.
5. Tax
Analysis of the tax charge for the period
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£m £m £m
Tax charge comprises:
UK corporation tax in respect of the current period 35.8 35.6 81.2
RPDT in respect of the current year 6.5 5.5 13.0
Adjustments in respect of prior years (7.8) - (0.2)
34.5 41.1 94.0
Deferred tax relating to origination and reversal of temporary differences 1.1 0.6 2.8
Impact of introduction of RPDT on deferred tax - (0.4) -
Adjustments recognised in the current year in respect of prior years' deferred - - (0.4)
tax
1.1 0.2 2.4
Tax charge for the year recognised in Statement of Comprehensive Income 35.6 41.3 96.4
The tax charge for the period of £35.6m includes a tax charge of £0.6m
relating to the exceptional items detailed in Note 4.
The tax charge for the period can be reconciled to the accounting profit as
follows:
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£m £m £m
Profit from continuing operations 146.3 151.0 351.8
Tax calculated at UK corporation tax rate (inclusive of RPDT) 42.4 41.5 96.7
Accounting base cost not deductible for tax purposes - - -
Goodwill impairment losses that are not deductible 0.2 0.8 1.8
Expenditure not allowable for tax purposes 0.3 0.5 0.9
Introduction of RPDT - (0.2) -
Impact of RPDT on deferred tax 0.1 - -
Items not deductible for RPDT 0.7 (0.5) (0.6)
Enhanced tax reliefs (0.5) (0.8) (1.8)
Adjustments in respect of prior years (7.8) - (0.6)
Non-deductible impairment provision 0.2 - -
Tax charge for the period recognised in Statement of Comprehensive Income 35.6 41.3 96.4
The tax charge for the period includes both current and deferred tax. The tax
charge is based upon the expected tax rate for the full year, which is applied
to taxable profits for the period, together with any charge or credit in
respect of prior years and the tax impact of one-off/non-recurring items
arising in the same period. Current tax includes both UK corporation tax and
the Residential Property Developer Tax (RPDT).
Deferred tax is calculated as the tax payable or recoverable in future
accounting periods in respect of temporary differences which may be taxable or
allowed as deductible. Temporary differences represent the difference between
the carrying amount of an asset or liability in the financial statements and
the relevant tax base.
The effective rate of tax for the period was 24.3% which was lower than in
previous periods (31 December 2023: 27.4%; 30 June 2023: 27.4%) as a result of
credits in respect of prior years and the tax impact of one-off/non-recurring
items arising in the same period. We expect the full year 31 December 2024
effective tax rate to be around 27.3% and closer to the rate reported in 2023.
Deferred tax recognised in other comprehensive expense
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£m £m £m
Recognised on re-measurement charges on pension schemes - (2.7) (9.8)
Tax recognised directly in equity
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£m £m £m
Arising on transactions with equity participants
Current tax related to equity settled transactions - (0.1) (0.6)
Deferred tax related to equity settled transactions (0.1) (0.1) (0.7)
(0.1) (0.2) (1.3)
UK adoption of OECD Pillar 2: There is no impact from the implementation of
the UK's domestic top-up tax, as the Group does not have any profits arising
in any entities which are located in a non-UK jurisdiction and which are taxed
below the minimum rate of tax of 15%.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit for the period
attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the period (excluding those held in the
employee benefit trust) which were 319.4m (June 2023: 319.2m; December 2023:
319.2m).
Diluted earnings per share is calculated by dividing the profit for the period
attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue adjusted to assume conversion of all potentially
dilutive ordinary shares from the start of the period, giving a figure of
322.3m (June 2023: 321.7m; December 2023: 321.0m).
Underlying earnings per share excludes the net exceptional charge and goodwill
impairment. The earnings per share from continuing operations were as follows:
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
Basic earnings per share 34.7p 34.4p 80.0p
Underlying basic earnings per share 35.7p 36.2p 82.4p
Diluted earnings per share 34.3p 34.1p 79.5p
Underlying diluted earnings per share 35.4p 35.9p 81.9p
The calculation of the basic and diluted earnings per share is based upon the
following data:
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£m £m £m
Underlying earnings attributable to shareholders 114.2 115.5 263.0
Exceptional items (net of tax) (2.6) - -
Goodwill impairment (0.9) (5.8) (7.6)
Earnings attributable to shareholders 110.7 109.7 255.4
At 30 June 2024 the issued share capital of the Company was 319,441,898
ordinary shares (30 June 2023: 319,419,494; 31 December 2023: 319,421,416
ordinary shares).
7. Dividends
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£m £m £m
Amounts recognised as distributions to capital holders in the period:
2022 dividend to all shareholders of 60p per share paid 2023 - 191.5 191.5
2023 dividend to all shareholders of 20p per share paid 2023 - - 63.9
2023 dividend to all shareholders of 40p per share paid July 2024 127.9 - -
Total capital return to shareholders 127.9 191.5 255.4
On 12 July 2024, 40p per share (or £127.9m) of capital was returned to
shareholders as a final cash dividend in respect of the financial year 2023
which was approved by shareholders at the AGM on 25 April 2024. This has been
accrued for in the half year results.
8. Inventories
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Land 2,103.6 2,090.5 2,103.5
Work in progress 1,511.8 1,476.9 1,431.3
Part exchange properties 122.4 85.8 114.6
Showhouses 57.6 51.9 51.8
3,795.4 3,705.1 3,701.2
The Group has conducted a review of the net realisable value of its land and
work in progress portfolio at 30 June 2024. Our approach to this review has
been consistent with that conducted at 31 December 2023 and was fully
disclosed in the financial statements for the year ended on that date. This
review gave rise to an impairment of land and work in progress of £nil (2023:
£13.7m). 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. If the UK
housing market were to improve or deteriorate in the future then further
adjustments to the carrying value of land and work in progress may be
required.
Net realisable value provisions held against inventories at 30 June 2024 were
£18.8m (30 June 2023: £5.3m; 31 December 2023: £18.9m). Following the
review, £27.4m of inventories are valued at fair value less costs to sell
rather than historical cost (30 June 2023: £2.4m; 31 December 2023: £27.4m).
9. Shared equity loan receivables
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£m £m £m
Shared equity loan receivable at start of period 32.1 36.0 36.0
Settlements (1.9) (2.7) (5.7)
Gains 0.5 0.8 1.8
Shared equity loan receivable at end of period 30.7 34.1 32.1
All gains/losses have been recognised through finance income in the Statement
of Comprehensive Income for the period of which £nil was unrealised (June
2023: £0.2m; December 2023: £0.2m).
10. Legacy buildings provision
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£m £m £m
Legacy buildings provision at start of period 283.2 333.3 333.3
Imputed interest on provision in the period 3.0 2.2 4.3
Provision released in the period (23.0) (6.6) (6.6)
Provision utilised in the period (24.7) (16.5) (47.8)
Legacy buildings provision at end of period 238.5 312.4 283.2
In 2020 the Group made an initial commitment that no leaseholder living in a
building we had developed should have to cover the cost of removal of
combustible cladding. During 2022 we signed the Building Safety Pledge
(England) and worked constructively with the Government to agree the
'Long-Form Contract' that turned the pledge into a legal agreement. The Self
Remediation Contract was signed on 13 March 2023.
In the period we have been informed by a management company of a potential
liability for fire remediation costs, and we have added 1 development to the
total number. The number of developments we are now responsible for stands
at 83, of which 39 have now either secured EWS1 certificates or concluded any
necessary works. It is assumed the majority of the work will be completed
over the next 24 months and the amount provided for has been discounted
accordingly.
During the period £24.7m of the provision has been utilised for works
undertaken whilst £3.0m of imputed interest has been charged to the Statement
of Comprehensive Income through finance costs. During the period £23.0m of
the provision has been released following a review of the projected costs to
complete rectification work, which includes the recoverability of VAT
applicable to such costs. Due to the non-recurring nature of these changes
they have been disclosed as exceptional items to support the understanding of
financial performance and improve the comparability between reporting periods.
The assessment of the provision remains a highly complex area with judgments
and estimates in respect of the cost of the remedial works, with investigative
surveys ongoing to determine the full extent of those required works. Where
remediation works have not yet been fully tendered we have estimated the
likely scope and costs of such works based on experience of other similar
sites. Whilst we have exercised our best judgement of these matters, there
remains the potential for variations to this estimate from multiple factors
such as material, energy and labour cost inflation, limited qualified
contractor availability and abnormal works identified on intrusive
surveys. Should a 20% variation in the costs of untendered projects occur
then the overall provision would vary by +/- £15.8m.
The financial statements have been prepared on the latest available
information; however, there remains the possibility that, despite management's
endeavours to identify all such properties, including those constructed by
acquired entities well before acquisition, further developments requiring
remediation may emerge.
11. Financial instruments
In aggregate, the fair value of financial assets and liabilities are not
materially different from their carrying value.
Financial assets and liabilities carried at fair value are categorised within
the hierarchical classification of IFRS 7 Revised (as defined within the
standard) as follows:
30 June 2024 30 June 2023 31 December 2023
Level 3 Level 3 Level 3
£m £m £m
Shared equity loan receivables 30.7 34.1 32.1
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 (2023: ten years) and a discount rate of 8.8% (June 2023: 7%; December
2023: 8.8%) based on current observed market interest rates offered to private
individuals on secured second loans.
The discounted forecast cash flow calculation is dependent upon the estimated
future value of the properties on which the shared equity loans are secured.
Adjustments to this input, which might result from a change in the wider
property market, would have a proportional impact upon the fair value of the
asset. Furthermore, whilst not easily accessible in advance, the resulting
change in security value may affect the credit risk associated with the
counterparty, influencing fair value further.
12. Reconciliation of net cash flow to net cash and analysis of net cash
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£m £m £m
Net cash at start of period 420.1 861.6 861.6
Decrease in net cash equivalents in cash flow (69.9) (504.6) (441.5)
Net cash at end of period 350.2 357.0 420.1
Net cash is defined as cash and cash equivalents, bank overdrafts and interest
bearing borrowings. At 30 June 2024, £1.9m (June 2023: £9.8m, December
2023: £nil) of cash recognised was held at third party solicitors with an
undertaking.
The Group has a Revolving Credit Facility of £700m which was extended by a
further year during the period out to 5 July 2029. The facility was undrawn
at 30 June 2024.
13. Retirement benefit assets
As at 30 June 2024 the Group operated five employee pension schemes, being
three Group personal pension schemes and two defined benefit pension
schemes. Re-measurement gains and losses in the defined benefit schemes are
recognised in full as other comprehensive income within the consolidated
statement of comprehensive income. All other pension scheme costs are
reported in profit or loss.
The amounts recognised in the consolidated statement of comprehensive income
are as follows:
Six months to 30 June 2024 Six months to 30 June 2023 Year to 31 December 2023
£m £m £m
Current service cost 0.2 0.5 0.9
Administrative expense 0.2 0.1 0.6
Curtailment cost 0.1 - -
Pension cost recognised as operating expense 0.5 0.6 1.5
Interest income on net defined benefit asset (2.8) (3.6) (7.4)
Pension cost recognised as a net finance credit (2.8) (3.6) (7.4)
Total defined benefit pension income recognised in profit or loss (2.3) (3.0) (5.9)
Re-measurement loss recognised in other comprehensive expense 0.3 9.7 35.1
Total defined benefit scheme (gain)/loss recognised (2.0) 6.7 29.2
The amounts included in the balance sheet arising from the Group's obligations
in respect of the Pension Scheme are as follows:
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Fair value of pension scheme assets 529.6 535.1 552.7
Present value of funded obligations (400.4) (385.7) (425.6)
Net pension asset 129.2 149.4 127.1
The increase in the net pension asset to £129.2m (June 2023: £149.4m;
December 2023: £127.1m) is due to an increase in the discount rate assumption
applied to scheme obligations to 5.1% (December 2023: 4.5%) which has been
partially offset by the underperformance asset returns when compared to the
standard expected returns at the start of the year.
During the period, the Persimmon Plc Pension & Life Assurance scheme has
been closed to future accrual.
14. Contingent liability
As disclosed in note 10 the Group has undertaken a review of all of its legacy
buildings that used cladding on their facades.
The financial statements have been prepared on the latest available
information; however, there remains the possibility that, despite
management's, endeavours to identify all such properties, including those
constructed by acquired entities well before acquisition, further developments
requiring remediation may emerge. There is also the possibility that estimates
based on preliminary assessments regarding the scale of remediation works
relating to buildings yet to be fully surveyed may prove incorrect. The cost
of remedial works will remain under review and be updated as works progress.
In February 2024 the Competition and Markets Authority ('CMA') announced an
investigation into eight housebuilders under the Competition Act 1998
regarding the sharing of information. We continue to co-operate
constructively with the CMA in this enquiry and await their conclusions. The
potential impact, if any, and timing is not yet known.
15. Principal risks
The principal risks that could substantially affect the Group's business and
results were previously reported on pages 69 to 75 of the 2023 Annual Report
and Accounts. During the period, the Board has continued to monitor these
risks and have identified one new risk, Financing and liquidity, which is
detailed below. The remaining risks and the assessment of them are
unchanged.
Financing and liquidity
Residual risk rating Medium
Risk trend assessment
- Overall New
- Impact New
- Likelihood New
Risk owners and accountability Group CFO
Group Financial Controller
Senior Group Accountant
Link to key priorities 3 and 4
Risk description
The Group's strategy requires access to significant working capital to fund
investments in land and work in progress. At times, the Group will draw on its
Revolving Credit Facility (RCF) to provide this working capital.
Failure to manage cash requirements effectively could lead to unnecessarily
high borrowing costs, breaches of loan covenants, or an inability to take
advantage of land or other investment opportunities that could benefit the
Group.
Approach to risk mitigation
The Group closely monitors its cash position and forecast cash utilisation to
ensure these are sufficient to support land investments and fund work in
progress.
Investment decisions in land are subject to comprehensive appraisal under the
supervision of the Land Committee. Work in progress is tightly controlled
through the bi-monthly valuation process.
The Group's RCF is considered sufficient to meet all our projected funding
requirements in the short to medium term. The RCF was extended during the
period and now runs to July 2029, with an option to request an extension for a
further year. Covenants on the RCF are monitored and subject to periodic
certification.
How we monitor the risk
· Utilisation of the RCF and optimisation of cash deposits is monitored
daily by the Group Finance team.
· The Board is provided with routine reporting on the Group's actual and
forecast cash positions.
Statement of Directors' responsibilities in respect of the Half Year Report
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with UK adopted International Accounting Standard ("IAS") 34
Interim Financial Reporting
· the Half Year Report includes a fair review of the information
required by:
o DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements and a description of the principal risks and uncertainties for the
remaining six months of the year; and
o DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
The Directors of Persimmon Plc and their function are listed below:
Roger Devlin Chairman
Dean Finch Group
Chief Executive
Andrew Duxbury Chief Financial Officer
Nigel Mills
Senior Independent Director
Annemarie Durbin Non-Executive Director
Andrew Wyllie
Non-Executive Director
Shirine Khoury-Haq Non-Executive Director
Alexandra Depledge Non-Executive Director
Colette O'Shea Non-Executive
Director
By order of the Board
Dean Finch Andrew
Duxbury
Group Chief Executive Chief Financial Officer
7 August 2024
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
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2024 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 15. We have read
the other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2024 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our work, for this report, or for the conclusions we
have formed.
Victoria Venning
Ernst & Young LLP
Manchester
7 August 2024
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