Full Year results for the year ended 31 December 2019


Highlights

“Improving build quality and the service delivered to our customers were our top priorities throughout 2019.  Putting customers before volume is at the heart of our customer care improvement plan and, as a result, new home legal completion volumes were 4% lower year on year. Having commissioned the Independent Review in April, we were clear that we would not delay action until its completion in December and were engaged on a broad range of customer service and quality improvement initiatives throughout the year.  We are confident these initiatives will add to our momentum this year.

“Persimmon’s results for 2019 reflect our focus on offering attractively priced new homes for all, where housing need is greatest across the UK. I am proud of the enthusiasm and dedication with which the whole Persimmon team is making the many changes necessary to achieve higher levels of quality and service to our customers.  We continue to invest in our teams, systems, and our off-site manufacturing capabilities to support the Group’s further sustainable development.

“I am pleased with the headway we have made in 2019 and determined that we will make further progress with these initiatives in 2020. Persimmon is in a strong position for the future supported by the Group’s talented teams, healthy forward sales, strong forward build and robust balance sheet.”

Dave Jenkinson, Group Chief Executive

    

Strategic Focus

  • Improving customer service levels – continuing to put customers before volume
    • Delaying sales release in higher demand locations to later stages of construction is delivering the anticipated benefits to customers
    • Significant investment in improving build quality and customer care, with an additional £213m invested in work in progress and a c. £15m increase in annual quality assurance and customer care spend
    • Persimmon’s HBF survey rating1 continues to trend strongly ahead of the Four Star threshold   
    • Customer portal being rolled out across the Group’s regional businesses during the first half of 2020 further strengthening engagement and service levels
  • Improving build quality and safety
    • Industry leading retention scheme introduced in July 2019 reinforcing behavioural change in site construction management and customer care
    • Construction programmes advancing – work in progress of £1,095m now at 32% of new housing sales (2018: £882m, 25%) supporting increased new home inventory volumes, improving new home quality, availability and delivery
    • New team of Independent Quality Inspectors engaged, strengthening our current assurance processes across each of our regional businesses
    • Additional Group wide training initiatives being delivered to support improved site management of construction programmes
  • Independent Review update
    • The Independent Review, published on 17 December 2019, provided some additional recommendations which the Persimmon team have embraced and are in the process of implementing
    • Persimmon’s Construction Working Group is currently consolidating the Group’s construction standards to define “the Persimmon Way” of new home construction, and establish consistent construction and quality processes Group wide
    • Central control of construction processes and standards is being established under the Group’s newly appointed Construction Champion
    • The Group continues to progress its cavity barrier inspection programme, with over 20,000 properties now inspected
    • Board review of clarity of Persimmon’s purpose and culture continuing with an update to be given at the AGM in April 2020, as previously announced
  • Housebuilder for all
    • Increasing the supply of good quality homes for everyone with more first time buyers helped onto the housing ladder than any other UK housebuilder – 6,262 new homes sold to first time buyers in 2019, representing 50% of Group private sales
    • Group average private selling price c. 18% lower than the national average for newly built homes sold to owner occupiers2
    • Creating opportunities for all - directly employing more local tradespeople (c. 2,050) than any other housebuilder, with c. 750 trainees employed in structured training courses
    • Investment of over £520m in local communities during the year, including the delivery of 3,392 new homes for lower income families to our housing association partners
    • Signatory to the Social Mobility Pledge3 - leading engagement in the house building industry to promote opportunities for all 
    • Launched our Building Futures campaign, joining forces with Team GB, run by the British Olympic Association, to support children across the UK
    • Persimmon’s Charitable Foundation contributed c. £2.3m to support c. 900 charities, local community groups and good causes across the UK 
  • Supporting environmental wellbeing
    • Reduced our Scope 1 and 2 greenhouse gas emissions per new home sold by 8%
    • Working with Government and industry to manage the transition to low carbon homes
    • Provided c. 7504 acres of public open spaces and gardens
    • Planted c. 146,000 trees during 2019
  • Group Chief Executive Succession
    • Dave Jenkinson has informed the Board of his wish to step down in due course and a search process for his successor will now commence  
    • Dave will remain as Group Chief Executive and is fully committed to leading the ongoing programme of change for as long as the business requires

Financial highlights

  • Financial trading performance remains strong
    • 15,855 new homes sold (2018: 16,449) – 4% down on last year
    • Total new homes average selling price of £215,709 (2018: £215,563)
    • Total Group revenue 2.4% lower at £3.65bn (2018: £3.74bn)
    • Underlying new housing operating margin5 of 30.3% (2018: 30.8%)
    • Profit before tax of £1,041m (2018: £1,091m)
    • Net free cash generation6 of £544m (2018: £478m)
    • Basic earnings per share of 266.8p (2018: 283.3p)
    • Return on average capital employed7 of 37.0% (2018: 41.3%)
    • Return on equity8 of 26.3% (2018: 27.7%)
  • Excellent platform for future growth
    • 10,013 plots of new land secured in the period, including 4,218 plots converted from the Group’s strategic land bank; 71,942 plots owned (December 2018: 75,793 plots)
    • Increase in work in progress investment to £1,095m (2018: £882m)
    • Land creditors reduced by £113m to £435m at year end (2018: £548m) providing increased flexibility to invest in attractive future land opportunities
    • £844m cash held (2018: £1,048m)
    • Strong current forward sales of £1.982bn (2018: £2.017bn) 
  • Shareholder returns
    • Return of surplus capital of £1.25 per share (£397.7m) paid 29 March 2019 in addition to the scheduled payment of £1.10 per share (£350.1m) paid on 2 July 2019
    • Commitment to a total return of £2.35 per share in 2021 (2020: £2.35)

 

1. 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.
2. 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 £241,985.
3. Social Mobility Pledge is a cross party campaign to improve social mobility in the UK
4. Estimated using an economic toolkit 
5. Stated before goodwill impairment (2019: £7.3m, 2018: £9.2m) and based on new housing revenue (2019: £3,420.1m, 2018: £3,545.8m)
6. Net free cash generation stated before Capital Return Plan payments
7. 12 month rolling average stated before goodwill impairment and includes land creditors
8. 12 month rolling profit after tax generated from the average of the opening and closing total equity for the 12 month period