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Persimmon Plc Annual Report 2022
Building for
tomorrow, today
Contents
For further information
www.persimmonhomes.com/corporate
Strategic report
Our mission and vision 1
Chairman’s statement 2
The strength of our business
– Three strong brands 4
– Key attributes 5
– Vertical integration
Space4, Brickworks, Tileworks, FibreNest 6
– Clear priorities with sustainability at the heart 7
Our marketplace 8
Our business model
– Overview 10
– What we do 11
How we performed
– Financial KPIs 12
– Non-financial KPIs 13
Governance
Directors’ Report 86-125
– Chairman’s introduction
to corporate governance 86
– Board leadership 88
– Corporate governance statement 92
– Composition, succession and evaluation
– Nomination Committee Chair’s statement 106
– Nomination Committee report 108
– Audit, Risk and Internal control
– Audit & Risk Committee Chair’s statement 116
– Audit & Risk Committee report 118
– Other disclosures 123
Remuneration 126-153
– Remuneration Committee Chair’sstatement 126
– Remuneration at a glance 130
– Directors’ future Remuneration Policy 132
– Annual report on Remuneration 140
Financial statements
Statement of Directors’ Responsibilities 154
Independent Auditor’s Report 155
Consolidated Statement
of Comprehensive Income 161
Balance sheets 162
Statement of changes
inshareholders’equity 163
Cash flow statements 164
Notes to the financial statements 165
Other information
Shareholder Information 198
Financial Calendar 2023 198
Five Year Record 198
Group Chief Executive’s statement 14
Our five key priorities
– Build quality and safety 21
– Reinforcing trust: customers at the
heart of our business 25
– Disciplined growth:
high quality land investment 28
– Industry-leading financial performance 31
– Supporting sustainable communities 33
Our people 36
Sustainability 42
Financial review 53
How we manage risk
– Protecting long-term value creation 56
– Principal risks and material issues 57
Task force on climate related financial
disclosures (TCFD) 64
Viability statement 75
Section 172 statement 78
Non-financial information statement 85
Strategic report Corporate governance Financial statements Other information
About Persimmon
Our mission
To build homes with quality
ourcustomers can rely on
at a price theycan afford.
Our vision
To be Britain’s leading homebuilder, with
quality and customer service at its heart,
building the best value homes on the market
insustainable and inclusive communities.
We will invest in innovation and technology
toextend our low cost strengths and enhance
our five-star capabilities to enable as many
people as possible to buy the homes we build.
1. Estimated using an economic toolkit.
2. The value of homes delivered to housing associations, the value of discounted
openmarket value homes plus the value of planning contributions we have
madeover the last five years.
3. 12-month rolling average calculated on operating profit before legacy
buildingsprovision charge (2022: £275.0m, 2021: £nil) and goodwill impairment
(2022: £6.6m,2021: £6.2m) and total capital employed. Capital employed
beingtheGroup’s net assets less cash and cash equivalents plus land creditors.
Highlights
Number of homes sold
14,868
2021: 14,551
Average selling price 2022
£248,616
2021: £237,078
Construction and supply
chain jobs supported
1
c.92,000
2021: c.92,000
Investment in local communities
2
c.£2.4bn
2021: c.£2.3bn
Owned land holdings (plots)
70,768
2021: 67,089
Return on capital employed (‘ROCE’)
3
30.4%
2021: 35.8%
Strategic report Corporate governance Financial statements Other information
Persimmon Plc | Annual Report | December 2022
01
1. Stated before legacy buildings provision charge
(2022: £275.0m, 2021: £nil) and goodwill impairment
(2022: £6.6m, 2021: £6.2m).
Chairman’s statement
A more challenging period
butopportunities ahead
We have a strong platform
to prepare for a new
growth phase when
marketconditions permit.
Roger Devlin
Chairman
I am pleased to report that
Persimmon had a strong year
in2022. For the first time in
our50year history we delivered
five-star quality and service while
alsoachieving underlying pre-tax
profits
1
in excess of £1 billion.
By contrast 2023 promises to be a tough year,
albeit largely for reasons beyond our control.
While I am confident that our attention to build
quality and customer care will remain undimmed,
we will inevitably see a sharp fall in the number
ofcompletions as well as a decline in profitability
as a consequence of the nationwide diminution in
demand for housing arising from higher mortgage
rates and challenging economic circumstances.
However, I remain very confident of the exciting
long-term prospects for Persimmon. We are
constantly reminded by the political classes of the
national need for 300,000 homes to be built every
year. I expect the outturn for 2023 may not be much
more than half this number. Therefore we anticipate
that our company will be a beneficiary of strong pent
up demand when the economic and housing cycles
turn in our favour eventually.
When I joined the company as Chairman in 2018
Iquickly commissioned an Independent Review
ofour approach to build quality. I am delighted
thatDean and his team have responded to the
challenge so vigorously and diligently to deliver
better homes built right first time.
Many colleagues have commented to me that
2022 was perhaps the most dicult year they have
known in the building trade. The combination of
material and labour shortages, significant inflation
and the stark drop-o in sales rates in the fourth
quarter presented myriad challenges that my
colleagues have navigated with impressive skill
andcommitment. Our mission is to build homes
withquality our customers can rely on at a price
they can aord and 2022’s results demonstrate
thecompany has done just that.
Persimmon Plc | Annual Report | December 2022
02
Revenue
£3.82bn
2021: £3.61bn
Dividend per share
paid in the year
235p
2021: 235p
Underlying new housing
operating margin
1
27. 2%
2021: 28.0%
Forward sales
2
£1.52bn
2021: £2.21bn
Affordable homes
3
2,868
2021: 2,759
A more challenging period
butopportunities ahead
Following the swift rise in interest rates the
Groupacted quickly to enhance its already
stronginvestment discipline and working
capitalcostcontrols, to protect our cash
positionandin the longer-term provide the
flexibilityto pursue new growth opportunities.
We have a strong platform to prepare for a
newgrowth phase when market conditions
permit.Although 2023 will be a dicult year,
Persimmon has the opportunity to expand
our outletnetwork at the right time through
disciplinedand targeted investment and a more
sophisticated approach tosecuring planning
toexpedite approvals. We arehopeful that
bynextyear we will be expanding once more,
delivering more new homes for customers
andsustainable returns for shareholders.
Industry leadership
Although the national political environment
hasbecome more challenging as backbench
anti-new housing forces have gained strength,
weare pleased to continue to lead the industry
withcladding and fire safety remediation.
We were proud to be first with our initial
commitment in February 2021 to protect
leaseholders from the costsof remediation
in any multi-storey developmentwe built.
The government’s developerremediation
contract seeks to contractualise our existing
commitment; a commitment we are already
making good progresson. We expect to sign
the contract imminently. We are also engaged
in similarly positive discussions with the Welsh
andScottish governments.
As announced in November 2022, the Group
increased our provision for building safety
remediation across the UK to £350m (before spend
to date), resulting in a £275m exceptional charge for
the year. This increase reflects the extensive work
we have done to get a more detailed understanding
of costs over the last year. The government has also
broadened the scope of works required this year
to include non-cladding fire related build defects,
resulting in both an increase in the amount of work
required and in the number of eligible buildings.
This has also happened against a background
ofsignificant build cost inflation during the period.
We expect the work to be largely completed
– with the associated cash impact – over the
nextthree years.
Capital allocation policy
Persimmon remains a fundamentally strong
business, with industry-leading financial
performance through the cycle. The actions
wearecurrently taking will strengthen our
capabilities to grow and deliver sustainable
returnsover time to shareholders.
A new capital allocation policy was announced
in November to deliver sustainable returns to
shareholders while investing in future growth
through disciplined expansion of our industry-
leading land portfolio and enhancing our quality
and service capabilities. Alongside this the Board
considers our current assessment of prevailing
market conditions, the sector’s increased tax
contribution and building safety remediation costs.
For 2022, the Board proposes a final dividend
of 60p per share to be paid on 5 May 2023 to
shareholders on the register on 14 April 2023,
following shareholder approval at the AGM.
This dividend is the final and only dividend in
respectof financial year 2022. The Board’s intention
is to at least maintain the 2022 dividend per share
in 2023, with a view to growing this over time.
As previously announced, payments will be made
semi-annually with an interim dividend paid in the
second half of this year in relation to 2023.
Board changes
The only Board change during the year was
Jason Windsor joining on 11 July 2022 as Chief
Financial Ocer, replacing Mike Killoran following
his retirement in January 2022. The Board
warmlywelcomes Jason to the business.
Finally, on behalf of the whole Board I would like to
thank our colleagues, subcontractors and suppliers
for their hard work and determination to deliver
agood performance in 2022. This year will not be
easy. Sometimes in life you have to go backwards
in order to move forwards. I am convinced our
long-term future is bright and we all look forward
to working together to maintain Persimmon’s
industry-leading position and deliver more quality
homes for our customers and sustainable returns
forourshareholders through the cycle.
Roger Devlin
Chairman
28 February 2023
1. Based on new housing revenue (2022: £3,696.4m,
2021: £3,449.7m) and underlying operating profit
(2022: £1,006.4m, 2021: £966.7m) (stated before legacy
buildings provision charge (2022: £275.0m, 2021: £nil)
and goodwill impairment (2022: £6.6m, 2021: £6.2m)).
2. As at 28 February 2023 (2021 figure as at 1 March 2022).
3. Homes provided to our housing association partners
and discounted open market value homes.
Strategic report Corporate governance Financial statements Other information
Persimmon Plc | Annual Report | December 2022
03