Persimmon Plc

It's five months since I joined Persimmon now and I'm incredibly impressed by the strength of the business. It really is an incredibly valuable business in my opinion. It buys land incredibly well and it develops land really well whilst balancing the needs of design and placemaking. It also builds really efficiently and I think that gives it a competitive advantage over its peers but I think importantly it is now building a quality which is comparable to its peers and survey results are telling us that. It's also I think, pitch perfect in terms of its customer base with first time buyers and first time movers. And of course all of this is underpinned by an incredibly strong balance sheet. But I do think that the business can be a bigger and better business. And I think the key to that is for it to be able to develop the capabilities to build at scale, to build more houses at scale and consistently deliver good quality. And I think what's key to that is building right first time every time and also putting customers at the heart of the business. We're known for outstanding value. We also want to be known for outstanding service and quality as well. And I think when we achieve that, we will be Britain's best builder and Britain's most responsible builder. I have five priorities of the business. Firstly, to build right first time every time. Secondly, to put customers at the heart of the business, outstanding value, outstanding service, outstanding quality. They will help grow and strengthen our brand. Thirdly, it's about growth for the business. As we are able to develop our capabilities to build more houses consistently well, we will be able to sell those houses. Which takes me to my fourth priority, which is maintaining and growing our financial strength. which I'm sure we can do as we will be able to consistently build well and sell and grow the business whilst maintaining our leadership in terms of financial returns, margins and so on. And then that takes me to my fifth priority, which is making sure we are at the forefront of sustainability and in particular the environment. And I want Persimmon to play its full part in the great climate change debate of the day in terms of emissions and in terms of building net zero carbon homes, which I think is going to be incredibly important for our customers. Building right first time every time is absolutely going to be key to our success and we've invested in the Persimmon Way which is going from strength to strength in the company and I want us to accelerate our investments and really double down on that in terms of we're putting more money into the business to have more inspectors and to better train our people to build our houses to better standards and that is already having results. We see that in the surveys back from our customers and also actually it's giving us a financial benefit too. We are seeing that we're able to reap rewards in terms of lower remediation costs, whether that's in terms of bricklaying, whether that's in terms of drainage whether that's in terms of doors everywhere where we are seeing the persimmon way applied properly in the company we are seeing benefits both for customers and for the bottom line and we want to invest more and deliver more of that to enable us to grow the business Trust is incredibly important for us as a business. Look I absolutely understand that for our customers buying a house from us is probably the biggest most important decision, investment decision they're going to make in their lives. and I want them to have absolute confidence in the house that they're buying from us. It's worth the investment, it's a good place to live, they can trust in Persimmon. So I think there is no clearer demonstration of what we want to do in terms of customers trusting us than the recent decision we've taken in respect of cladding. Clearly we are doing the right thing here and putting customers first and that's what we want to achieve. We want to grow the business, but in 2021, we're still dealing with COVID. It's still present in the business. It's still affecting production in terms of the rate at which we can build. So I think 2021, we'll still see the impact of COVID on the business. By the time we get to 2022, we hope we are beyond COVID and we get back to where we were in 2019. But this time will enable us to deal with firstly the impact of COVID on production and also the impact COVID had during lockdown in terms of the mini boom, which chomped through some of our land bank and meant that we have fewer outlets today than we had in 2019. So we need to take time to develop what we have in our land bank and pull it through into production. What that means alongside that, along with achieving my priorities for the business, which is to enable us to build right first time, every time, consistently well. I think by the time we get to 2023, the business will be in a great place, assuming the economy remains stable, and it will be really able to grow. Maintaining our financial strength and growing our financial strength is a key objective of mine and I think we can achieve this through some of the great assets we've got in the business. The brick and tile factory, its timber frame factory and also fibre nest. And I think they can contribute much more to the business. Brick and tile in terms of pulling more into production, the space for business in terms of us being able to build faster and build better. And I think Fibernest is a tremendous USP for the business, which is perfectly aligned to what customers are telling us they want. which I think is also a feature of some of the things that we've seen come out of COVID. People perhaps moving out of London, wanting to work from home more, they want great connectedness and our Fiboness facility enables us to provide that, so a great USP. So I think the business has got some great assets from which to build. We are going to be investing in the business in terms of build quality, in terms of customer care. That's probably going to cost us something of the region of 10 to 15 million pounds in the coming year. But I'm certain that we're going to get more than that back. through the benefits of building right first time and obviously Persimmon's got some fantastic margins embedded in its land bank but I think that there are other opportunities in the business as well and for instance one of the first things I did when I joined was ask for a review of procurement be carried out and we saw there that we have national agreements for around half of our what we buy you know we can we can expand and improve on that and that will enable us to deliver better results so in terms of what we're investing I am sure that we will get that payback in terms of the bottom line Sustainability is an important priority of ours and Persimmon has many touch points. in terms of how it can affect the society in which it is operating in, whether that's as an employer, whether that's in terms of building affordable homes for the public, whether that's in terms of air quality, water quality or even biodiversity. Of course, environment is absolutely critical. We're announcing today our ambitions and targets for the next decade and more, including an ambition to be developing zero net carbon homes by 2030. And we are piloting now on some of our sites, Germany Beck, for instance, near York, zero carbon homes. And I think this is an incredibly important topic just in terms of customers, in terms of employees, and frankly me. I've set out my five priorities for the business, build right first time, brand and customers, growth, maintaining and improving our financial performance and sustainability. And I'm convinced that this will enable Persimmon to have a bigger and better future. What this means for shareholders As you can see today we're announcing our board commitment to increasing the permanent dividend to £1.25 as expected and we also expect subject to market conditions in the second half of the year to be able to pay the full dividend of £2.35 including the surplus capital return. Looking forward, the business is committed to paying the new higher level of permanent dividend and will always be committed, I believe, to returning surplus cash to shareholders, subject to the investment needs of the business. What that means for us currently is to invest around about half a billion a year, which is where it was pre-Covid.