It is my pleasure to introduce the 2020 corporate governance report, the Group’s second under the UK Corporate Governance Code 2018, and my third as Chairman. 2020 has brought unprecedented challenges.
The health, safety and wellbeing of our colleagues and wider workforce, customers and communities has been paramount throughout this period. Despite the challenges, the Board led the Group to deliver a robust trading performance and maintain the Group’s balance sheet strength and financial flexibility, securing a strong platform for future growth.
The Board has continued to exercise oversight of the Group’s important programme of operational improvements to support higher levels of build quality and assurance processes and customer service levels. The commitment shown from within the business to these changes has been recognised in improvements in our HBF eight week customer satisfaction scores, which are currently trending above five-star.
The implementation of the Persimmon Way, the Group’s consolidated approach to new home construction, which encompasses improved technology for our site managers and enhanced training for all relevant members of our workforce is now embedded within business and making a real difference.
The Board appreciates that effective stakeholder engagement is essential to the long-term success of the Group. Maintaining good relationships with all of our stakeholders is important to the Board. Engagement has therefore continued as a key theme during the year. The Company’s Employee Engagement Panel, which was formed during 2019, met three times during the year, with attendees including Dave Jenkinson, the Group Chief Executive at the time, and the Company Secretary. The Group also undertook its first Employee Engagement Survey during the year. Feedback from the survey was positive overall, with 90% of respondents committed to the Group and what we aim to achieve. Respondents requested better and more frequent communications and good progress has been made on improving this. Regular email updates are issued, we circulate a regular employee newsletter, HQ and we have enhanced our online communications, including for training. Employee Engagement Surveys are scheduled to take place on an annual basis.
We have robust and long-standing relationships with the majority of our suppliers and subcontractors. During the first lockdown we provided our suppliers and subcontractors with secure forward orders, prepaying for material deliveries to support our supply chain’s cash flows.
Due to the constraints of the first national lockdown, the 2020 AGM was held with the minimum required attendees and was broadcast to shareholders via a live webcast. Shareholders were invited to ask questions before the meeting, with answers posted on the Group’s corporate website prior to the meeting.
Further information on engagement throughout the year can be located in the Section 172 Statement within our Annual Report 2020.
Following a comprehensive search process, the Nomination Committee recommended the appointment of Dean Finch as the Group’s new Chief Executive. Dean is a widely experienced senior executive with a strong commercial, financial and operational track record spanning a 30-year career in Europe and North America. Dean joined the Group on 28 September 2020 and has made a strong start in the business with his focus on build quality, customer service and sustainability. Dave Jenkinson left the Company on 20 September 2020, having been with the business for 23 years. We thank Dave for his service to the Group; he played a critical role in the development of, and investment in, a range of customer care and quality initiatives, including our industry leading Homebuyer Retention.
We appointed three new Independent Non-Executive Directors during the year. Joanna Place joined the Board on 1 April 2020. Persimmon will benefit from her breadth of management experience gained in the course of her 30-year executive career at the Bank of England. Annemarie Durbin joined the Board on 1 July 2020 and replaced Marion Sears as Remuneration Committee Chair, following Marion Sears’ retirement in June. Marion made a significant contribution to the Board over many years; we thank her for her service. Annemarie is a highly experienced Independent Non-Executive Director and Remuneration Committee Chair.
We had previously identified that the Board could benefit from an additional Independent Non-Executive Director with construction sector experience. The Nomination Committee was therefore pleased to recommend the appointment of Andrew Wyllie and Andrew joined the Board on 4 January 2021. Andrew has a long and successful track record within the construction industry and brings highly relevant sector experience to the Board. Further information on the changes to the Board can be located in the Nomination Committee report within our Annual Report 2020.
The Audit Committee has focused on the Covid-19 pandemic and the impact of the resulting economic uncertainty on the Group’s operations and financial reporting. In particular, the Committee has conducted detailed reviews of management’s assessments of asset carrying values, Group liquidity, going concern assessments and other forward-looking accounting judgements, working with management and the external auditors to obtain additional reports, information and assurances to fulfil its duties.
The Committee has retained its clear focus on maintaining a high quality of external audit, and has built on existing measures to monitor and feedback on auditor performance. In recognition of the increasing volume and depth of regulation of the audit profession, and the continued investments in quality and oversight made by Ernst & Young LLP (EY), the Committee has agreed a higher level of audit fee for the 2020 financial year.
The Audit Committee has continued to provide oversight on the effective management of risk and internal controls, and the challenges imposed in these areas by increased remote working and social distancing. This has included particular focus on reviewing the work of the Group Internal Audit department, approving the department’s annual plan and changes in methodology to adapt to the expansion in remote working within the year. The Committee has overseen changes made by the department to fully implement the provisions of the Internal Audit Code of Practice issued by the Chartered Institute of Internal Auditors in January 2020, and has approved the department’s development plan, designed to ensure continuous improvement in internal audit provision. Further information can be located in the Audit Committee report within our Annual Report 2020.
We were pleased that our new Remuneration Policy received a high level of shareholder support at our AGM in 2020; over 97.8% of votes received were in favour. We consider that the high level of shareholder support was a result of our commitment to a best practice policy, as we listened carefully to our stakeholders and consulted with major shareholders. The Remuneration Committee considers workforce pay policies when implementing the policy for Executive Directors and when setting pay for the Senior Executive Group. One of the key tasks for the Committee during the year was to set the remuneration for Dean Finch, our new Group Chief Executive. His remuneration is consistent with the Directors’ Remuneration Policy and in determining the overall package, the Committee reflected the aim to deliver restraint on pay, balanced with the need to recruit a CEO with FTSE experience and a track record of performance.
During the year we retained all of our employees and kept as many of them working, in a Covid-secure environment, as possible. We paid any employees who were stood down due to the disruption caused by the pandemic their full basic pay and we have not accessed any of the UK Government’s Covid-19 financial support schemes, and have no plans to do so. We also provided support to our suppliers and subcontractors to ensure operational continuity and enable a safe and structured re-start to site operations in late April 2020.
Sustainability is a key area of focus for the Group. Our newly restructured Sustainability Committee has developed the Group’s sustainability approach after performing a materiality assessment to identify issues material to the Group’s stakeholders, taking account of the Group’s operational strategy and business model. The Committee fulfils an important governance role by ensuring the Group’s ‘sustainability approach’, covering key environment and social issues, is embedded in to day-to-day operations.
The Board understands the importance of diversity and is committed to increasing the diversity of the Group’s workforce and the diversity of the Board itself. The gender diversity split of the Board is 33% female, 67% male. Females make up 26% of our senior executive management team, including direct reports (19 females and 55 males). The Board is mindful of the recommendations of The Parker Review and its target that each FTSE 100 board should have at least one director of colour by 2021. As at the date of this report the Board has regrettably not achieved this target. We aim to increase the ethnic diversity of the Board as soon as reasonably practicable.
Increasing the diversity of our workforce is a key objective and in pursuit of this we have set new diversity targets to improve the Group’s gender diversity with the aim to have females composing 40% of our employees, 35% of our senior management team and 45% of employees in management roles by the end of 2025. We have also appointed a Director of Talent and Diversity who will join the Group in spring 2021 to add strategic resource to the Group’s diversity and succession planning activities.
A formal and rigorous internal evaluation of the performance of the Board and its Committees was undertaken during the year, which was supported by Clare Chalmers Limited, an experienced and independent provider of Board evaluations. Following this evaluation I am satisfied that all Directors continue to perform well in their roles and contribute effectively.
Further information on the Board Evaluation can be located in the Nomination Committee report within the Annual Report 2020.
The UK Corporate Governance Code 2018 was applicable to the financial year ending 31 December 2020. I am pleased to report that the Company has complied with the UK Corporate Governance Code 2018.
2 March 2021