DELIVERING HOMES FOR ALL Annual Report 2020 What’s inside this report? STRATEGIC HIGHLIGHTS Strategic report Number of homes sold Average selling price 02 At a glance 04 Chairman’s statement 13,575 £230,534 08 The UK housing market 2019: 15,855 2019: £215,709 10 Our strategic objective 12 Our business model 14 Our Key Performance Indicators (KPIs) 17 Our sustainability approach Revenue Underlying new housing 20 Sustainability Accounting Standards Board 1 (SASB) disclosures operating margin 22 Group Chief Executive’s statement 28 Our core focus areas £3.33bn 27.6% 54 Financial review 2019: £3.65bn 2019: 30.3% 58 How we manage risk 59 Our principal risks 66 Climate change risks and opportunities 67 Task Force on Climate Related Financial Disclosures (TCFD) Profit before tax Cash generation 2 69 Viability statement pre land investment 72 Section 172 statement 78 Non-financial information £783.8m £1,066.8m Governance 2019: £1,040.8m 2019: £996.2m Directors’ Report: 79 Chairman’s introduction to Corporate Governance 82 Board leadership Dividend paid Current customer 84 Corporate Governance Statement in the year satisfaction score3 94 Nomination Committee Report 98 Audit Committee Chair’s Statement 110p 89.7% 100 Audit Committee Report 107 Other disclosures 2019: 235p 2019: 83.7% Remuneration: 110 Remuneration Committee Chair’s Statement 113 Annual Report on Remuneration 4 128 Summary of Directors’ Remuneration Policy Affordable homes Construction and supply chain jobs supported5 Financial statements 133 Statement of Directors’ Responsibilities 2,433 c.86,000 134 Independent Auditor’s Report 140 Consolidated Statement 2019: 3,589 2019: 99,500 of Comprehensive Income 141 Balance Sheets 142 Statement of Changes in Shareholders’ Equity Trainees and apprentices Investment in local communities6 144 Cash Flow Statements 145 Notes to the Financial Statements c.680 £376m Other information 2019: c.750 2019: £522m 185 Shareholder Information 185 Financial Calendar 2021 185 Five Year Record 1 Stated on new housing revenue of £3,129.5m (2019: £3,420.1m) and underlying profit from operations of £862.8m (2019: £1,036.7m) stated before legacy buildings provisions of £75.0m (2019: £nil) and goodwill impairment of £4.3m (2019: £7.3m). The Group’s operating margin is 23.5% (2019: 28.2%) based on revenue of £3,328.2m (2019: £3,649.4m) and profit from operations of £783.5m (2019: £1,029.4m). 2 Ca sh generation pre land investment is net cash flow before capital return (£350.7m) and net land investment (£325.9m) (2019: capital return £747.8m and net land investment £452.6m). 3 We participate in a National New Homes Survey run by the HBF. The Survey year covers the period from 1 October to 30 September. The rating system is based on the number of customers who would recommend their builder to a friend. 4 Homes provided to our housing association partners and Discounted Open Market Value homes. 5 Estimated using an economic toolkit which has been updated to reflect latest guidance. 6 Th e value of homes delivered to housing associations, the value of Discounted Open Market Value Housing plus the value of planning contributions we have made. Strategic report Governance Financial statements Other information 01 OUR PURPOSE To build good quality homes at a range of price points to meet the UK’s housing needs. We aim to create and protect superior long term value for the benefit of our customers, workforce, suppliers, shareholders and wider stakeholders through the housing cycle. Persimmon Plc | Annual Report | December 2020 02 Strategic report Governance Financial statements Other information At a glance PROVIDING HOMES AND SERVING OUR COMMUNITIES ACROSS THE UK We are a leading UK housebuilder with 31 operating businesses, three house building brands and three off-site manufacturing facilities providing homes and serving their local communities across the UK. Persimmon Homes is our core Contribution to Group housing revenue brand which delivers a range 9% of traditional family housing throughout the UK in places where customers wish to live and work. 12% With a focus on delivering value and quality for our customers, we sell most of our homes under this brand. 79% £239,318 £3.13bn Persimmon Homes average selling See page 32 price 2020 The Charles Church brand complements and differentiates itself from Persimmon by delivering larger, higher specification homes in premium locations across the UK. We build homes under this brand tailored to local markets where our research and experience has identified a strong Persimmon demand for a premium product. Charles Church Westbury Partnerships £361,147 Homes so 16% ld Charles Church average selling See page 33 price 2020 Land ban k p Westbury Partnerships is our brand lo 15,503 ts with a focus on affordable social 8% housing. We sell these homes to housing associations across the UK. This brand plays a key part in the delivery of sustainable homes for the 8,425 benefit of lower income occupiers, 76% offering solutions to some of the country’s affordable housing problems. 60,246 £125,930 Westbury Partnerships average selling See page 33 price 2020 c.17% lower average private selling price lower * National average selling price for newly built homes sourced from the UK House Price Index as calculated by the Office for than the UK national average* National Statistics from data provided by HM Land Registry. Persimmon Plc | Annual Report | December 2020 Strategic report Governance Financial statements Other information 03 Broadband provider National coverage, FibreNest is the Group’s own ultrafast, full fibre to the home, local presence broadband service which aims to ensure all our customers Northern offices are connected to the internet Southern offices from moving in day onwards. Off-site manufacturing Working with an experienced partner, FibreNest provides ultrafast speeds coupled with excellent levels 1 of service both during installation and for the duration of the service. 2 3 Off-site manufacturing Our Space4 manufacturing business 4 5 produces timber frames, highly Northern offices Southern offices 6 insulated wall panels and roof 1. North Scotland 17. Central 2. West Scotland 18. South Midlands cassettes as a ‘fabric first’ solution 7 9 3. East Scotland 19. Midlands to the construction of new homes. 8 4. North East 20. Essex 11 Space4’s unique modern method 5. Durham 21. Suffolk 10 33 34 of construction system helps 6. Teesside 22. West Wales us to improve site productivity, 7. Lancashire 23. East Wales 12 increase build capacity and 8. West Yorkshire 24. Severn Valley 13 14 15 16 mitigate construction industry skills 9. Yorkshire and 25. Wessex 32 17 shortages. Space4 supports all Group Head 26. North London 18 19 21 Office 27. Thames Valley of our brands and supplied 5,300 20 10. North West 28. South East 22 26 timber frame kits and roof systems 11. South Yorkshire 23 25 29. South Coast 24 27 28 to the Group in 2020. 12. Nottingham 30. South West 13. North Midlands 31. Cornwall 29 14. West Midlands Our Brickworks produces concrete 30 Off-site manufacturing 31 bricks and is entirely focused on 15. East Midlands 16. Anglia 32. Space4 supplying the Group’s housebuilding 33. Brickworks operations. During 2020, the 34. Tileworks brickworks supplied c.35 million bricks to the Group. The factory has the capacity to produce c.80 million Persimmon Charitable bricks a year, which approximates to two thirds of the Group’s Foundation brick requirements. Throughout the year, the Persimmon Charitable Foundation has continued to Tileworks, the Group’s own make donations to charities and good concrete roof tile manufacturing causes across the UK. The Community plant, commenced deliveries to Champions campaign focused on site in early 2020 and has supplied charities and good causes that benefit c.2.5 million tiles to 115 sites across the over-70s, a group particularly the Group. affected by the pandemic. We participate in a National New Homes Survey run by the HBF. The rating system is based c.£2.0m on the number of customers who donated to c.900 local charities would recommend their builder and community groups to a friend. 2019: £2.3m Persimmon Plc | Annual Report | December 2020 04 Strategic report Governance Financial statements Other information Chairman’s statement MAINTAINING A STRONG PLATFORM TO DELIVER VALUE FOR ALL OUR STAKEHOLDERS “Persimmon is a company with many great strengths. We not only provide many of the new houses the country needs but also the opportunity of homeownership to thousands of families a year. In so doing we generate jobs across the country and value for local communities and shareholders alike.” Roger Devlin Chairman Operational highlights Homes sold Average selling price Forward sales 13,575 £230,534 £2.27bn* 2019: 15,855 2019: £215,709 2020: £1.98bn Owned land Investment in Construction and supply holdings (plots) local communities chain jobs supported 67,205 c.£2.4bn c.86,000** 2019: 71,942 over the last six years 2019: c.99,500 * As at 2 March 2021 (2020 figure as at 26 February 2020). ** Es timated using an economic toolkit which has been updated to reflect latest guidance. Persimmon Plc | Annual Report | December 2020 Strategic report Governance Financial statements Other information 05 Persimmon is a company with many great strengths. We recognise, however, the highly uncertain nature of the pandemic and continue to monitor the situation and any We not only provide many of the new houses potential impact of increased transmission rates or social the country needs but also the opportunity of distancing measures on our ongoing operations. homeownership to thousands of families a year. In Whilst uncertainty persists around the Covid-19 pandemic and its potential to further disrupt our operations, there has been so doing we generate jobs across the country and no significant disruption to the business caused by the UK’s exit value for local communities and shareholders alike.