Full Year Results for the year ended 31 December 2020


Dean Finch, Group Chief Executive, commented:

“Persimmon delivered a robust performance in 2020 despite the challenges presented by the pandemic. I would like to commend our workforce for the effective way Covid-secure operating protocols have been adopted, protecting our customers, local communities and colleagues alike whilst maintaining effective on-site operations.

“I am particularly pleased we have delivered all this whilst continuing to see an increase in our HBF eight-week customer satisfaction score, with our current rates above the five-star threshold. We must build on this important progress and further enhance our build quality and customer care so we are known for both outstanding service as well as outstanding value. To achieve this we will further strengthen our build quality and independent inspection regime within the Persimmon Way. This will both drive efficiencies that will pay for these improvements and enhance our capabilities, enabling us to build a greater volume of homes at five-star. We have also set new environmental targets in line with the Paris Agreement and will seek to further develop the Persimmon Way to embed the specific measures that will deliver on these targets in the future.

“In addition, having adopted the principles of the Living Wage Foundation within our direct pay policies we are seeking full accreditation in working with our broader supply chain and development partners.

“Persimmon is a company of many strengths with great opportunities ahead. Combining the business’ entrepreneurial spirit and astute land buying with enhanced quality, efficiency and service standards will drive superior, sustainable value creation for our shareholders and broader stakeholders alike.”

Financial Highlights

 

2020

2019

New home completions

13,575

15,855

New home average selling price

£230,534

£215,709

Total Group revenues

£3.33bn

£3.65bn

New housing revenues

£3.13bn

£3.42bn

Underlying new housing gross margins1

31.0%

33.1%

Underlying profit before tax2

£863.1m

£1,048.1m

Profit before tax

£783.8m

£1,040.8m

Cash at 31 Dec

£1,234.1m

£843.9m

Land holdings at 31 Dec – plots owned and under control

84,174

93,246

Current number of developments across the UK

c. 300

c. 345

Current forward sales position

£2.27bn

£1.98bn

Net assets per share

1,102.7p

1,021.7p

Return on average capital employed3

29.4%

37.0%

Dividend

110p per share in the year

235p per share in the year

 

 Trading performance

  • Persimmon has achieved a resilient trading performance for 2020, the year including the period of maximum disruption with the outbreak of the Covid-19 global pandemic
  • The Group’s average private weekly sales rate per site for 2020 was 12% higher year on year reflecting good stock availability coming into the year and strong customer demand
  • Average selling prices increased by 6.9% reflecting the 6.5% increased proportion of homes sold to owner occupiers during the year
  • 2,212 new homes were delivered to our Housing Association partners in 2020, representing 16% of new homes sold (2019: 3,392 homes, 21% of new homes sold)
  • £1,067m of net cash generation before capital returns of £351m and net land spend of £326m

Legacy buildings provision

  • The Group is setting aside £75m towards any necessary remediation work to remove now-banned cladding on 26 multi-storey developments we have built in line with our announcement on 10 February 2021
  • Where Persimmon owns the building, it will lead this work. Where the Group no longer owns the building, it will support the owners and other parties in their efforts to ensure the buildings are safe for residents. Should a building owner fail to meet their obligations, Persimmon stands ready to provide the support to make sure this happens

Continued focused management of housing cycle risk

  • The Group has maintained its selective investment in land to preserve the quality of the Group’s land holdings. 6,827 plots have been brought into the business in 33 locations across the UK during 2020 (c. 50% of consumption levels), with 4,562 plots, two thirds, in the second half of the year
  • Recognising the cyclical nature of the housing market, the Group continues to execute its long established strategy which minimises financial risk and judges the deployment of capital through the cycle

2020 in focus

Covid-19 update

  • The health, safety and wellbeing of our customers, our workforce and our communities remains paramount
  • Continuing to operate effectively across our business in accordance with all relevant guidelines, including the Construction Leadership Council Safe Operating Procedures, HBF Coronavirus Sales and Marketing Operating Procedures and HM Government Working Safely During COVID-19 guidance

The homes we build – ‘build right, first time, every time’

  • Building on recent progress, an even greater focus on quality and customer service
  • The ‘Persimmon Way’, our Group wide consolidated approach to new home construction is being strengthened further with enhanced quality standards and a doubling of our Independent Quality Inspection team
  • The Group has been trending above five-star from January 2020 in its eight-week post-sale HBF customer satisfaction score4, showing the progress made already

Customer service

  • Continuing to put our customers before volume, we strengthened the enforcement of the Group’s policy of build completion 21 days ahead of customer handover, ensuring build programmes allow for effective quality assurance procedures
  • c. 50% of the Group’s owner occupiers have utilised our industry leading Homebuyer Retention Scheme since 1 July 2020
  • Increased our online services to support our customers through “lockdown” periods
  • Further investing in our customer portal, which supports our customers from the point of reserving their new home
  • FibreNest, the Group’sultrafast, full fibre broadband service, currently supports over 12,500 of our customers across 198 developments

Supporting our communities

  • Persimmon continues to build ‘homes for all’ providing a range of house types at affordable prices
  • c. 50% of the Group’s private home completions were to first time buyers
  • Our private average selling price of £250,897 for the year to 31 December 2020 is c. 17%5 below the UK national average
  • Investment of £376m in local communities, including the delivery of 2,212 new homes for lower income families to our Housing Association partners
  • Approximately £2.0m donated to local charities and community groups
  • A commitment to achieving Living Wage Foundation accreditation as soon as possible
  • 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

Setting new environmental targets

  • Achieve net zero carbon in our homes in use by 2030 and across our operations by 2040
  • Set interim science based carbon reduction targets to reduce carbon emissions from our own operations by 46.2% by 2030 and our indirect operations by 22% per mcompletedfloor area by 2030, in line with the Paris Agreement
  • Appointed Regional Environmental Champions to further enhance environmental considerations across each of our developments

Strong platform for future growth

  • Diverse network of c. 300 active outlets (2019: c. 345) across the UK anticipated to be maintained at a consistent level throughout the year
  • Robust balance sheet with high quality land holdings, with 84,174 plots owned and under control at 31 December 2020 held across 31 operating businesses (2019: 93,246 plots)
  • Strong liquidity with cash held of £1,234m and land creditors reduced by £106m to £329m at 31 December 2020 (2019: £435m) providing significant opportunity to grow the business
  • Seeking to take advantage of excellent land opportunities leading to investment returning to historic levels of c. £0.5bn

Outlook

  • Strong forward sales levels of £2.3bn, 15% higher year on year, supported by low interest rates, good mortgage availability and ongoing Government support measures
  • The Group’s average private weekly sales rates for the first eight weeks was 7% ahead of last year
  • Build rates have been maintained at pre-Covid levels since July 2020
  • Further quality and service improvements to benefit our customers and secure greater efficiency, protecting industry leading margins and strengthening our platform for growth, thereby driving improved profit and cash generation
  • Reflecting the consistent outlet levels anticipated through the year, in the first half of 2021 we expect to deliver new home completion volumes approaching the levels seen during the first half of 2019, with similar delivery in the second half. We anticipate the Group’s margin will reflect the return to delivering an increased proportion of homes to our Housing Association Partners from 2021.
  • We are targeting a full return to 2019 levels of new home completions in 2022. From 2023, with a stable market, we expect our enhanced quality, service and efficiency capabilities to provide the opportunity to grow further. We are focused on bringing more outlets into production to support these targets
  • Despite near term uncertainties as the economic and social disruption of the pandemic continue and the full impact of the UK’s exit from the EU unfolds, the longer term fundamentals of the UK housing market remain strong

Shareholder returns

  • Dividends of 40p (£127.5m) and 70p (£223.2m) per share paid on 14 September and 14 December 2020 respectively
  • Commitment to a total return of £2.35 per share in 2021 subject to continual Board review
  • Payment of regular annual instalment of £1.25 per share to be accelerated to 26 March 2021 from July 2021
  • Intended payment of £1.10 per share surplus capital to be split into 55p per share to be paid in August 2021 and 55p per share to be paid in December 2021

 

1       Stated before legacy buildings provision (2020: £75.0m, 2019: £nil) and based on new housing revenue (2020: £3,129.5m, 2019: £3,420.1m).

2       Stated before legacy buildings provision (2020: £75.0m, 2019: £nil) and goodwill impairment (2020: £4.3m, 2019: £7.3m). Profit before tax after legacy buildings provision and goodwill impairment is £783.8m (2019: £1,040.8m).

3       12 month rolling average calculated on underlying operating profit and total capital employed (including land creditors). Underlying operating profit is stated before legacy buildings provision (2020: £75.0m, 2019: £nil) and goodwill impairment (2020: £4.3m, 2019: £7.3m).

4       The Group participates in a National New Homes Survey, run by the Home Builders Federation. The rating system is based on the number of customers who would recommend their builder to a friend.

5       National average selling price for newly built homes sourced from the UK House Price Index as calculated by the Office for National Statistics from data provided by HM Land registry. Group average private selling price is £250,897.