REG - Persimmon Plc - Final Results <Origin Href="QuoteRef">PSN.L</Origin> - Part 2
27/02/2018 07:05
- Part 2: For the preceding part double click ID:nRSa9833Fa
key material component for
our build process. The plant and manufacturing process is highly automated
and is very durable with low maintenance requirements.
Brickworks is a further development of the Group's offsite manufacturing
capability, delivering a consistently high quality product and will be solely
focused on supplying bricks to the Group's house building operations, with
capacity to manufacture c. 80 million bricks each year, approximately two
thirds of the Group's current requirement. Our manufacturing process has
strong environmental credentials due to the significant reduction in energy
usage compared to more traditional brick manufacturing methods.
Tileworks
After extensive review we have taken the decision to manufacture our own roof
tiles to provide improved supply. During 2018 we will establish a new roof
tile manufacturing facility based at our manufacturing hub in Harworth,
Doncaster. It is intended that the facility will supply the Group with
concrete roof tiles across our standard house type range with a similar
approach to Brickworks.
Profitability
As a result of further operational gains and robust land investment the Group
has secured a 340 basis point increase in underlying operating margin** to
28.2% (2016: 24.8%) for the full year. In line with our expectations, margin
progress through the second half was maintained with a margin of 28.8% in the
second six months (2016: 25.7%), compared to margins in the first half of 2017
of 27.6% (2016: 23.8%).
The Group continues to face challenges in achieving detailed planning consents
and making a start on new sites. To mitigate these risks, over recent years
we have increased our investment in the Group's capabilities to optimise the
development plans for each new land parcel that we acquire. The diligence of
our land and planning teams is a key ingredient in achieving the most
appropriate planning consents reflecting local communities housing needs. We
remain focused on opening up new sales outlets as promptly as possible.
During the year 197 new sales outlets were opened (2016: 255 new sales
outlets) and this has resulted in maintaining lower land cost recoveries,
securing an additional 30 basis point contribution to the Group's gross margin
year on year. For 2017 the value of the Group's land recoveries totalled
16.1% of sales, down from 16.4% in 2016. This improvement reflects the
quality of the land we have acquired across the whole of the UK over recent
years.
As we secure new planning consents and open new sales outlets we increase the
coverage of the Group's core house types across all of our regional markets.
This allows us to leverage further benefits from consolidated procurement and
site construction activities. Operational focus remains on improving our
build programme management to capture productivity gains and our site
management teams, suppliers, site workers and sub-contractors have all worked
extremely hard to deliver these gains during 2017. As a result we have driven
a further reduction in our build and direct costs of 320 basis points to 52.6%
of sales (2016: 55.8% of sales).
Having opened our new Nottingham business at the start of 2017, and our sixth
new business in three years near Ipswich in Suffolk, on 2 January 2018, we
continue to invest in our management teams, processes and systems to ensure
sustainable growth for the Group is achieved. Given this investment and the
increase in output volume in 2017, the Group's operating expense efficiency
has remained in line with the previous year.
Cash generation, net finance income and financial assets
Strong cash generation through the housing cycle is at the core of the Group's
long term strategy. This will be delivered by maximising the cash efficiency
of our operational activities together with exercising capital discipline
whilst minimising financial risk through the cycle. The Group held cash
balances at 31 December 2017 of £1,303m (2016: £913m) after generating £806m
of free cash before capital returns during 2017, or 261 pence per share (2016:
£681m, 221 pence per share).
The disciplined reinvestment of free cash generated remains a key strategic
priority for the Group. Actual and prospective conditions in the sales and
land markets will influence the level of reinvestment over the housing cycle.
Market conditions, during 2017, have allowed further significant investment in
work in progress to meet the demand from customers. However, we remain
mindful of the risks and uncertainties to the UK economy and UK housing market
that surround the ongoing process of the UK leaving the EU. The cash
efficiency of our land replacement activities, expansion of our cash margins
and our superior asset turn, have allowed us to invest in substantial new land
holdings at a rate of c. 108% of 2017 consumption.
The Group has continued to take advantage of a supportive land market and has
successfully acquired a number of attractive investment opportunities with
deferred payment terms during the year. As a result the Group has extended
its deferred land creditor obligations modestly to £567m at the year end
(2016: £555m). This has allowed the growth of the business to be supported
from operational cash flows, prior to working capital requirements, without
reducing the cash resources available to shareholders. Cash inflow from
operations, before working capital requirements, totalled £997m in 2017 (2016:
£800m).
Following strong cash inflows from customers the carrying value of the Group's
outstanding shared equity loans, reported as "Available for sale financial
assets", has reduced during the year by £32m to £117m (2016: £149m). The
carrying value of these receivables has been reviewed by the Board which has
concluded that the value is appropriate.
Net finance income for the year was £11.0m (2016: £4.3m). Included within
this is £15.2m of imputed interest generated on the Group's shared equity
receivables (2016: £15.9m) and £10.2m of imputed interest payable on land
creditors (2016: £12.0m).
The delivery of the Capital Return Plan depends upon the cash efficiency of
our business processes along with strong capital discipline. We remain
confident that our current operational approach will support the execution of
our long term strategy and is reflected in the 31% increase in the rate of
return on average capital employed* in the business to 51.5% (2016: 39.4%).
The significant increase in the Capital Return Plan demonstrates the Board's
ongoing confidence.
Land and construction
Disciplined investment in new land opportunities at the appropriate point in
the housing market cycle and at attractive values is critical to sustaining
superior shareholder value creation over the longer term.
This shareholder value is created by securing high quality returns from
acquiring high quality replacement land and is a key focus of each of our 30
regional house building operations. We continue to invest in the Group's land
and planning teams across the UK, enhancing the skills and expertise of these
regional teams. Significant value is created through the identification of
compelling land acquisition opportunities in the short term land market and
for strategic land investment and by optimising our development schemes and by
bringing them into production as promptly as possible. The strong profits and
cash generated by the business serve to confirm the quality of the land
investments made by the Group together with the expertise of the management
team.
Our strategy remains to adjust the Group's forward owned and controlled land
bank to reflect prevailing and prospective conditions in the sales and land
markets judged in the context of the evaluation of the near term, and longer
term, outlook. The anticipated future growth of the business and further
disciplined investment in replacement land will continue to secure the
required capital efficiency of our land holdings.
During the year 17,301 new plots of land were acquired. At the year end the
Group owned 77,067 plots of land. Of these owned plots, 52,585 had an
implementable detailed planning consent providing c. 3.3 years of forward
supply at 2017 output volumes. These plots will provide support to each of
our regional operations as they seek to achieve a sustainable market share.
Our land and planning teams continue to work hard to secure implementable
consents on the remaining plots.
The Group has also entered into conditional contracts for an additional 21,378
plots which we are actively promoting through the planning system.
The carrying value of the Group's land assets at 31 December 2017 was £2,011m,
£65m higher than the prior year (2016: £1,946m).
Investment in strategic land and its successful promotion through the planning
system is a key driver of the success of our business model. In 2017 we
acquired interests in a further c. 920 acres of strategic land and we
converted 8,296 plots of land from our strategic land portfolio, representing
c. 52% of the Group's land consumption.
The consistent application of the National Planning Policy Framework through
2017 has ensured that improvements in land availability continued,
underpinning the industry's confidence to invest further in the land and work
in progress required to support an increase in the supply of new homes. We
are focused on delivering these high quality sustainable development
opportunities, fulfilling all specific planning requirements to enable the
Group to achieve a detailed implementable planning consent as quickly as
possible. We are confident that our strategic land portfolio of c. 16,100
acres will, in due course, yield in excess of 100,000 forward plots for future
development by the Group and will provide local communities with the
opportunity to meet their housing needs.
The carrying value of our work in progress at 31 December 2017 of £724m was
£107m higher than the prior year (2016: £617m). The Group continues to focus
on improving build programmes and investing in infrastructure on opening new
sites, supporting the prompt and efficient delivery of new homes across all
sites where we have an implementable detailed planning consent.
The Group entered 2018 with a strong work in progress position which will
provide support to our construction programmes on our existing sites. The
Group's investment in work in progress at the year end represented 21% of 2017
sales, an industry leading asset turn. The Board expect substantial
additional investment will be made in work in progress during 2018, supporting
the Group's future growth, and we will continue to convert our work in
progress as swiftly as possible over future periods to minimise operational
and financial risks.
Using consistent principles to prior years the Board has reviewed the net
realisable value of land and work in progress at 31 December 2017. The Board
concluded that the carrying value of land and work in progress was
appropriate. At the year end the Group retained an impairment provision of
£41.9m (2016: £48.5m) which is considered adequate to address the potential
impact of current market uncertainties on future revenue and direct costs for
the relevant sites.
Shareholders' equity, treasury policy and related risks
Delivering sustainable shareholder value over the long term and returning
surplus capital to shareholders are key priorities for the Group. Our long
term strategy is based upon the disciplined investment of capital in land and
work in progress at the appropriate points in the housing cycle. This
supports the development of the business over the longer term whilst securing
a strong financial position to mitigate the financial risks associated with
the housing cycle.
The Board's commitment to exercise capital discipline through the housing
cycle and return surplus capital to shareholders was reflected in the
Director's decision on 24 February 2017 to increase the Capital Return Plan to
£9.25 per share, c. £2.85bn, a 49% increase over the original Capital Return
Plan. This has been reinforced further with the announcement today that the
Board has increased the Capital Return Plan to c. £4.1bn, or £13.00 per
share.
Further instalments under the Capital Return Plan of £77m, or 25 pence per
share, and £1.10 per share, or £339m, were paid as dividends for the 2016
financial year, to shareholders on 31 March 2017 and 3 July 2017
respectively.
The Group's total retained profits after tax for the year were 26% higher than
last year at £786.9m (2016: £625.3m). The Group's retained earnings were
added to by an after tax remeasurement gain of £18.4m associated with the
Group's pension scheme asset of £67.7m and by share based payments of £72.5m.
The Group's total net asset value for the year ended 31 December 2017
increased 17%, or £465m, to £3,202m (2016: £2,737m). Net assets per share
increased over the prior year by 17% to 1,036.6 pence (2016: 887.3 pence) and
cash balances held at the year end increased by £390m and totalled £1,303m
(2016: £913m).
We continue to focus on generating strong liquidity. The Group maintains
revolving credit facilities which will only be used to support short term
seasonal working capital needs of the business. The operational plans of the
Group will be delivered by the generation of strong annual after tax earnings,
management of the Group's equity, debt and cash management facilities,
together with changes to planned shareholder capital returns. This approach
will mitigate the financial risks the Group faces which include credit risk,
liquidity risk, interest rate volatility and debt capital market pricing
risk.
The Group maintains a £300m Revolving Credit Facility with its five
relationship banks. During the year the Group extended the maturity of the
revolving credit facility to 31 March 2022.
Corporate Responsibility
The Board is accountable for the governance of the Group's corporate
responsibilities and sets the structure for their effective management. The
Board sets the Group's sustainability strategy as part of its overall business
strategy. Our Corporate Responsibility (CR) Committee is responsible for
reviewing, monitoring and evaluating sustainability performance within our
business and for providing feedback and suggestions to the Board. CR
Committee membership is drawn from all parts of the Group's operations. This
helps to maintain clear alignment with the Group's strategy and also helps the
effective communication of our sustainability strategy.
Our Sustainability Policy outlines five key principles relating to 'Our
Customers', 'Our People', 'Our Wellbeing', 'Our Environment' and 'Our
Communities'. These principles help us to ensure our business is responsible
and sustainable. Detailed information on our approach to Corporate
Responsibility, including our progress in 2017, objectives for 2018 and our
stakeholder engagement matrix can be found in our 2017 Sustainability Report
available at www.persimmonhomes.com/corporate.
Our Customers
We aim to help to address housing need by building a range of homes to suit
different customers in locations across the UK. We focus on offering new
homes for our customers at lower price points providing a comprehensive range
of selling prices, with an emphasis on first time buyers and first time
movers. Indeed, our average selling price during 2017 was £213,321 with just
under 45% of our private sales being delivered at prices below £200,000. The
market average UK house price was c. £227,000 in December 2017***. The
Government's Help to Buy shared equity loan scheme is continuing to enable
greater access to the owner occupier market, principally for first time
buyers, by supporting the purchase of a newly built home with a 5% deposit.
In October 2017 the Government announced a further £10bn of funding for this
scheme. Mortgage lenders are also keen to support these customers and offer
the most favourable interest rates on loans associated with this scheme.
During the year we sold 7,682 new homes to customers who secured a Help to Buy
mortgage. The recent cut in stamp duty by the Government in November 2017 may
also provide support for first time buyers to enter the market.
Delivering good quality new homes with a high standard of customer service is
a priority for the Group. We focused on three areas in 2017 which were; to
maintain high build quality with the increase in production; to improve the
service we deliver to customers in the month after they move into their new
home and to continue to improve communications regarding the date a customer's
new home will be ready.
Although we have increased our build numbers significantly in recent years,
our quality control procedures and increased use of standard house types have
helped to maintain our build quality. In addition, we have improved our
processes and systems to identify report and monitor the resolution of any
remaining issues in the few weeks after a customer takes possession of their
new home. We monitor how quickly any issues are dealt with and we have
introduced an escalation policy for any matters not resolved within required
timescales. This provides management greater visibility of the service we are
providing to our customers. In response to feedback from our customers, we
have introduced maintena- Part 2: For the preceding part double click ID:nRSa9833Fa
2018, we
continue to invest in our management teams, processes and systems to ensure
sustainable growth for the Group is achieved. Given this investment and the
increase in output volume in 2017, the Group's operating expense efficiency
has remained in line with the previous year.
Cash generation, net finance income and financial assets
Strong cash generation through the housing cycle is at the core of the Group's
long term strategy. This will be delivered by maximising the cash efficiency
of our operational activities together with exercising capital discipline
whilst minimising financial risk through the cycle. The Group held cash
balances at 31 December 2017 of £1,303m (2016: £913m) after generating
£806m of free cash before capital returns during 2017, or 261 pence per share
(2016: £681m, 221 pence per share).
The disciplined reinvestment of free cash generated remains a key strategic
priority for the Group. Actual and prospective conditions in the sales and
land markets will influence the level of reinvestment over the housing cycle.
Market conditions, during 2017, have allowed further significant investment
in work in progress to meet the demand from customers. However, we remain
mindful of the risks and uncertainties to the UK economy and UK housing market
that surround the ongoing process of the UK leaving the EU. The cash
efficiency of our land replacement activities, expansion of our cash margins
and our superior asset turn, have allowed us to invest in substantial new land
holdings at a rate of c. 108% of 2017 consumption.
The Group has continued to take advantage of a supportive land market and has
successfully acquired a number of attractive investment opportunities with
deferred payment terms during the year. As a result the Group has extended
its deferred land creditor obligations modestly to £567m at the year end
(2016: £555m). This has allowed the growth of the business to be supported
from operational cash flows, prior to working capital requirements, without
reducing the cash resources available to shareholders. Cash inflow from
operations, before working capital requirements, totalled £997m in 2017
(2016: £800m).
Following strong cash inflows from customers the carrying value of the Group's
outstanding shared equity loans, reported as "Available for sale financial
assets", has reduced during the year by £32m to £117m (2016: £149m). The
carrying value of these receivables has been reviewed by the Board which has
concluded that the value is appropriate.
Net finance income for the year was £11.0m (2016: £4.3m). Included within
this is £15.2m of imputed interest generated on the Group's shared equity
receivables (2016: £15.9m) and £10.2m of imputed interest payable on land
creditors (2016: £12.0m).
The delivery of the Capital Return Plan depends upon the cash efficiency of
our business processes along with strong capital discipline. We remain
confident that our current operational approach will support the execution of
our long term strategy and is reflected in the 31% increase in the rate of
return on average capital employed* in the business to 51.5% (2016: 39.4%).
The significant increase in the Capital Return Plan demonstrates the Board's
ongoing confidence.
Land and construction
Disciplined investment in new land opportunities at the appropriate point in
the housing market cycle and at attractive values is critical to sustaining
superior shareholder value creation over the longer term.
This shareholder value is created by securing high quality returns from
acquiring high quality replacement land and is a key focus of each of our 30
regional house building operations. We continue to invest in the Group's
land and planning teams across the UK, enhancing the skills and expertise of
these regional teams. Significant value is created through the
identification of compelling land acquisition opportunities in the short term
land market and for strategic land investment and by optimising our
development schemes and by bringing them into production as promptly as
possible. The strong profits and cash generated by the business serve to
confirm the quality of the land investments made by the Group together with
the expertise of the management team.
Our strategy remains to adjust the Group's forward owned and controlled land
bank to reflect prevailing and prospective conditions in the sales and land
markets judged in the context of the evaluation of the near term, and longer
term, outlook. The anticipated future growth of the business and further
disciplined investment in replacement land will continue to secure the
required capital efficiency of our land holdings.
During the year 17,301 new plots of land were acquired. At the year end the
Group owned 77,067 plots of land. Of these owned plots, 52,585 had an
implementable detailed planning consent providing c. 3.3 years of forward
supply at 2017 output volumes. These plots will provide support to each of
our regional operations as they seek to achieve a sustainable market share.
Our land and planning teams continue to work hard to secure implementable
consents on the remaining plots.
The Group has also entered into conditional contracts for an additional 21,378
plots which we are actively promoting through the planning system.
The carrying value of the Group's land assets at 31 December 2017 was
£2,011m, £65m higher than the prior year (2016: £1,946m).
Investment in strategic land and its successful promotion through the planning
system is a key driver of the success of our business model. In 2017 we
acquired interests in a further c. 920 acres of strategic land and we
converted 8,296 plots of land from our strategic land portfolio, representing
c. 52% of the Group's land consumption.
The consistent application of the National Planning Policy Framework through
2017 has ensured that improvements in land availability continued,
underpinning the industry's confidence to invest further in the land and work
in progress required to support an increase in the supply of new homes. We
are focused on delivering these high quality sustainable development
opportunities, fulfilling all specific planning requirements to enable the
Group to achieve a detailed implementable planning consent as quickly as
possible. We are confident that our strategic land portfolio of c. 16,100
acres will, in due course, yield in excess of 100,000 forward plots for future
development by the Group and will provide local communities with the
opportunity to meet their housing needs.
The carrying value of our work in progress at 31 December 2017 of £724m was
£107m higher than the prior year (2016: £617m). The Group continues to
focus on improving build programmes and investing in infrastructure on opening
new sites, supporting the prompt and efficient delivery of new homes across
all sites where we have an implementable detailed planning consent.
The Group entered 2018 with a strong work in progress position which will
provide support to our construction programmes on our existing sites. The
Group's investment in work in progress at the year end represented 21% of 2017
sales, an industry leading asset turn. The Board expect substantial
additional investment will be made in work in progress during 2018, supporting
the Group's future growth, and we will continue to convert our work in
progress as swiftly as possible over future periods to minimise operational
and financial risks.
Using consistent principles to prior years the Board has reviewed the net
realisable value of land and work in progress at 31 December 2017. The Board
concluded that the carrying value of land and work in progress was
appropriate. At the year end the Group retained an impairment provision of
£41.9m (2016: £48.5m) which is considered adequate to address the potential
impact of current market uncertainties on future revenue and direct costs for
the relevant sites.
Shareholders' equity, treasury policy and related risks
Delivering sustainable shareholder value over the long term and returning
surplus capital to shareholders are key priorities for the Group. Our long
term strategy is based upon the disciplined investment of capital in land and
work in progress at the appropriate points in the housing cycle. This
supports the development of the business over the longer term whilst securing
a strong financial position to mitigate the financial risks associated with
the housing cycle.
The Board's commitment to exercise capital discipline through the housing
cycle and return surplus capital to shareholders was reflected in the
Director's decision on 24 February 2017 to increase the Capital Return Plan to
£9.25 per share, c. £2.85bn, a 49% increase over the original Capital Return
Plan. This has been reinforced further with the announcement today that the
Board has increased the Capital Return Plan to c. £4.1bn, or £13.00 per
share.
Further instalments under the Capital Return Plan of £77m, or 25 pence per
share, and £1.10 per share, or £339m, were paid as dividends for the 2016
financial year, to shareholders on 31 March 2017 and 3 July 2017 respectively.
The Group's total retained profits after tax for the year were 26% higher than
last year at £786.9m (2016: £625.3m). The Group's retained earnings were
added to by an after tax remeasurement gain of £18.4m associated with the
Group's pension scheme asset of £67.7m and by share based payments of
£72.5m.
The Group's total net asset value for the year ended 31 December 2017
increased 17%, or £465m, to £3,202m (2016: £2,737m). Net assets per share
increased over the prior year by 17% to 1,036.6 pence (2016: 887.3 pence) and
cash balances held at the year end increased by £390m and totalled £1,303m
(2016: £913m).
We continue to focus on generating strong liquidity. The Group maintains
revolving credit facilities which will only be used to support short term
seasonal working capital needs of the business. The operational plans of the
Group will be delivered by the generation of strong annual after tax earnings,
management of the Group's equity, debt and cash management facilities,
together with changes to planned shareholder capital returns. This approach
will mitigate the financial risks the Group faces which include credit risk,
liquidity risk, interest rate volatility and debt capital market pricing risk.
The Group maintains a £300m Revolving Credit Facility with its five
relationship banks. During the year the Group extended the maturity of the
revolving credit facility to 31 March 2022.
Corporate Responsibility
The Board is accountable for the governance of the Group's corporate
responsibilities and sets the structure for their effective management. The
Board sets the Group's sustainability strategy as part of its overall business
strategy. Our Corporate Responsibility (CR) Committee is responsible for
reviewing, monitoring and evaluating sustainability performance within our
business and for providing feedback and suggestions to the Board. CR
Committee membership is drawn from all parts of the Group's operations. This
helps to maintain clear alignment with the Group's strategy and also helps the
effective communication of our sustainability strategy.
Our Sustainability Policy outlines five key principles relating to 'Our
Customers', 'Our People', 'Our Wellbeing', 'Our Environment' and
'Our Communities'. These principles help us to ensure our business is
responsible and sustainable. Detailed information on our approach to
Corporate Responsibility, including our progress in 2017, objectives for 2018
and our stakeholder engagement matrix can be found in our 2017 Sustainability
Report available at www.persimmonhomes.com/corporate
(http://www.corporate.persimmonhomes.com) .
Our Customers
We aim to help to address housing need by building a range of homes to suit
different customers in locations across the UK. We focus on offering new
homes for our customers at lower price points providing a comprehensive range
of selling prices, with an emphasis on first time buyers and first time
movers. Indeed, our average selling price during 2017 was £213,321 with just
under 45% of our private sales being delivered at prices below £200,000.
The market average UK house price was c. £227,000 in December 2017***. The
Government's Help to Buy shared equity loan scheme is continuing to enable
greater access to the owner occupier market, principally for first time
buyers, by supporting the purchase of a newly built home with a 5% deposit.
In October 2017 the Government announced a further £10bn of funding for this
scheme. Mortgage lenders are also keen to support these customers and offer
the most favourable interest rates on loans associated with this scheme.
During the year we sold 7,682 new homes to customers who secured a Help to Buy
mortgage. The recent cut in stamp duty by the Government in November 2017
may also provide support for first time buyers to enter the market.
Delivering good quality new homes with a high standard of customer service is
a priority for the Group. We focused on three areas in 2017 which were; to
maintain high build quality with the increase in production; to improve the
service we deliver to customers in the month after they move into their new
home and to continue to improve communications regarding the date a customer's
new home will be ready.
Although we have increased our build numbers significantly in recent years,
our quality control procedures and increased use of standard house types have
helped to maintain our build quality. In addition, we have improved our
processes and systems to identify report and monitor the resolution of any
remaining issues in the few weeks after a customer takes possession of their
new home. We monitor how quickly any issues are dealt with and we have
introduced an escalation policy for any matters not resolved within required
timescales. This provides management greater visibility of the service we
are providing to our customers. In response to feedback from our customers,
we have introduced maintenance appointments at weekends and "out of hours"
opening of customer care departments.
As customers often reserve their new home many months before it is completed,
one particular area of importance is having an accurate move-in date. We
have continued to improve our communications to customers on the expected
completion date of their property, in order that they are better able to plan
for their move.
Our customer care initiatives have resulted in continued improvement in our
rating scores in the HBF National New Homes Customer Satisfaction Survey.
Our score in relation to the question 'Would you recommend Persimmon to a
friend?' has increased to 79.1% for 2017 (2016: 74.6%). This is just below
the 80% required for the HBF to rate us a four star builder. We will
continue to focus on improving our customer care during 2018. Customer care
performance conditions will continue to be included in performance related pay
for relevant employees aligning their interests with this focus on customer
care.
During 2018 we will remain focused on continuing to deliver tangible
improvements in our customer satisfaction ratings in particular by focusing on
site staff induction training to cover all customer care processes and
continuing to offer a more flexible service to customers.
Our People
It is important to the success of our strategy that we have a highly skilled
and diverse workforce. The right skills to buy land, plan our developments,
build quality homes and provide good service to our customers are essential.
Our merit-based culture is an important part of the Group's growth and
success as it supports the wellbeing and career aspirations of our workforce
and rewards them for the Group's success.
A major challenge for the Group remains ensuring we have a steady and stable
supply of skilled labour to support the delivery of our new homes. The tight
labour market for housebuilding skills is experienced across the industry.
We continue to invest in systems and processes to build the skills base of
the business.
Our workforce has continued to grow to support the expansion in the number of
homes we build. The Group employed 4,713 employees at 31 December 2017
(2016: 4,483). Our strengthened selection, engagement, induction and
training processes provide opportunities for all our staff to fulfil their
responsibilities to the best of their ability. Persimmon has a long
established tradition of promoting from within the business wherever possible
and our growth has provided opportunities for a number of our staff to take on
greater responsibilities and develop their career with us.
We are continuing our commitment to graduate, trainee and apprentice
recruitment which has been augmented this year by recruitment of diploma
students from colleges, some of whom joined us as part of our commitment to
the Home Building Skills Partnership (see below), enabling us to maintain our
supply of new skilled talent onto our sites. We have also engaged a number
of Apprentice Masters in many of our operating businesses to provide on-site
guidance and training to our new recruits to enable them to make a smooth
transition from college to the working environment. The Group currently
employs c. 580 trainees and apprentices. Combat to Construction, our
initiative to utilise the skills and knowledge of former members of the UK's
armed forces continues to develop. We currently have 127 employees on the
Combat to Construction programme, of which 73 have successfully completed
their training. The quality of the Combat to Construction programme and the
career opportunities we are able to offer continue to be recognised by the
Ministry of Defence and in 2017 we were re-awarded with the ERS Silver Award.
The Group is committed to playing a full and active role in the Home Building
Skills Partnership, a joint initiative between the Construction Industry
Training Board (CITB) and the Home Builders Federation which aims to train
over 40,000 new tradespeople by 2019 to help address the skills shortage that
presents such a key challenge to expanding output by the industry. In 2017
we became a signatory to the Home Building Skills Pledge, which contains
specific commitments relating to industry collaboration, training standards,
diversity and inclusion and promoting careers in the sector.
We believe that all employees and subcontractors can perform to their full
potential with the right support and training. We have maintained our
training commitment for our workforce across all disciplines in our business,
including IT, health and safety and sales. We provided over 10,600 training
days (excluding apprenticeships) to employees and our construction workforce
in 2017 (2016: c. 10,500) an average of 2.3 days per employee (2016: 2.3).
We consider that a diverse work force will support the delivery of the Group's
strategy. As at 31 December 2017 we employed 4,713 people, 25% of which
were female (2016: 4,483, of which 25% were female). We had two female and
six male directors on the Company's Board and 19 female colleagues in our 144
strong senior management team. In 2017 the Group was reaccredited by
Innovatec AS at the Silver Level for our approach to equality, diversity and
inclusion in Employment and Customer Service.
We demand the appropriate levels of conduct from all of our stakeholders,
including our employees in all of our operations. We value once appointments at weekends and "out of hours"
opening of customer care departments.
As customers often reserve their new home many months before it is completed,
one particular area of importance is having an accurate move-in date. We have
continued to improve our communications to customers on the expected
completion date of their property, in order that they are better able to plan
for their move.
Our customer care initiatives have resulted in continued improvement in our
rating scores in the HBF National New Homes Customer Satisfaction Survey. Our
score in relation to the question 'Would you recommend Persimmon to a friend?'
has increased to 79.1% for 2017 (2016: 74.6%). This is just below the 80%
required for the HBF to rate us a four star builder. We will continue to
focus on improving our customer care during 2018. Customer care performance
conditions will continue to be included in performance related pay for
relevant employees aligning their interests with this focus on customer care.
During 2018 we will remain focused on continuing to deliver tangible
improvements in our customer satisfaction ratings in particular by focusing on
site staff induction training to cover all customer care processes and
continuing to offer a more flexible service to customers.
Our People
It is important to the success of our strategy that we have a highly skilled
and diverse workforce. The right skills to buy land, plan our developments,
build quality homes and provide good service to our customers are essential.
Our merit-based culture is an important part of the Group's growth and success
as it supports the wellbeing and career aspirations of our workforce and
rewards them for the Group's success.
A major challenge for the Group remains ensuring we have a steady and stable
supply of skilled labour to support the delivery of our new homes. The tight
labour market for housebuilding skills is experienced across the industry. We
continue to invest in systems and processes to build the skills base of the
business.
Our workforce has continued to grow to support the expansion in the number of
homes we build. The Group employed 4,713 employees at 31 December 2017 (2016:
4,483). Our strengthened selection, engagement, induction and training
processes provide opportunities for all our staff to fulfil their
responsibilities to the best of their ability. Persimmon has a long
established tradition of promoting from within the business wherever possible
and our growth has provided opportunities for a number of our staff to take on
greater responsibilities and develop their career with us.
We are continuing our commitment to graduate, trainee and apprentice
recruitment which has been augmented this year by recruitment of diploma
students from colleges, some of whom joined us as part of our commitment to
the Home Building Skills Partnership (see below), enabling us to maintain our
supply of new skilled talent onto our sites. We have also engaged a number of
Apprentice Masters in many of our operating businesses to provide on-site
guidance and training to our new recruits to enable them to make a smooth
transition from college to the working environment. The Group currently
employs c. 580 trainees and apprentices. Combat to Construction, our
initiative to utilise the skills and knowledge of former members of the UK's
armed forces continues to develop. We currently have 127 employees on the
Combat to Construction programme, of which 73 have successfully completed
their training. The quality of the Combat to Construction programme and the
career opportunities we are able to offer continue to be recognised by the
Ministry of Defence and in 2017 we were re-awarded with the ERS Silver Award.
The Group is committed to playing a full and active role in the Home Building
Skills Partnership, a joint initiative between the Construction Industry
Training Board (CITB) and the Home Builders Federation which aims to train
over 40,000 new tradespeople by 2019 to help address the skills shortage that
presents such a key challenge to expanding output by the industry. In 2017 we
became a signatory to the Home Building Skills Pledge, which contains specific
commitments relating to industry collaboration, training standards, diversity
and inclusion and promoting careers in the sector.
We believe that all employees and subcontractors can perform to their full
potential with the right support and training. We have maintained our
training commitment for our workforce across all disciplines in our business,
including IT, health and safety and sales. We provided over 10,600 training
days (excluding apprenticeships) to employees and our construction workforce
in 2017 (2016: c. 10,500) an average of 2.3 days per employee (2016: 2.3).
We consider that a diverse work force will support the delivery of the Group's
strategy. As at 31 December 2017 we employed 4,713 people, 25% of which were
female (2016: 4,483, of which 25% were female). We had two female and six
male directors on the Company's Board and 19 female colleagues in our 144
strong senior management team. In 2017 the Group was reaccredited by
Innovatec AS at the Silver Level for our approach to equality, diversity and
inclusion in Employment and Customer Service.
We demand the appropriate levels of conduct from all of our stakeholders,
including our employees in all of our operations. We value our reputation for
ethical behaviour, integrity and reliability. We have Human Rights and Anti
Bribery policies, a code of Ethics and a Modern Slavery Statement, which are
all available on our website at www.persimmonhomes.com/corporate.
As we are a UK housebuilder and the vast majority of our sub-contractors and
suppliers are also UK based, we do not consider that human rights abuses and
modern slavery represent a significant risk to our business. However, we have
appropriate procedures in place to provide assurance that our employees and
suppliers are working to the high standards we demand. During 2017 we
reviewed our Modern Slavery Risk Assessment and considered that further
interrogation of our supply chain was appropriate. We are conducting a
supplier due diligence survey to further improve awareness within our supply
partners.
We have identified the most significant potential human rights impact areas to
be; the labour and employment rights of our employees, subcontractors and
those working within our supply chain; the health and safety of our workforce
and the rights of communities where we undertake our developments. As a
responsible employer, we are committed to compliance with all UK labour,
health and safety, planning and environmental legislation.
Staff are given details of the Group's Anti-Bribery policy and management
reinforce the adherence to our policies and procedures. In addition we have
whistleblowing facilities to ensure employees and others can raise concerns
confidentially.
Our Wellbeing
The wellbeing, including health and safety of our employees, supply chain
workforce, and others, including customers who are affected by our work
activities is a top operational priority for the Group.
The Board ensures that the investment in Group Health and Safety resources,
devoted to ensuring our development sites and offices remain safe and healthy
environments, is appropriate to support Operational Management at Group,
Regional and Operating Business level. The Health and Safety team under the
direction of our Group Health and Safety Director has considerable experience
in providing both a pro-active advisory and reactive incident led approach to
identify and mitigate health and safety risk.
Pre-start and ongoing planning of construction activities as our sites
progress is undertaken by our management as they strive to achieve and
maintain high levels of health and safety performance. This includes
confirming the competency levels of individuals through the Construction
Skills Certification Scheme and organisations via the Safety Schemes in
Procurement.
The Group Health and Safety Policy provides additional guidance for our
management teams and in 2017 a particular focus was on improving the sharing
of best practice across the Group with the aim of ensuring the requirements of
this guidance are uniformly applied across our sites at each stage of the
construction process. This was achieved by the delivery of both Senior
Management briefings and "Effective Leadership and Management" Training for
Operating Business Project Managers to enhance their skills to plan, manage,
monitor and review health and safety issues.
In addition, the presentation of site inspection findings was enhanced during
2017 to enable our Operational Management to better interrogate specific
health and safety KPI performance criteria and improve monitoring and review
of health and safety issues.
During 2017 we reported 49 construction work related incidents in our
housebuilding operations to the Health and Safety Executive under the
Reporting of Incidents Diseases and Dangerous Occurrences Regulations
(RIDDOR). This was 2 more than the previous year (2016: 47) however due to
the increase in production we improved the level of build per RIDDOR,
completing 330 legal completions per RIDDOR (2016: 327). The RIDDORs per
thousand workers remained similar to last year at 3.62 accidents per thousand
workers (2016: 3.59).
Our Environment
We are committed to managing the direct and indirect impacts that our
operations and new homes have on the environment. We identify all major
environmental risks that we face in both the short and long term and our
development processes include appropriate management actions that will
mitigate these risks. Addressing these issues at the start of our development
plans ensures our environmental performance remains robust and helps the Group
secure more sustainable business processes. Further information can be found
in our policies, including our Environment Policy, Waste and Resource
Management Policy and Climate Change Position Statement which are available on
our corporate website at www.persimmonhomes.com/corporate.
We monitor our own operational efficiency and direct environmental impact in a
number of ways including measuring our greenhouse gas emissions (CO2e) and the
amount of waste that we generate and recycle for each home we build. Last
year we set ourselves a target to reduce the intensity of our carbon emissions
by 10% from 2016 to 2025. The target excludes our brick manufacturing plant
as it was not operational in 2016. We have collated data captured across the
Group and from our suppliers to identify the amount of energy used in our own
operations in 2017. We have then used DEFRA environmental reporting
guidelines and emission factors from DEFRA's Greenhouse Gas Conversion Factors
Repository as a methodology for calculating our emissions. A summary is set
out in the table below:
Greenhouse Gas Emissions (tonnes CO2e) 2017 2016
Scope1 emissions from gas, transport and construction site fuel use 26,870 28,047
Scope 2 emissions from electricity use 3,960 4,552
Total greenhouse gas emissions 30,830 32,599
Greenhouse gas emissions per home sold 1.92 2.15
The amount of CO2e per home sold in 2017 represents a c.10% decrease on the
prior year and we have therefore already achieved our carbon reduction target.
There are a number of factors which have contributed to this result including
a c.13% reduction in the purchase of diesel by the company, in part due to a
reduction in the number of employees electing to use a company fuel card. In
addition, there has been a c.1% decrease in red diesel consumption on site
which has been achieved through the use of more efficient and appropriately
sized plant. These reductions, together with a 15% reduction in the emissions
conversion factor for grid electricity have reduced the intensity of our
emissions.
We will continue to monitor our energy use with the aim of pursing actions to
reduce our energy costs and minimise consumption where possible. Given that
our carbon reduction target has been achieved far quicker than we originally
anticipated and partly through measures which are beyond our control we have
reset our target to reduce the intensity of our carbon emissions by 10% from
2017 to 2026, on a like for like basis.
In 2017, we again participated in the CDP, formerly the Carbon Disclosure
Project, climate survey and our rating improved to C (Awareness) from D
(Disclosure) in 2016. This survey requests information on climate risks and
low carbon opportunities from the world's largest companies. By sharing
information in this way we aim to demonstrate the importance we attach to the
challenges posed by climate change and how we are addressing these issues,
both at a strategic and operational level.
During 2017 the percentage of waste we recycled remained broadly similar to
2016 at 92% (2016: 93%) thereby minimising the amount of waste sent to
landfill despite the amount of waste per home built increasing to 7.25 tonnes
(2016: 6.6 tonnes). We are investigating the key reasons for the rise in
waste per home built with a view to identify further opportunities for
reduction.
The most important indirect environmental impact of our development activities
is the ongoing effect of our new homes. Our focus is to build new homes to
high sustainability standards harnessing the benefits of good design, and
improvements in materials and building techniques to deliver new homes with
high sustainable qualities. We are particularly pleased that our new
brickworks at Harworth near Doncaster has started to supply concrete bricks to
the Group's operating businesses, underpinning our ability to increase
housebuilding volumes. The plant is one of the most advanced in the UK with
the potential to produce around 80m bricks each year, which is around two
thirds of our current requirement. The manufacture of concrete bricks uses
significantly less energy than the firing process of manufacturing clay brick,
producing c.100 kg less CO2e per tonne of bricks. Concrete bricks are also an
absorber of CO2e due to the re-carbonisation properties of concrete. This
further reduces the net CO2e emissions of the concrete brick over the course
of its life.
The direct and indirect environmental benefits of Space4's timber frame build
system are considerable. The highly insulated wall panels and roof cassettes
have strong sustainability credentials which produce benefits for our
customers including enhanced air tightness and acoustic performance and
reduced energy costs. Using Space4's modern method of construction supports
the delivery of an average energy efficiency for the Group's new homes as
measured by the Standard Assessment Procedure ('SAP') of 83, which is around
40% more energy efficient than existing housing stock which has an average SAP
rating of around 60.
In addition to the benefits for our customers there are additional benefits
for the Group. The frame build system helps to achieve a more consistent
build quality and a more streamlined construction process. This enables
Space4 houses to be built over a reduced timeline compared to traditional
brick and block houses and allows the Group's bricklaying resource to be more
efficiently utilised. The process is also less susceptible to delays caused
by adverse weather conditions and uses less heavy machinery helping us to
reduce our greenhouse gas emissions.
Our Communities
We believe that close collaboration with planning authorities and engagement
with local communities is intrinsic to the delivery of much needed new housing
and the creation of successful and sustainable developments. By understanding
local needs we can refine our plans and ensure the right mix of properties is
constructed.
Our land replacement processes focus on acquiring new land in attractive
locations where demand for homes is high. These sites give customers access
to a full range of services and variety of house types aligned to local need.
The Group's developments are designed to promote social inclusion,
incorporating housing for families with a broad span of incomes. In 2017 we
provided 2,769 homes, or £321m of housing, to housing associations and a
further 236 homes or £27m of housing to private customers using Discounted
Market Sales Housing. Discounted Market Sales Housing is sold at a discount
of around 20-30% below the local market value. The discount stays with the
property in perpetuity and these homes can only be purchased by customers who
meet eligibility criteria established by local councils. We provided 3,005
homes, or £348m of affordable housing, for lower income families (2016: 2,448
houses or £262m).
Through the drive for excellence in planning and delivering our development
plans we have the opportunity to create places where our customers want to
live and work. We seek to engage the local community actively in the
development and planning process, from consultation and feedback through the
planning journey with continued communication of the development's progress.
We understand that the process of development and the consequences of
investment decisions have a lasting effect upon local communities. The
delivery of new homes comes with thur reputation
for ethical behaviour, integrity and reliability. We have Human Rights and
Anti Bribery policies, a code of Ethics and a Modern Slavery Statement, which
are all available on our website at www.persimmonhomes.com/corporate
(http://www.corporate.persimmonhomes.com) .
As we are a UK housebuilder and the vast majority of our sub-contractors and
suppliers are also UK based, we do not consider that human rights abuses and
modern slavery represent a significant risk to our business. However, we
have appropriate procedures in place to provide assurance that our employees
and suppliers are working to the high standards we demand. During 2017 we
reviewed our Modern Slavery Risk Assessment and considered that further
interrogation of our supply chain was appropriate. We are conducting a
supplier due diligence survey to further improve awareness within our supply
partners.
We have identified the most significant potential human rights impact areas to
be; the labour and employment rights of our employees, subcontractors and
those working within our supply chain; the health and safety of our workforce
and the rights of communities where we undertake our developments. As a
responsible employer, we are committed to compliance with all UK labour,
health and safety, planning and environmental legislation.
Staff are given details of the Group's Anti-Bribery policy and management
reinforce the adherence to our policies and procedures. In addition we have
whistleblowing facilities to ensure employees and others can raise concerns
confidentially.
Our Wellbeing
The wellbeing, including health and safety of our employees, supply chain
workforce, and others, including customers who are affected by our work
activities is a top operational priority for the Group.
The Board ensures that the investment in Group Health and Safety resources,
devoted to ensuring our development sites and offices remain safe and healthy
environments, is appropriate to support Operational Management at Group,
Regional and Operating Business level. The Health and Safety team under the
direction of our Group Health and Safety Director has considerable experience
in providing both a pro-active advisory and reactive incident led approach to
identify and mitigate health and safety risk.
Pre-start and ongoing planning of construction activities as our sites
progress is undertaken by our management as they strive to achieve and
maintain high levels of health and safety performance. This includes
confirming the competency levels of individuals through the Construction
Skills Certification Scheme and organisations via the Safety Schemes in
Procurement.
The Group Health and Safety Policy provides additional guidance for our
management teams and in 2017 a particular focus was on improving the sharing
of best practice across the Group with the aim of ensuring the requirements of
this guidance are uniformly applied across our sites at each stage of the
construction process. This was achieved by the delivery of both Senior
Management briefings and "Effective Leadership and Management" Training for
Operating Business Project Managers to enhance their skills to plan, manage,
monitor and review health and safety issues.
In addition, the presentation of site inspection findings was enhanced during
2017 to enable our Operational Management to better interrogate specific
health and safety KPI performance criteria and improve monitoring and review
of health and safety issues.
During 2017 we reported 49 construction work related incidents in our
housebuilding operations to the Health and Safety Executive under the
Reporting of Incidents Diseases and Dangerous Occurrences Regulations
(RIDDOR). This was 2 more than the previous year (2016: 47) however due to
the increase in production we improved the level of build per RIDDOR,
completing 330 legal completions per RIDDOR (2016: 327). The RIDDORs per
thousand workers remained similar to last year at 3.62 accidents per thousand
workers (2016: 3.59).
Our Environment
We are committed to managing the direct and indirect impacts that our
operations and new homes have on the environment. We identify all major
environmental risks that we face in both the short and long term and our
development processes include appropriate management actions that will
mitigate these risks. Addressing these issues at the start of our
development plans ensures our environmental performance remains robust and
helps the Group secure more sustainable business processes. Further
information can be found in our policies, including our Environment Policy,
Waste and Resource Management Policy and Climate Change Position Statement
which are available on our corporate website at
www.persimmonhomes.com/corporate (http://www.persimmonhomes.com/corporate) .
We monitor our own operational efficiency and direct environmental impact in a
number of ways including measuring our greenhouse gas emissions (CO(2)e) and
the amount of waste that we generate and recycle for each home we build.
Last year we set ourselves a target to reduce the intensity of our carbon
emissions by 10% from 2016 to 2025. The target excludes our brick
manufacturing plant as it was not operational in 2016. We have collated data
captured across the Group and from our suppliers to identify the amount of
energy used in our own operations in 2017. We have then used DEFRA
environmental reporting guidelines and emission factors from DEFRA's
Greenhouse Gas Conversion Factors Repository as a methodology for calculating
our emissions. A summary is set out in the table below:
Greenhouse Gas Emissions (tonnes CO(2)e) 2017 2016
Scope1 emissions from gas, transport and construction site fuel use 26,870 28,047
Scope 2 emissions from electricity use 3,960 4,552
Total greenhouse gas emissions 30,830 32,599
Greenhouse gas emissions per home sold 1.92 2.15
The amount of CO(2)e per home sold in 2017 represents a c.10% decrease on the
prior year and we have therefore already achieved our carbon reduction
target. There are a number of factors which have contributed to this result
including a c.13% reduction in the purchase of diesel by the company, in part
due to a reduction in the number of employees electing to use a company fuel
card. In addition, there has been a c.1% decrease in red diesel consumption
on site which has been achieved through the use of more efficient and
appropriately sized plant. These reductions, together with a 15% reduction
in the emissions conversion factor for grid electricity have reduced the
intensity of our emissions.
We will continue to monitor our energy use with the aim of pursing actions to
reduce our energy costs and minimise consumption where possible. Given that
our carbon reduction target has been achieved far quicker than we originally
anticipated and partly through measures which are beyond our control we have
reset our target to reduce the intensity of our carbon emissions by 10% from
2017 to 2026, on a like for like basis.
In 2017, we again participated in the CDP, formerly the Carbon Disclosure
Project, climate survey and our rating improved to C (Awareness) from D
(Disclosure) in 2016. This survey requests information on climate risks and
low carbon opportunities from the world's largest companies. By sharing
information in this way we aim to demonstrate the importance we attach to the
challenges posed by climate change and how we are addressing these issues,
both at a strategic and operational level.
During 2017 the percentage of waste we recycled remained broadly similar to
2016 at 92% (2016: 93%) thereby minimising the amount of waste sent to
landfill despite the amount of waste per home built increasing to 7.25 tonnes
(2016: 6.6 tonnes). We are investigating the key reasons for the rise in
waste per home built with a view to identify further opportunities for
reduction.
The most important indirect environmental impact of our development activities
is the ongoing effect of our new homes. Our focus is to build new homes to
high sustainability standards harnessing the benefits of good design, and
improvements in materials and building techniques to deliver new homes with
high sustainable qualities. We are particularly pleased that our new
brickworks at Harworth near Doncaster has started to supply concrete bricks to
the Group's operating businesses, underpinning our ability to increase
housebuilding volumes. The plant is one of the most advanced in the UK with
the potential to produce around 80m bricks each year, which is around two
thirds of our current requirement. The manufacture of concrete bricks uses
significantly less energy than the firing process of manufacturing clay brick,
producing c.100 kg less CO(2)e per tonne of bricks. Concrete bricks are also
an absorber of CO(2)e due to the re-carbonisation properties of concrete.
This further reduces the net CO(2)e emissions of the concrete brick over the
course of its life.
The direct and indirect environmental benefits of Space4's timber frame build
system are considerable. The highly insulated wall panels and roof cassettes
have strong sustainability credentials which produce benefits for our
customers including enhanced air tightness and acoustic performance and
reduced energy costs. Using Space4's modern method of construction supports
the delivery of an average energy efficiency for the Group's new homes as
measured by the Standard Assessment Procedure ('SAP') of 83, which is around
40% more energy efficient than existing housing stock which has an average SAP
rating of around 60.
In addition to the benefits for our customers there are additional benefits
for the Group. The frame build system helps to achieve a more consistent
build quality and a more streamlined construction process. This enables
Space4 houses to be built over a reduced timeline compared to traditional
brick and block houses and allows the Group's bricklaying resource to be more
efficiently utilised. The process is also less susceptible to delays caused
by adverse weather conditions and uses less heavy machinery helping us to
reduce our greenhouse gas emissions.
Our Communities
We believe that close collaboration with planning authorities and engagement
with local communities is intrinsic to the delivery of much needed new housing
and the creation of successful and sustainable developments. By
understanding local needs we can refine our plans and ensure the right mix of
properties is constructed.
Our land replacement processes focus on acquiring new land in attractive
locations where demand for homes is high. These sites give customers access
to a full range of services and variety of house types aligned to local
need. The Group's developments are designed to promote social inclusion,
incorporating housing for families with a broad span of incomes. In 2017 we
provided 2,769 homes, or £321m of housing, to housing associations and a
further 236 homes or £27m of housing to private customers using Discounted
Market Sales Housing. Discounted Market Sales Housing is sold at a discount
of around 20-30% below the local market value. The discount stays with the
property in perpetuity and these homes can only be purchased by customers who
meet eligibility criteria established by local councils. We provided 3,005
homes, or £348m of affordable housing, for lower income families (2016: 2,448
houses or £262m).
Through the drive for excellence in planning and delivering our development
plans we have the opportunity to create places where our customers want to
live and work. We seek to engage the local community actively in the
development and planning process, from consultation and feedback through the
planning journey with continued communication of the development's progress.
We understand that the process of development and the consequences of
investment decisions have a lasting effect upon local communities. The
delivery of new homes comes with the responsibility of ensuring that
the impact upon the lives of new and existing residents is understood and
mitigated. Under the planning process, we invest in local communities in
many forms, such as parks and public open space; education provision,
community buildings and roads and other infrastructure, either through direct
construction or through financial contributions to local authorities. During
2017 we contributed over £64m to local communities (2016: £65m) through
planning contributions to local authorities. Of the money contributed over
£20m related to education provision and £8 million related to affordable
housing provision.
We have several thousand suppliers to our business all of which are assessed
on a number of factors such as quality, cost, availability and sustainability
credentials and all of which are expected to sign up to our Supplier
Principles. Where possible we aim to source locally. We directly engage
with our largest suppliers in order to collaborate for mutual benefit.
Through our engagement we work with suppliers, particularly those with whom we
have long term relationships, to develop more sustainable ways of trading, for
example through fewer deliveries and less packaging.
We are pleased to report that the Persimmon Charitable Foundation made
£748,842 of donations in 2017 to local community groups and good causes and
to local sporting organisations. The Foundation continued our Community
Champions initiative, which provides funding for numerous small charities and
voluntary organisations at the heart of the communities we serve. This
initiative is now well into its fourth year and since the beginning of the
campaign we have made donations to c. 2,000 charities and local good causes in
the communities we serve across the UK. Charities apply to the Persimmon
Charitable Foundation (via our website www.persimmonhomes.com/charity) for
funding support up to a value of £1,000 to match their own fundraising
initiatives. Each of our operating businesses has the opportunity of
supporting two applicants every month.
In addition, the Persimmon Charitable Foundation launched its Healthy
Communities campaign in May 2017. Each of our operating businesses made a
monthly donation of £750 to a local sports club or association particularly
aimed at amateur sport for young people aged under 21. In January 2018, each
business nominated three of the clubs who had applied for funding from launch
to be chosen for the list of 30 finalists who will compete to receive a top
prize of £200,000. The winner will be the organisation which receives the
most votes from the general public. Two runners up will receive £50,000
each and the other finalists will receive £5,000 each. The winner will be
announced in March 2018.
The Group made donations of £601,092 to the Persimmon Charitable Foundation
during 2017 and £63,500 to other good causes.
Current trading outlook
We have made an encouraging start to 2018 with good levels of visitors to our
development sites over the first eight weeks of the year with the usual
strengthening in activity being evident. The level of interest on our
Persimmon and Charles Church home-finder websites is strong. The market is
benefiting from higher levels of employment and resilient consumer sentiment
supported by interest rates which remain low. Our private sales reservation
rate per site for the first eight weeks was 7% ahead of last year.
The encouraging start to the year together with the Group's performance
through the 2017 autumn sales season has delivered a 7.5% year on year
increase in current forward sales (including legal completions taken in 2018
to date) to £2.03bn (2017: £1.89bn). Our private sales reservation volumes
in our forward sales are 5.7% ahead of last year.
We believe the Group's offer of attractively designed core house types at
affordable price points on developments that have layouts which provide a full
range of products to all customers with an emphasis on first time buyers and
first time home movers places the Group in a strong position in its local
markets moving forwards.
Whilst conditions in the new build housing market remain supportive, the
negotiations associated with the UK's exit from the EU, including both the
transitional arrangements and the terms of the longer term relationship,
together with the nature of UK's trading relationships with its other global
partners, present key uncertainties that will have a substantial influence on
market outcomes. However, with a long term unfulfilled demand for housing,
we believe that UK fundamentals remain strong. We will continue to focus on
meeting this demand by opening as many new development sites as promptly as
possible and driving our construction programmes forward.
The sustainability of the UK housing market will be achieved in part by the
continued vigilance of the Bank of England in maintaining disciplined lending
practices. The Financial Policy Committee's guidance and direction to
lenders together with the Bank's monetary policy settings and the Government's
fiscal policy measures, will all contribute to influence conditions in the
market. Greater sustainability and stability will provide the industry with
the confidence to continue to invest in skills, land and new home construction
to maintain the expansion in output that the country needs.
During 2018 we will concentrate on retaining flexibility to react to changes
in market conditions with our replacement land activity continuing to target
superior returns. The Group continues to see good quality opportunities in
the land market which will encourage us to invest at appropriate levels to
support our future growth towards optimal sustainable scale in our regional
markets. We are working hard in partnership with the planning authorities to
identify opportunities for our strategic land to form part of their five year
plans for meeting the housing needs in their local communities. The Group's
strong balance sheet provides a great platform to secure the right level of
investment in support of the future growth of the business.
As a result of the hard work and dedication of the whole Persimmon team the
performance of the Group in 2017 has been excellent. The Board is confident
that the Group will thrive by pursuing the current strategy and seeking
continual improvement in operational execution. We are confident that this
team has the skills, drive and vision to deliver the Group's strategic
objectives and we thank all our employees and supply chain partners for their
contribution to the Group's success.
Jeff
Fairburn
Mike Killoran
Group Chief Executive
Group
Finance Director
26 February 2018
* 12 month rolling average and stated before goodwill impairment
** stated before goodwill impairment of £11.0m (2016: £8.0m)
*** Source: ONS
PERSIMMON PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017
2017 2016
Note Total Total
£m £m
Revenue 3,422.3 3,136.8
Cost of sales (2,3e responsibility of ensuring that the
impact upon the lives of new and existing residents is understood and
mitigated. Under the planning process, we invest in local communities in many
forms, such as parks and public open space; education provision, community
buildings and roads and other infrastructure, either through direct
construction or through financial contributions to local authorities. During
2017 we contributed over £64m to local communities (2016: £65m) through
planning contributions to local authorities. Of the money contributed over
£20m related to education provision and £8 million related to affordable
housing provision.
We have several thousand suppliers to our business all of which are assessed
on a number of factors such as quality, cost, availability and sustainability
credentials and all of which are expected to sign up to our Supplier
Principles. Where possible we aim to source locally. We directly engage with
our largest suppliers in order to collaborate for mutual benefit. Through our
engagement we work with suppliers, particularly those with whom we have long
term relationships, to develop more sustainable ways of trading, for example
through fewer deliveries and less packaging.
We are pleased to report that the Persimmon Charitable Foundation made
£748,842 of donations in 2017 to local community groups and good causes and to
local sporting organisations. The Foundation continued our Community
Champions initiative, which provides funding for numerous small charities and
voluntary organisations at the heart of the communities we serve. This
initiative is now well into its fourth year and since the beginning of the
campaign we have made donations to c. 2,000 charities and local good causes in
the communities we serve across the UK. Charities apply to the Persimmon
Charitable Foundation (via our website www.persimmonhomes.com/charity) for
funding support up to a value of £1,000 to match their own fundraising
initiatives. Each of our operating businesses has the opportunity of
supporting two applicants every month.
In addition, the Persimmon Charitable Foundation launched its Healthy
Communities campaign in May 2017. Each of our operating businesses made a
monthly donation of £750 to a local sports club or association particularly
aimed at amateur sport for young people aged under 21. In January 2018, each
business nominated three of the clubs who had applied for funding from launch
to be chosen for the list of 30 finalists who will compete to receive a top
prize of £200,000. The winner will be the organisation which receives the
most votes from the general public. Two runners up will receive £50,000 each
and the other finalists will receive £5,000 each. The winner will be
announced in March 2018.
The Group made donations of £601,092 to the Persimmon Charitable Foundation
during 2017 and £63,500 to other good causes.
Current trading outlook
We have made an encouraging start to 2018 with good levels of visitors to our
development sites over the first eight weeks of the year with the usual
strengthening in activity being evident. The level of interest on our
Persimmon and Charles Church home-finder websites is strong. The market is
benefiting from higher levels of employment and resilient consumer sentiment
supported by interest rates which remain low. Our private sales reservation
rate per site for the first eight weeks was 7% ahead of last year.
The encouraging start to the year together with the Group's performance
through the 2017 autumn sales season has delivered a 7.5% year on year
increase in current forward sales (including legal completions taken in 2018
to date) to £2.03bn (2017: £1.89bn). Our private sales reservation volumes in
our forward sales are 5.7% ahead of last year.
We believe the Group's offer of attractively designed core house types at
affordable price points on developments that have layouts which provide a full
range of products to all customers with an emphasis on first time buyers and
first time home movers places the Group in a strong position in its local
markets moving forwards.
Whilst conditions in the new build housing market remain supportive, the
negotiations associated with the UK's exit from the EU, including both the
transitional arrangements and the terms of the longer term relationship,
together with the nature of UK's trading relationships with its other global
partners, present key uncertainties that will have a substantial influence on
market outcomes. However, with a long term unfulfilled demand for housing, we
believe that UK fundamentals remain strong. We will continue to focus on
meeting this demand by opening as many new development sites as promptly as
possible and driving our construction programmes forward.
The sustainability of the UK housing market will be achieved in part by the
continued vigilance of the Bank of England in maintaining disciplined lending
practices. The Financial Policy Committee's guidance and direction to lenders
together with the Bank's monetary policy settings and the Government's fiscal
policy measures, will all contribute to influence conditions in the market.
Greater sustainability and stability will provide the industry with the
confidence to continue to invest in skills, land and new home construction to
maintain the expansion in output that the country needs.
During 2018 we will concentrate on retaining flexibility to react to changes
in market conditions with our replacement land activity continuing to target
superior returns. The Group continues to see good quality opportunities in
the land market which will encourage us to invest at appropriate levels to
support our future growth towards optimal sustainable scale in our regional
markets. We are working hard in partnership with the planning authorities to
identify opportunities for our strategic land to form part of their five year
plans for meeting the housing needs in their local communities. The Group's
strong balance sheet provides a great platform to secure the right level of
investment in support of the future growth of the business.
As a result of the hard work and dedication of the whole Persimmon team the
performance of the Group in 2017 has been excellent. The Board is confident
that the Group will thrive by pursuing the current strategy and seeking
continual improvement in operational execution. We are confident that this
team has the skills, drive and vision to deliver the Group's strategic
objectives and we thank all our employees and supply chain partners for their
contribution to the Group's success.
Jeff Fairburn Mike Killoran
Group Chief Executive Group Finance Director
26 February 2018
* 12 month rolling average and stated before goodwill impairment
** stated before goodwill impairment of £11.0m (2016: £8.0m)
*** Source: ONS
PERSIMMON PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017
2017 2016
Note Total Total
£m £m
Revenue 3,422.3 3,136.8
Cost of sales (2,350.6) (2,265.4)
Gross profit 1,071.7 871.4
Other operating income 9.4 6.8
Operating expenses (126.0) (107.7)
Profit from operations before impairment of intangible assets 966.1 778.5
Impairment of intangible assets (11.0) (8.0)
Profit from operations 955.1 770.5
Finance income 24.5 19.8
Finance costs (13.5) (15.5)
Profit before tax 966.1 774.8
Tax 2 (179.2) (149.5)
Profit after tax (all attributable to equity holders of the parent) 786.9 625.3
Other comprehensive income/(expense)
Items that will not be reclassified to profit:
Remeasurement gains/(losses) on defined benefit pension schemes 8 22.1 (23.4)
Tax 2 (3.7) 4.4
Other comprehensive income/(expense) for the year, net of tax 18.4 (19.0)
Total recognised income for the year 805.3 606.3
Earnings per share
Basic 4 255.0p 203.0p
Diluted 4 243.1p 197.0p
PERSIMMON PLC
Consolidated Balance Sheet
As at 31 December 2017
2017 2016
Note £m £m
Assets
Non-current assets
Intangible assets 202.6 213.6
Property, plant and equipment 52.5 43.0
Investments accounted for using the equity method 3.0 3.0
Available for sale financial assets 117.3 148.7
Trade and other receivables 7.0 8.8
Deferred tax assets 92.0 42.5
Retirement benefit assets 8 67.7 23.3
542.1 482.9
Current assets
Inventories 5 2,825.9 2,645.0
Trade and other receivables 86.1 103.7
Cash and cash equivalents 7 1,302.7 913.0
4,214.7 3,661.7
Total assets 4,756.8 4,144.6
Liabilities
Non-current liabilities
Trade and other payables (294.1) (333.3)
Deferred tax liabilities (24.0) (17.7)
Partnership liability (38.5) (41.7)
(356.6) (392.7)
Current liabilities
Trade and other payables (1,099.6) (935.0)
Partnership liability (5.4) (5.4)
Current tax liabilities (93.6) (74.1)
(1,198.6) (1,014.5)
Total liabilities (1,555.2) (1,407.2)
Net assets 3,201.6 2,737.4
Equity
Ordinary share capital issued 30.9 30.8
Share premium 13.5 10.6
Capital redemption reserve 236.5 236.5
Other non-distributable reserve 276.8 276.8
Retained earnings 2,643.9 2,182.7
Total equity 3,201.6 2,737.4
PERSIMMON PLC
Consolidated Statement of Changes in Shareholders' Equity
For the year ended 31 December 2017
Share capital Share premium Capital redemption reserve Other non-distributable reserve Retained earnings Total
£m £m £m £m £m £m
Balance at 1 January 2016 30.7 9.3 236.5 276.8 1,902.5 2,455.8
Profit for the year - - - - 625.3 625.3
Other comprehensive income - - - - (19.0) (19.0)
Transactions with owners:
Dividend on equity shares - - - - (338.3) (338.3)
Issue of new shares 0.1 1.3 - - (0.1) 1.3
Own shares purchased - - - - (1.0) (1.0)
Exercise of share options/share awards - - - - (1.0) (1.0)
Share-based payments - - - - 13.3 13.3
Satisfaction of share options from own shares held - - - - 1.0 1.0
Balance at 31 December 2016 30.8 10.6 236.5 276.8 2,182.7 2,737.4
Profit for the year - - - - 786.9 786.9
Other comprehensive income - - - - 18.4 18.4
Transactions with owners:
Dividend on equity shares - - - - (416.6) (416.6)
Issue of new shares 0.1 2.9 - - - 3.0
Exercise of share options/share awards - - - - (0.9) (0.9)
Share-based payments - - - - 72.5 72.5
Satisfaction of share options from own shares held - - - - 0.9 0.9
Balance at 31 December 2017 30.9 13.5 236.5 276.8 2,643.9 3,201.6
The other non-distributable reserve arose prior to transition to IFRSs and
relates to the issue of ordinary shares to acquire the shares of Beazer Group
Plc in 2001.
PERSIMMON PLC
Consolidated Cash Flow Statement
For the year ended 31 December 2017
2017 2016
Note £m £m
Cash flows from operating activities:
Profit for the year 786.9 625.3
Tax charge 2 179.2 149.5
Finance income (24.5) (19.8)
Finance costs 13.5 15.5
Depreciation charge 8.4 8.0
Impairment of intangible assets 11.0 8.0
Share-based payment charge 18.8 14.0
Net imputed interest income 5.0 3.9
Other non-cash items (1.5) (3.9)
Cash inflow from operating activities 996.8 800.5
Movement in working capital:
(Increase)/decrease in inventories (176.6) 7.8
Increase in trade and other receivables (20.5) (18.3)
Increase in trade and other payables 131.1 11.1
Decrease in available for sale financial assets 46.6 44.6
Cash generated from operations 977.4 845.7
Interest paid (3.9) (4.0)
Interest received 3.4 3.1
Tax paid (152.9) (146.6)
Net cash inflow from operating activities 824.0 698.2
Cash flows from investing activities:
Purchase of property, plant and equipment (18.0) (14.7)
Proceeds from sale of property, plant and equipment 0.3 0.8
Net cash outflow from investing activities (17.7) (13.9)
Cash flows from financing activities:
Financing transaction costs - (0.9)
Payment of Partnership liability (3.0) (2.8)
Own shares purchased - (1.0)
Share options consideration 3.0 1.3
Dividends paid 3 (416.6) (338.3)
Net cash outflow from financing activities (416.6) (341.7)
Increase in net cash and cash equivalents 7 389.7 342.6
Cash and cash equivalents at the beginning of the year 913.0 570.4
Cash and cash equivalents at the end of the year 7 1,302.7 913.0
Notes
1. Basis of preparation
The results for the year have been prepared on a basis consistent with the
accounting policies set out in the Persimmon Plc Annual Report for the year
ended 31 December 2017.
The preparation of the financial statements in conformity with the Group's
accounting policies requires the Directors to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the balance sheet date and the reported
amounts of revenue and expenses during the reported period. Whilst these
estimates and assumptions are based on the Directors' best knowledge of the
amount, events or actions, actual results may differ from those estimates.
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 December 2017 or 2016, but is
derived from those accounts. Statutory accounts for 2016 have been delivered
to the Registrar of Companies, and those for 2017 will be delivered in due
course. The auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain statements under Section 498(2) or (3) of the Companies
Act 2006.
Whilst the financial information included in this announcement has been
computed in accordance with IFRS as adopted by the European Union, this
announcement does not itself contain sufficient information to comply with
IFRS. The Company expects to send its Annual Report 2017 to shareholders on
19 March 2018.
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Strategic
Report in the Annual Report and the financial statements and notes. The
Directors believe that the Group is well placed to manage its business risks
successfully. The principal risks that may impact the Group's performance and
their mitigation are outlined in note 10. After making enquiries, the
Directors have a reasonable expectation that the Group has adequate resources
to fund its operations for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the annual financial
statements.
Adoption of new and revised International Financial Reporting Standards
(IFRSs) and Interpretations (IFRICs)
The following amendments to standards are mandatory for the
- More to follow, for following part double click ID:nRSa9833Fc 50.6) (2,265.4)
Gross profit 1,071.7 871.4
Other operating income 9.4 6.8
Operating expenses (126.0) (107.7)
Profit from operations before impairment of intangible assets 966.1 778.5
Impairment of intangible assets (11.0) (8.0)
Profit from operations 955.1 770.5
Finance income 24.5 19.8
Finance costs (13.5) (15.5)
Profit before tax 966.1 774.8
Tax 2 (179.2) (149.5)
Profit after tax (all attributable to equity holders of the parent) 786.9 625.3
Other comprehensive income/(expense)
Items that will not be reclassified to profit:
Remeasurement gains/(losses) on defined benefit pension schemes 8 22.1 (23.4)
Tax 2 (3.7) 4.4
Other comprehensive income/(expense) for the year, net of tax 18.4 (19.0)
Total recognised income for the year 805.3 606.3
Earnings per share
Basic 4 255.0p 203.0p
Diluted 4 243.1p 197.0p
PERSIMMON PLC
Consolidated Balance Sheet
As at 31 December 2017
2017 2016
Note £m £m
Assets
Non-current assets
Intangible assets 202.6 213.6
Property, plant and equipment 52.5 43.0
Investments accounted for using the equity method 3.0 3.0
Available for sale financial assets 117.3 148.7
Trade and other receivables 7.0 8.8
Deferred tax assets 92.0 42.5
Retirement benefit assets 8 67.7 23.3
542.1 482.9
Current assets
Inventories 5 2,825.9 2,645.0
Trade and other receivables 86.1 103.7
Cash and cash equivalents 7 1,302.7 913.0
4,214.7 3,661.7
Total assets 4,756.8 4,144.6
Liabilities
Non-current liabilities
Trade and other payables (294.1) (333.3)
Deferred tax liabilities (24.0) (17.7)
Partnership liability (38.5) (41.7)
(356.6) (392.7)
Current liabilities
Trade and other payables (1,099.6) (935.0)
Partnership liability (5.4) (5.4)
Current tax liabilities (93.6) (74.1)
(1,198.6) (1,014.5)
Total liabilities (1,555.2) (1,407.2)
Net assets 3,201.6 2,737.4
Equity
Ordinary share capital issued 30.9 30.8
Share premium 13.5 10.6
Capital redemption reserve 236.5 236.5
Other non-distributable reserve 276.8 276.8
Retained earnings 2,643.9 2,182.7
Total equity 3,201.6 2,737.4
PERSIMMON PLC
Consolidated Statement of Changes in Shareholders' Equity
For the year ended 31 December 2017
Share capital Share premium Capital redemption reserve Other non-distributable reserve Retained earnings Total
£m £m £m £m £m £m
Balance at 1 January 2016 30.7 9.3 236.5 276.8 1,902.5 2,455.8
Profit for the year - - - - 625.3 625.3
Other comprehensive income - - - - (19.0) (19.0)
Transactions with owners:
Dividend on equity shares - - - - (338.3) (338.3)
Issue of new shares 0.1 1.3 - - (0.1) 1.3
Own shares purchased - - - - (1.0) (1.0)
Exercise of share options/share awards - - - - (1.0) (1.0)
Share-based payments - - - - 13.3 13.3
Satisfaction of share options from own shares held - - - - 1.0 1.0
Balance at 31 December 2016 30.8 10.6 236.5 276.8 2,182.7 2,737.4
Profit for the year - - - - 786.9 786.9
Other comprehensive income - - - - 18.4 18.4
Transactions with owners:
Dividend on equity shares - - - - (416.6) (416.6)
Issue of new shares 0.1 2.9 - - - 3.0
Exercise of share options/share awards - - - - (0.9) (0.9)
Share-based payments - - - - 72.5 72.5
Satisfaction of share options from own shares held - - - - 0.9 0.9
Balance at 31 December 2017 30.9 13.5 236.5 276.8 2,643.9 3,201.6
The other non-distributable reserve arose prior to transition to IFRSs and
relates to the issue of ordinary shares to acquire the shares of Beazer Group
Plc in 2001.
PERSIMMON PLC
Consolidated Cash Flow Statement
For the year ended 31 December 2017
2017 2016
Note £m £m
Cash flows from operating activities:
Profit for the year 786.9 625.3
Tax charge 2 179.2 149.5
Finance income (24.5) (19.8)
Finance costs 13.5 15.5
Depreciation charge 8.4 8.0
Impairment of intangible assets 11.0 8.0
Share-based payment charge 18.8 14.0
Net imputed interest income 5.0 3.9
Other non-cash items (1.5) (3.9)
Cash inflow from operating activities 996.8 800.5
Movement in working capital:
(Increase)/decrease in inventories (176.6) 7.8
Increase in trade and other receivables (20.5) (18.3)
Increase in trade and other payables 131.1 11.1
Decrease in available for sale financial assets 46.6 44.6
Cash generated from operations 977.4 845.7
Interest paid (3.9) (4.0)
Interest received 3.4 3.1
Tax paid (152.9) (146.6)
Net cash inflow from operating activities 824.0 698.2
Cash flows from investing activities:
Purchase of property, plant and equipment (18.0) (14.7)
Proceeds from sale of property, plant and equipment 0.3 0.8
Net cash outflow from investing activities (17.7) (13.9)
Cash flows from financing activities:
Financing transaction costs - (0.9)
Payment of Partnership liability (3.0) (2.8)
Own shares purchased - (1.0)
Share options consideration 3.0 1.3
Dividends paid 3 (416.6) (338.3)
Net cash outflow from financing activities (416.6) (341.7)
Increase in net cash and cash equivalents 7 389.7 342.6
Cash and cash equivalents at the beginning of the year 913.0 570.4
Cash and cash equivalents at the end of the year 7 1,302.7 913.0
Notes
1. Basis of preparation
The results for the year have been prepared on a basis consistent with the
accounting policies set out in the Persimmon Plc Annual Report for the year
ended 31 December 2017.
The preparation of the financial statements in conformity with the Group's
accounting policies requires the Directors to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the balance sheet date and the reported
amounts of revenue and expenses during the reported period. Whilst these
estimates and assumptions are based on the Directors' best knowledge of the
amount, events or actions, actual results may differ from those estimates.
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 December 2017 or 2016, but is
derived from those accounts. Statutory accounts for 2016 have been delivered
to the Registrar of Companies, and those for 2017 will be delivered in due
course. The auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain statements under Section 498(2) or (3) of the Companies
Act 2006.
Whilst the financial information included in this announcement has been
computed in accordance with IFRS as adopted by the European Union, this
announcement does not itself contain sufficient information to comply with
IFRS. The Company expects to send its Annual Report 2017 to shareholders on
19 March 2018.
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Strategic
Report in the Annual Report and the financial statements and notes. The
Directors believe that the Group is well placed to manage its business risks
successfully. The principal risks that may impact the Group's performance
and their mitigation are outlined in note 10. After making enquiries, the
Directors have a reasonable expectation that the Group has adequate resources
to fund its operations for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the annual financial
statements.
Adoption of new and revised International Financial Reporting Standards
(IFRSs) and Interpretations (IFRICs)
The following amendments to standards are mandatory for the first time for the
financial year beginning 1 January 2017:
· Amendments to IAS 7 Disclosure Initiative
· Amendments to IAS 12 Recognition of Deferred Tax Assets for
Unrealised Losses
· Annual Improvements to IFRSs 2014-2016 Cycle
The effects of the implementation of these standards have been limited to
disclosure amendments.
The Group has not applied the following new standards and amendments to
standards which are EU endorsed but not yet effective:
· IFRS 9 Financial Instruments
· IFRS 15 Revenue from Contracts with Customers
· IFRS 16 Leases
The Group is currently considering the implication of these new standards with
the expected impact upon the Group as follows:
IFRS 15 Revenue from Contracts with Customers will be effective and will be
applied by the Group from 1 January 2018. Currently the Group recognises
revenue at the fair value of the consideration received or receivable on the
legal completion of a residential property. On applying IFRS 15 revenue from
the sale of residential properties will continue to be recognised on a
consistent basis and will also include the fair value of the consideration
received or receivable on the sale of part exchange properties. The revenues
associated with the sale of part exchange properties are currently included as
a reduction in cost of sales as the purchase and sale of part exchange
properties is regarded as a mechanism for selling. Applying IFRS 15 will
result in an increase to both revenue and cost of sales. There will be no
impact on the reported profit from operations but there will be a decrease in
the reported operating margin. There would be no impact on the Group's cash
flows.
Were IFRS 15 applied to the years ended 31 December 2017 and 2016 both revenue
and cost of sales would have been increased by £175.5m and £176.8m
respectively. Reported profit from operations would have remained at
£955.1m for 2017 and £770.5m for 2016. Reported operating margin for 2017
would have decreased to 26.5% from 27.9%, with 2016 decreasing from 24.6% to
23.3%.
IFRS 9 Financial Instruments will be effective for the Group from 1 January
2018 and will replace IAS 39 Financial Instruments: Recognition and
Measurement. The new standard affects the classification, measurement,
impairment and de-recognition of financial instruments. We do not currently
expect the standard to have a material impact on our reported consolidated
results.
IFRS 16 Leases will be effective for the Group from 1 January 2019. The key
effect of this standard will be to require the company to create a long term
depreciating "right of use" asset and corresponding lease liability for leases
currently classified as operating leases and charged over the lease term in
accordance with the current standard IAS 17 Leases. The net effect on
profits in a given year is not anticipated to be significant. The Group
operate a number of such operating leases, principally in relation to office
properties and vehicles.
2. Tax
2017 2016
£m £m
Tax charge comprises:
UK corporation tax in respect of the current year 187.1 153.6
Adjustments in respect of prior years (8.4) (11.3)
178.7 142.3
Deferred tax relating to origination and reversal of temporary differences 1.0 3.0
Adjustments recognised in the current year in respect of prior years deferred (0.5) 4.2
tax
0.5 7.2
179.2 149.5
The tax charge for the year can be reconciled to the accounting profit as
follows:
2017 2016
£m £m
Profit from continuing operations 966.1 774.8
Tax calculated at UK corporation tax rate of 19.25% (2016: 20%) 186.0 155.0
Accounting base cost not deductible for tax purposes - 0.1
Goodwill impairment losses that are not deductible 2.1 1.6
Expenditure not allowable for tax purposes 0.2 0.1
Effect of change in rate of corporation tax (0.1) (0.2)
Adjustments in respect of prior years (9.0) (7.1)
Tax charge for the year recognised in profit 179.2 149.5
The Group's overall effective tax rate of 18.6% has been reduced from the
mainstream rate of 19.25% by a prior year tax credit arising from the removal
of some uncertainties regarding the Group's prior year tax computations.
The applicable corporation tax rate has reduced from 20% in the prior year to
19.25% in line with corporation tax rates effective from 1 April 2017. In
relation to the Group's deferred tax calculations, a further corporation tax
rate change enacted on 15 September 2016 effective from 1 April 2020 (17%) has
been used.
In addition to the amount recognised in profit, deferred tax of £3.7m was
charged directly to other comprehensive income/(expense) (2016: credit of
£4.4m), and a £47.4m credit was recognised in equity (2016: charge of
£0.7m). The Group has recognised deferred tax liabilities of £11.5m (2016:
liabilities of £4.0m) on retirement benefit assets of £67.7m (2016: assets
of £23.3m).
3. Dividends/Return of capital
2017 2016
£m £m
Amounts recognised as distributions to capital holders in the period:
2015 dividend to all shareholders of 110p per share paid 2016 - 338.3
2016 dividend to all shareholders of 25p per share paid 2017 77.1 -
2016 dividend to all shareholders of 110p per share paid 2017 339.5 -
Total capital return 416.6 338.3
The Directors propose to return 125 pence of surplus capital to shareholders
for each ordinary share in issue held at 6.00pm on 9 March 2018 with payment
made on 29 March 2018 as an interim dividend in respect of the financial year
ended 31 December 2017. This is an additional payment of surplus capital
over and above the previously announced Capital Return Plan schedule. In
line with the previously announced schedule, the Directors propose to return a
further 110 pence of surplus capital to shareholders for each ordinary share
in issue held at 6.00pm on 15 June 2018 with payment made on 2 July
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