Persimmon : Half Year Results 2021

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021

Strong trading performance; positive outlook reaffirmed; creating sustainable value

Persimmon Plc today announces its half year results for the six months ended 30 June 2021.

Dean Finch, Group Chief Executive, said:

"Persimmon's first half performance has been robust. In particular, I am pleased we have delivered strong growth in legal completions whilst also achieving higher levels of build quality and customer satisfaction.

"We made good progress in the land market in the period, bringing over 10,000 plots of high quality land into the business, achieving good visibility of new outlet openings and providing momentum for our future growth. With c. 85 new outlets opening in the second half of the current year, we are improving availability and choice for our customers.

"We're managing the balance of inflationary pressures well and currently anticipate that our industry leading returns will remain resilient. Our forward sales position is c. 9% ahead of the same point in 2019, with our cumulative private sales rate over 20% above that of 2019 for the year to date.

"I would like to thank all my colleagues across the business who have achieved these results.

"Persimmon's high quality land holdings, disciplined land replacement strategy, healthy liquidity, experienced management team and continued resolve to drive improvements in build quality and customer service provide an excellent platform for its future success.

"Our ambition is to be seen by our customers as delivering both outstanding service and outstanding value. I am determined to build on the progress we have made and enhance our capability to consistently provide high quality homes which will help secure sustainable benefits for all of our stakeholders.

"We anticipate successfully delivering c. 10% growth in sales completions this year. The Group has a great platform and good momentum to deliver further disciplined growth into the medium term, creating value for all."

Highlights

	H1 2021	H1 2020
New home completions	7,406	4,900
New home average selling price	£236,199	£225,066
Total Group revenues1	£1.84bn	£1.19bn
New housing operating margin2	27.6%	26.6%
Profit before tax	£480.1m	£292.4m
Cash at 30 June	£1.32bn	£0.83bn
Current forward sales position	£2.23bn	£2.48bn
Current customer satisfaction score3	91.9%	89.6%
Dividend (per share)	125p (March 2021)	40p (September 2020)
	110p (August 2021)	70p (December 2020)

Strong platform for high quality growth

• Experienced management team delivering high quality homes across the Group's 31 housebuilding businesses.
• A diverse UK-wide network, operating on c. 300 active outlets on average during 2021, with a strong pipeline expected to deliver approximately 85 new outlets by the end of this year, with a similar number of new outlets targeted to open in the first half of 2022.
• High quality land holdings, with 85,771 plots owned and under control at 30 June 2021 (December 2020: 84,174), with industry leading embedded returns.
• The Group brought 10,272 plots into the business in the period whilst maintaining the Group's high quality return requirements, across 48 locations at a replacement rate of c. 140%. Exciting pipeline of deals progressing.
• The Persimmon Way is fully operational across the business focused on delivering consistent high standards of build quality.
• Pre-Covidbuild rates have been maintained for the last twelve months.

Industry leading financial performance

• Good first half performance against the backdrop of the continuing pandemic and the pandemic's impact in the first half of the prior year - profit before tax of £480.1m (2020: £292.4m).
• Average private sales rate for the period was over 30% ahead of 2020, the increase reflecting the unprecedented site shutdowns in 2020 due to the pandemic, but was also c. 20% ahead of 2019.
• New housing operating margin of 27.6%2 for the six months to 30 June 2021 (2020: 26.6%).
• The business is managing the balance of inflationary pressures being experienced by the industry well.
• £479.8m of net cash generation before capital returns of £398.7m and land spend of £200.4m.
• Underlying return on average capital employed4 of 37.9% (December 2020: 29.4%).
• Over the last 3 years, the Group's average underlying return on capital employed has been 36.5% reflecting the sustainable performance of the business.
• After tax return on equity of 22.6%5 (2020: 21.5%).

Focusing on our customers - build right, first time, every time

• The Group is delivering increased volumes of legal completions and at higher levels of build quality and customer service; the Group's HBF customer satisfaction rating3 being ahead of the five star threshold since January 2020.
• Continuing to improve consistency in build quality and customer service remains a key focus for the business.
• As part of the ongoing implementation of The Persimmon Way, the Group is continuing to invest in improving quality assurance, with a 70% increase in the number of Independent Quality Controllers across the business from 31 December 2020.
• The Group continues to invest in its people with increased training and skills development, with for example, c. 400 of our site management team registered to complete National Vocational Qualifications relevant to their role.

Supporting sustainable communities

• Strong sense of purpose supports the Group's sustainable business model in delivering long-term sustainable benefits in the best interests of all stakeholders through the cycle.
• The wellbeing of the Group's workforce, customers and local communities remains a top priority.
• Covid-19secure operating procedures continue maintaining the stringent two metre social distancing rules.
• The Group's private average selling price of £258,220 is c.15%6 below the UK national average.
• Approximately 50% of homes sold into the owner occupier market were to first time buyers.
• Invested over £0.5bn in local communities in the last eighteen months, covering the period since the pandemic began, delivering over 3,500 homes to our local housing association partners.
• The Group supports c. 86,0007 jobs across our communities and within our wider supply chain.
• The Group's challenging science based targets, which align to the Paris Agreement, are now fully accredited by the Science Based Target Initiative.
• Proud sponsor of Team GB and, through the Persimmon Charitable Foundation, the Group supports local charities and community groups across the UK, having donated c. £2.4m to over 1,300 local good causes over the last eighteen months.

Capital return programme

• 235p per share paid in respect of the year ended 31 December 2020.
• As announced in March 2021, the Board intends to revert to the pre-Covid profile of capital return of two payments a year, with the payment of the regular annual distribution of 125p per share being made in early July 2022.

Outlook

• Good forward sales of £2.23bn, including legal completions in the second half so far, up c. 9% on the more normal trading year of 2019.
• Cumulative average private weekly sales rate for the 33 weeks to date is over 20% ahead of 2019.
• As previously announced, we anticipate delivering c. 10% growth in sales completions this year (FY 2020: 13,575 legal completions), with further growth to come.
• The Group is managing the inflationary effects in the market well and we currently anticipate the Group's industry leading returns will remain resilient supported by its high quality land holdings.
• The Group maintains a strong balance sheet with healthy levels of liquidity.
• Persimmon's well-established strategy which recognises the cyclical nature of the housing market by maintaining financial flexibility and deploying capital at the appropriate time in the cycle, provides a high quality foundation to secure superior long term sustainable returns for all stakeholders.

Footnotes

• The Group's total revenues include the fair value of consideration received or receivable on the sale of part exchange properties and income from the provision of broadband internet services. Housing revenues are the revenues generated on the sale of newly built residential properties

only.

• Stated on new housing revenue of £1,749.3m (2020: £1,102.8m) and underlying profit from operations of £483.0m (2020: £293.2m) calculated
  before goodwill impairment of £3.9m (2020: £1.6m).

• The Group participates in a National New Homes Survey, run by the Home Builders Federation. The rating system is based on the number of

customers who would recommend their builder to a friend.

• 12 month rolling average calculated on underlying operating profit and total capital employed (including land creditors). Underlying operating profit is stated before legacy buildings provisions of £75.0m (December 2020: £75.0m) and goodwill impairment of £6.6m (December 2020:

£4.3m).

• 12 month rolling profit after tax generated from the average of the opening and closing total equity for the period.

• National average selling price for new build homes sourced from the UK House Price Index as calculated by the Office for National Statistics

from data provided by HM Land Registry.

7 Estimated using an economic toolkit.
For further information please contact:
Dean Finch, Group Chief Executive	Kevin Smith
Mike Killoran, Group Finance Director	Jos Bieneman
Persimmon Plc	Ellen Wilton
Tel: [phone]	Tel: [phone]

A presentation to analysts and investors will be available from 07.00 am on 18 August 2021. To view the presentation, please use the webcast link below:

Webcast link:https://edge.media-server.com/mmc/p/7xn5x3jf

There will also be a Q&A session with management, hosted by Group Chief Executive, Dean Finch and Group Finance Director, Mike Killoran via conference call at 09.00 am. Analysts may join the call by using the details below:

Dial in:	[phone]
Passcode:	Persimmon

An audiocast of the call will be available on www.persimmonhomes.com/corporatefrom this afternoon.

PERSIMMON PLC

RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021

CHAIRMAN'S STATEMENT

Persimmon has delivered a robust financial performance in the period, generating new housing revenue of £1.75bn in the last six months (2020: £1.10bn) and a profit before tax of £480.1m (2020: £292.4m). The business' diverse UK wide network of sites together with its resilient balance sheet, high quality land holdings and disciplined land replacement provide strong foundations for high quality growth. With The Persimmon Way, the Group's consolidated construction approach, now fully operational in the business providing further opportunity, we are confident that we can deliver high standards of build quality and customer satisfaction, consistently across our new homes whilst increasing our volumes.

Strategy

Persimmon builds communities and creates places where our customers wish to live and work. The Group has been pursuing a consistent strategy for a number of years, building a resilient liquidity position and high quality land holdings. This strategy, which recognises and creates resilience against the cyclical nature of the housing market, maintains financial and operational flexibility and deploys capital at the right time in the cycle. This ensures that the business is able to generate sustainable superior returns for the benefit of all of its stakeholders over the long-term.

Persimmon recognises it plays an important role in society. By following its strategy the Group has again demonstrated its resilience through the recent challenges associated with the ongoing pandemic and which has allowed the Group to be able to continue to contribute more widely to the communities it serves. I am pleased that we have taken important

• and industry-leading - steps to address legacy cladding and leasehold issues. By acting and putting customers first we are continuing to work to help remove uncertainty and concern, providing support to local communities.

Capital Return Programme

The Group has now distributed 235p per share to shareholders in respect of the year ended 31 December 2020, after re-iterating its commitment to do so in March 2021. The Board accelerated the payment of the regular annual distribution of 125p per share as an interim dividend, to March 2021 (from early July 2021). In addition, on 13 August 2021, the Group accelerated the return of surplus capital in relation to the year ended 31 December 2020 by way of a payment of 110p per share, rather than making two payments of 55p per share, one to be paid in August 2021 and the second in December 2021 as had previously been indicated. This has returned the Group to distributing two capital return payments every 12 months, a year earlier than originally envisaged. There will be no further dividend payments in relation to the year ended 31 December 2020.

As indicated at the release of Persimmon's final results on 3 March 2021, the Board intends to continue this pre-Covid profile of capital return payments in 2022, being distributions in relation to the financial year ending 31 December 2021. The payment of the regular annual distribution of capital of 125p per share will be paid in early July 2022 and any surplus capital in relation to the financial year ended 31 December 2021 will be paid in late March/early April 2022. The value of the surplus capital return, as always, will be subject to continual assessment by the Board in line with the Group's strategy.

Board Changes

The Board is pleased to welcome Shirine Khoury-Haq who joined as an Independent Non-Executive Director from 1 July 2021. Shirine joined the Board's Audit, Risk and Nomination Committees on the same date.

Rachel Kentleton, Non-Executive Director, will step down from the Board on 31 August 2021 to concentrate on her executive responsibilities, having recently been appointed Chief Financial Officer of St. Modwen Properties Ltd. On behalf of the Board, I would like to thank Rachel for the significant contribution she has made over the last six years and wish her well in her new role. Shirine will succeed Rachel as Chair of the Audit Committee.

The Board would also like to take this opportunity to thank Persimmon's employees, workforce and suppliers for their hard work and commitment.

Persimmon is well positioned for the future with an experienced management team, a strong platform for high quality growth, and a resilient liquidity position and balance sheet. We are confident of the Group's future success.

Roger Devlin

Chairman

17 August 2021

CHIEF EXECUTIVE'S REVIEW

Introduction

The business continues to perform well, with new home sale completion levels approaching those seen in the first half of 2019, whilst also delivering higher levels of customer satisfaction. In the period, we delivered 7,406 legal completions (2020: 4,900), generating gross profit of £540.5m (2020: £345.2m) and with the Group's new housing operating margin up 100 basis points at 27.6%1 (2020: 26.6%). I am particularly pleased that our current Home Builders Federation eight week customer satisfaction score continues to run ahead of the five-star threshold at 91.9%2 and that within our results we saw a growth in private sales when compared to 2019.

We have also managed to deliver these results during a period of notable challenges. I would like to pay tribute to my colleagues across the business for the way they have managed the ongoing challenge presented by the pandemic and maintained strong build rates at improved levels of quality despite the restrictions. Beyond this, we have managed the cost inflation and labour shortages that are effecting the industry well, with our Brickworks, Tileworks and Space4 timber frame manufacturing facilities playing an important role in providing cost efficient security of supply. Alongside the price increases on home sales secured, the Group's high quality asset base, vertical integration and strong cost management have helped maintain industry-leading margins.

Five priorities

At the 2020 final results I commented that in my first six months in post I had been impressed by Persimmon's strengths and had identified areas for renewed focus. I set out five priorities for the business to build on these strengths and enhance our capabilities to become a builder consistently achieving a five-star rating in the HBF eight week customer survey. These priorities are:

• Build quality: our ambition is to build right, first time, every time;
• Reinforce trust in the brand: consistently trusted to deliver a home to be proud of and a builder customers would readily recommend to others;
• Growth: through our improvements in build quality and increased focus on customer care we will be strengthening our capability to deliver more five-star homes in meeting customer demand;
• Maintaining an industry leading financial performance: sustaining our strong margins and returns and driving healthy profit and cash generation; and,
• Supporting sustainable communities: we will play an active role in the imperative of achieving a net zero carbon economy, as well as setting new biodiversity and sustainable community targets.

In the five months since I set out these priorities we have made important progress in continuing to support the communities we serve, demonstrating our credentials as a responsible business, recognising the wider role we play in society. I am pleased that our carbon reduction targets have been recently fully accredited by the Science Based Target Initiative. We have continued to take action to meet these targets with a switch to fully renewable electricity for our offices and manufacturing facilities, saving over 1,600 tonnes of CO2 a year.

In February we pledged to support leaseholders in multi-storey developments we built that required cladding removal and in obtaining the EWS1 form they need to sell their home. We created a £75m fund and our team has been in contact with management companies and building owners to ensure the required progress is being made, work having been completed on 2 buildings already. In addition, on 23 June we were pleased to lead the industry and agree voluntary undertakings with the Competition and Markets Authority in their leasehold enquiry, including extending our existing Right to Buy scheme for customers to purchase their freehold interest. We are pleased to have reached this agreement and provide certainty to leasehold customers.

Strong platform for high quality growth

I am determined that Persimmon maintains its industry-leading financial performance by incorporating the benefits of providing both outstanding service and outstanding value; a responsible company delivering both the new homes the country needs and opening up the opportunity of home ownership to thousands of families a year. I am more certain than ever that by making continued progress on these priorities, Persimmon will be well placed to deliver that ambition.

Four key features of the business provide a strong, resilient platform for a sustainable future and enable the Group to continue to develop and deliver the disciplined growth we seek. First, our senior management across the business and their teams are deeply experienced in the industry with the knowledge and skills to continue to develop the business and secure its future growth. Second, our disciplined approach to land replacement, investing in the places where our customers wish to live and work. Third, our focus on quality and service, placing the customer at the heart of our business, and lastly, the Group's strong balance sheet, high quality land holdings and healthy liquidity provide the platform from which our future growth will be secured.