AnnualReport December 2008 and March 2009 … · 83 Financial Calendar 2009 84 Persimmon Plc...

Persimmon PlcPersimmon HouseFulfordYorkYO19 4FETelephone 01904 642199Fax 01904 610014www.persimmonhomes.com

Persimmon

PlcD

ecember2008

Annual Report December 2008and Chairman’s letter to shareholders March 2009

Designed and produced by RadleyYeldar www.ry.comCover picture Port Glasgow,Kingston Dock, Scotland

13 March 2009

Dear Shareholder,

In my statement dated 2 March 2009, issued with the preliminary results for the yearended 31 December 2008, I confirmed that we had successfully agreed new terms andconditions with our banking partners and private note holders for the amendment ofour existing credit facilities and the arrangement of a new Forward Start Banking Facility.

I also gave an undertaking to notify you when the full documentation relating to thesecredit facilities had been finalised and signed.

I am pleased to report that on 13 March 2009, the full documentation was signed andall necessary formalities completed.

Yours faithfully

John WhiteGroup Chairman

PERSIMMON PLCPersimmon House

FulfordYork

YO19 4FETel: 01904 642199Fax: 01904 610014DX 711680 Fulford

www.persimmonhomes.com

Chairman’s letter to shareholders March 2009

• As one of the UK’s leading housebuilders our priority is to deliveraffordable, quality homes where people want to live.

• We have restructured our business in the light of the current weakhousing market and we have recently agreed new and amendedcredit facilities.

• Our divisional structure ensures we cover the UK from Exeter toEdinburgh,where we provide customers with a choice of homesto suit their individual budgets.

• We are committed to a sustainable future,with environmental issuesat the heart of what we do.This includes protecting and improvinglocal surroundings, adopting new technologies and improving thesustainability of our homes.

• We have strong foundations in place to grow our business whenthe market improves and are confident that we remain well placedfor the future.

Introduction

Contents

Annual Report December 2008

Persimmon Plc Annual Report December 2008

1

1 Introduction2 Overview of Persimmon4 Chairman’s Statement

Auditors’ Report

39 IndependentAuditors’Reportto the Shareholders ofPersimmon Plc

Financial Statements

40 Consolidated IncomeStatement

40 Statements of RecognisedIncome and Expense

41 Balance Sheets42 Cash Flow Statements43 Notes to the Financial

Statements

Company Information

80 Directory82 FiveYear Record83 Shareholder Information83 Financial Calendar 200984 Persimmon Plc Directors

& Company Information

Business Review 2008

6 Our Strategy8 Performance Review14 Financial Review18 Corporate Responsibility

Directors’ Reports

22 Board of Directors24 Directors’Report28 Remuneration Report35 Corporate Governance

Report38 Statement of Directors’

Responsibilities


Overview of Persimmon

2

Results and Key FinancialPerformance Indicators

Divisions

Revenue (£m)

2004 2005 2006 2007 2008

2,131.3 2,285.7

3,141.9 3,014.9

1,755.1

Profit from operations (£m)

2004 2005 2006 2007 2008a

498.0 527.8637.3 654.9

196.5

Profit before tax (£m)

2004 2005 2006 2007 2008b

468.0 495.4566.7 582.7

124.8

Gearing (%)

2004 2005 2006 2007 2008c

14 16

33 31

39

Return on average capital employed (%)

2004 2005 2006 2007 2008d

30.6 28.823.1 21.6

6.1

Free cash generation (£m)e

2004 2005 2006 2007 2008

151.3 167.3

583.1

67.0239.2

North Division

This division includesPersimmon Homesoperating businessesin Scotland,NorthWest,North East andYorkshire.

2,753Units sold

Central Division

Our Central Divisionincludes our Birmingham,Shires and Eastern regionsof Persimmon Homes. 2,748

Units sold

South Division

This division includesour Persimmon HomesSouthern,WesternandWales regionsand incorporatesWestbury Partnershipsand Space4.

2,777Units sold

Charles Church

Charles Church buildshomes across the UKfrom regional officeswhich are integratedinto each division.

1,924Units sold

aStated before exceptional items of £911.1m.After exceptional items, the 2008 figure is a loss of £714.6mbStated before exceptional items of £904.8m.After exceptional items, the 2008 figure is a loss of £780.0mcStated after exceptional itemsd Stated before exceptional items.After exceptional items, the 2008 figure is -23.1%e Stated before dividends, financing and acquisitions (where applicable)

Brands


3

The Persimmon Homes business is our core operation.We have 24 regional Persimmon offices from Exeter toEdinburgh, building quality homes which provide thevery best in design, construction and service.The widerange of property types includes three, four and five beddetached properties; two and three bed town housesand semi-detached houses; bungalows and apartments.

Charles Church provides a range of premium homes,in both modern and traditional styles.Charles Churchis one of the country’s foremost house building brandswith an unrivalled reputation for the design and qualityof the homes it builds.

TheWestbury Partnerships business focuses on socialhousing, in conjunction with Space4, our timber framemanufacturing operation.By working closely togetherwith Housing Associations, this business aims to offersolutions to some of the country’s affordable housingproblems.

It is well documented that 2008was the most challenging periodencountered in the housingmarket in recent history.Duringthe year we have restructured ourbusiness significantly across thewhole of the UK and haverecently agreed new and amendedcredit facilities to provide furtherstability as we move forwardthrough these difficult markets.

ResultsTurnover for the year ended 31 December 2008 was£1.755bn (2007:£3.015bn) with underlying pre-tax profitsof £126.6m (2007:£585.1m).These profits are stated beforeexceptional charges and goodwill impairment.

As previously reported, legal completions for 2008 were10,202, a reduction of 36% on last year (2007: 15,905).The average selling price of homes completed was £172,994,a decrease of 8.7% (2007:£189,558), stated before the IAS18 adjustment to reduce turnover by £9.8m to fair value thedeferred element of shared equity sales receipts (2007:£nil).Underlying operating profit (before exceptional charges andgoodwill impairment) was £198.3m, an operating marginof 11.3% (2007: 21.8%).

As announced in our Interim Management Statement on27 October 2008,we have carried out a detailed review ofthe net realisable value of our tangible assets, primarilyrelating to land and work in progress.This review of landand work in progress has now been completed and hasresulted in an exceptional non cash charge of c.£650min line with our previous guidance.

In addition,we have performed our annual impairmentreview of the value of intangible assets.The deterioration inmarket conditions has resulted in a non cash impairment ofgoodwill of £201m.This is largely as a result of the impacton the anticipated value of long term strategic land holdingsassociated with previous acquisitions.The value of intangibleassets will continue to be reviewed on an annual basis in linewith market conditions.Current year total exceptionalcharges reduced net assets per share at 31 December 2008 by243p to 518p.

The total pre-tax loss for the year after all exceptionalcharges and goodwill impairment was £780m (2007:profit £582.7m).

Throughout 2008 we have constantly monitored ouroverhead levels and expenditure to ensure that our financialposition remains strong.We have generated good net cashinflow from operations of £211m since 30 June 2008(H2 2007:£122m) when our earlier actions began to takemost effect.Net borrowings at the year end were £599m(2007:£721m).

On 27 February 2009 we successfully agreed new termsand conditions with our banking partners and private noteholders for the amendment of our existing credit facilities.We have also agreed terms for a new Forward Start Facilityof £322m which matures on 31 March 2012.Theseamended and new facilities will provide committed fundinglines of £1,085m at the outset of these arrangements,reducing to £560m during 2011.We expect these facilitiesto provide ample headroom and support for the effectivemanagement of the business over the next few years.The fulldocumentation relating to these credit facilities is currentlyin the process of being finalised and a further announcementwill be made when it has been signed.


Chairman’s Statement

4

JohnWhite,Group Chairman

The interest cost of the amended and new facilities is atan estimated blended interest rate of c. 6.4%, an increaseof c. 2.8% on previous arrangements.

The covenants associated with these amended and newfacilities are appropriate for the current market conditionsand our strategy of focusing on cash generation.We thereforecontinue to apply tight control over all expenditure. Insupport of this strategy Persimmon will not pay a dividendfor 2009.We will continue to review future dividend policyas appropriate in the light of trading conditions.

As already stated in ourTrading Update on 8 January 2009the Board is not proposing a final dividend for the year ended31 December 2008.An interim dividend of 5.0p was paid on17 October 2008.The total dividend for 2008 will thereforebe 5.0p (2007: 51.2p).

LandWe have reported on several occasions that we have remainedvery cautious on land acquisitions since Autumn 2007.Ourlandbank at 31 December 2008 consisted of 69,279 plotswhich were either owned or under control (2007: 78,863plots).We expect to reduce our land holding further during2009 as we complete house sales throughout the year. Landcreditors at 1 January 2009 were £314m of which c.£175mwill be paid during 2009.Our approach to future landacquisition will depend upon the opportunity and tradingenvironment we encounter at that time.

At some stage land will once again become an increasinglyattractive asset to control when house building volumesincrease to meet underlying supply requirements.Wetherefore continue to manage carefully our significantstrategic land holdings of c. 20,000 acres.These land holdingswill provide a large number of plots for development at sometime in the future, generally at a discount to market prices setat the time of development.This will provide a good platformfor growth of the business at that time.

OutlookForward sales at 1 January 2009 were £458m (2008:£603m).Since then weekly sales volumes have been ahead of ourexpectations and we currently have a total sales order bookfor 2009, including legal completions to date, of c.£698m(2008:£1,050m).This has put us in a good position toachieve our short term objectives for cash generation andbalance sheet strength.

We believe the combination of lower interest rates and animprovement in affordability will assist in increasing first timebuyer activity, although the threat of increased unemploymentremains a concern.

We are determined to continue to focus on the basicdisciplines of keeping costs to a minimum, conserving cashand reacting quickly to the market challenges and changes asthey occur.

We consider that 2009 is likely to be another difficult year,but we believe that we will eventually see an upturn in thehousing market.We are confident that our business is wellpositioned to react to take advantage of growth in ourmarkets as they improve in the future.

Finally, I would like to express the Board’s appreciation ofDavid Bryant’s service as a Main Board Director ofPersimmon Plc.David has decided to retire at the end of2009 and therefore will step down from the Board at theforthcoming AGM on 23 April 2009.

David joined the Company in 1985 and has been a Boardmember for eighteen years, during which time he hascontributed greatly to the success and growth of Persimmon.David will continue his Board responsibilities until 30 June2009 and thereafter continue in his capacity as Chairman ofthe Eastern Region until the end of the year.

I would also once again thank our many loyal and hardworking staff and employees for their support through thesemost difficult and testing times.

John White Group Chairman2 March 2009


5

Business Review 2008:

Introduction

Our strategy is to be a leading national housebuilder,building homes ranging from small affordable starter homesto large premium family homes and selling to both theprivate market and housing associations.

This strategy has now been complimented by a strongerfocus on cash generation in order to strengthen our balancesheet.We continue to improve our business processes tocontrol costs and we have repositioned each of ouroperating businesses to gain market share in our corehousing markets that offer the best growth opportunitiesfor the future.

Cash Generation

The decline in mortgage availability and housing demandthroughout the country has necessitated a review of ourbusiness strategy in the construction and sale of new homesin the UK market.As a consequence our main strategy isnow the generation of cash to reduce our debt, maintainliquidity and manage our balance sheet.

Land

Our current landbank represents a c. 6.8 year supply. Ourstrategy is to reduce our landbank to an equivalent of c. 5years’ supply so as to align our landbank with the expectedfuture consumer demand for our homes.

We continue to control a substantial amount of land bothowned and through option agreements which we promotethrough the planning process as part of our long termstrategy for replacing land at below open market value.

Development

Our business requires in depth knowledge of local marketsin order to engage subcontractors, plan sites in accordancewith local demand, to anticipate customer taste in specificmarkets and to assess the regulatory environment. Ourdivisional structure is designed to utilise our local marketexpertise.

We ensure we are not dependent on a single supplier orsubcontractor for the construction of our new homes andmaintain efficient operations by utilising standardisedmaterials available from a variety of sources.

Sales

We continue to follow our strategy of reducing exposureto local market volatility by maintaining operations acrossgeographically and economically diverse marketsthroughout the UK to enhance our sales potential.

We monitor our sales, maintain realistic pricing and thenclosely match our build programmes with our customerorders.We ensure a strong focus on quality and customersatisfaction.

Corporate Responsibility

Our key responsibilities are to build sustainable homes andcommunities, to operate efficiently and to minimise ourimpact on the environment, to work with localcommunities, to promote the skills of our employees, toprovide a safe and healthy working environment for ourworkforce and to care for our customers.

Our strategy is to integrate these complex social andenvironmental issues into our management processes fromthe start of our developments.


Our Strategy

6

Mike Farley,Group Chief Executive

Principal RisksThe Group’s financial and operational performance is subject to a significant number of risks,which are subject to continualassessment by management to mitigate and minimise these risks.There are also many risks which are outside of our controlwhich can affect our business.Our principal risks are:

Risk Impact Mitigation

National and regionaleconomic conditions

The housebuilding industry is sensitive tochanges in job growth, interest rates andconsumer confidence.Further deteriorationin economic conditions may significantlydecrease demand and pricing for new homes,which could have a material effect on ourbusiness revenues,margins and profits.

We minimise the level of speculativebuild undertaken by closely controlling ourwork in progress levels.


7


Capital requirements Our ability to continue to manage ourbusiness depends on our ability to accesscapital on favourable terms.We could beadversely affected by a change in our creditrating or disruption in the capital marketsresulting in credit facilities not beingavailable.We also require access to bondingfacilities to secure planning, road and seweragreements for our developments.

The Group actively maintains a mixture ofmedium and long term debt and bondinglines to ensure sufficient funds and bondingare available to support operations.

Mortgage availability Any further restrictions in the marketavailability of mortgages for our customerscould reduce demand for our homes andaffect revenues,margins and profits.

We ensure construction is matched toour level of sales.

Competitive markets We operate in a market with many othernational, regional and local housebuilders.Increasing levels of competition for areduced number of buyers could reduce thenumber of homes we sell and affectrevenues,margins and profits.

We constantly review our prices and salesincentives offered to customers to maintainappropriate sales volumes.We plan ourdevelopments to provide the right housestyles and specification to suit the localmarket.

Regulatory compliance Our business is subject to extensive andcomplex laws and regulations principallyrelating to planning, the environment andhealth and safety.Our obligations to complywith legislation can result in delays in landdevelopment and housebuilding activitycausing us to incur substantial costs andprohibit or restrict land development andconstruction.

We hold a landbank sufficient to providesecurity of supply for short termrequirements.We operate comprehensivemanagement systems to ensure regulatorycompliance and reduction in reputationalrisk.

The MarketThe UK housing market has experienced one of the mostsevere downturns in activity due to a significant reduction inmortgage availability and the loss of buyer confidence.As aresult, 2008 has been a year of change for Persimmon duringwhich we have redefined and refocused our business.

We saw the first signs of the impact of the credit tighteningin September 2007 which produced a lower forward orderbook for 2008 (down by 14% from the previous year).During the first quarter of 2008 market concerns regardingcredit availability and consumer confidence resulted in a17% reduction in visitor numbers to our sites compared to2007.However, our reservations declined by c. 30% showinga noticeable disconnection between the number of visitorsto site and the number of reservations,which are normallyaligned with each other.This clearly indicated that theshortage of credit was having an adverse impact onthe business.

In April mortgage provision tightened and our reservationlevels reduced further.We had already limited our exposureto further land expenditure as a result of the increasinguncertainties in the housing market, and took the decisionto reduce further our work in progress commitment on site.We also postponed the start of all new developments at thattime.As a result,we have been able to reduce our stockproperties by c. 36%,which now stand at c. 850 units.We offered more incentives to maintain our sales ratesand reduced prices,which culminated in a 5% reductionin selling prices in the first half of the year.

As a consequence of the market outlook and downturn inour sales reservations,we have restructured the business tomatch staffing levels to the lower anticipated sales volumes.

During the quiet summer months we were able to maintainreservations at the lower levels experienced in April.However, this was achieved at the expense of furtherreductions to selling prices and increased incentives which,in turn, created pressure on our operating margins.

During September the deepening of the banking crisis,both in the US and UK,had a further impact on consumersentiment and an increase in the rate of price decline.The impact was a further 10% reduction to the underlyingselling price for the second half of the year.

As a result of the early management decisions we had taken,we reduced debt in the second half of the year to leave uswith total borrowings of £599m, down from £906m at thehalf year.This debt reduction was assisted by a corporation taxrepayment received in November from HMRC of c.£150m.

The continued deterioration of the housing market led usto review the value of our land and work in progress.We announced a provision of £40m at the time of our halfyear results.However,with the worsening of the bankingcrisis and its growing impact on the economy andemployment,we experienced poorer market conditionsagainst which we have assessed the net realisable value ofour land holdings.This exercise has resulted in an overallprovision requirement of £652m,which is in line with theguidance given in our Interim Management Statement inOctober 2008.

The continued weakening of the market has resulted infurther restructuring and a reduction in our staffing levels toc. 2,300, a process which is now complete. Since early 2008we have reduced our operational and administrative staff byc.55%.However,we retain our strong geographical coveragewith 25 regional offices.

RefinancingIn order to ensure the business has a secure long termplatform from which to operate,we have agreed new termsand conditions for the amendment of our existing creditfacilities.Our revised UK banking agreement provides a threeyear committed facility from the combination of our existingrevolving credit facility and a new Forward Start Facility withour key banking partners.The Forward Start Facility matureson 31 March 2012.We have also taken the opportunity toadjust some of our covenants to reflect the currentenvironment for both the UK revolving credit facility and theprivate loan notes we have in issue. Final documentation iswell advanced.


Performance Review

8


Divisional StructureIn order to maintain our capability for the future we haveretained three divisions and maintained the three core brands:Persimmon,Charles Church andWestbury Partnerships.Wehave reduced the number of our operating businesses from 36to 25 with a number of operating businesses dual brandingPersimmon and Charles Church.

North Division

The division completed 2,753 homes (2007: 5,197).Thisreduction was as a result of the slower economy and poorerconsumer sentiment experienced in theYorkshire and NorthWest regions. In Scotland the market remained stronger inthe first half although we experienced a reduction in activityduring the second half of the year. Prices remained resilient inthe North East as a result of our existing competitive pricingstrategy.

We have reduced the number of operating businesses fromfifteen to eight and this reduction has been evenly distributedthroughout the division. In order to balance the Group’svolumes, the NorthWest region was transferred into theNorth division from the Central division.We retain twooperating businesses in Scotland,with our Partnerships brandoperating from theWest Scotland office and Charles Churchbrand operating from the East Scotland office.

The average selling price for the North division fell to£157,157 a 10% reduction on prior year.We completed420 affordable homes in the North which equates to 15%of the homes sold in the division.

Central Division

The number of homes sold in this division was 2,748 (2007:4,224).The average selling price reduced from £176,672 in2007 to £164,614.

The Central division housing market has been stronger inthe outskirts of London and the Shires, but pricing has beenmore competitive in and around Birmingham, particularlyin the apartment market.We have retained eight operatingbusinesses in the Central division, a small reduction fromour previous level of ten businesses.

We have been successful in completing 780 affordable homesequating to 28% of homes sold in the division.We achievedparticularly strong performances from the East Midlands andAnglia companies,which have a longer established record inthis market.

Performance Review continued


9


Our geographicspread enhancesthe number of salesopportunities.

Above Persimmon Homes, Saltersgate, Lugton, East ScotlandBelow Charles Church, St Paul’s on the Green,Haywards Heath, East Sussex

South Division

In this division there has been a 33% reduction of homessold to 2,436 (2007: 3,609) and of these, 547 were affordablehomes,which represents 22% of the division’s legalcompletions. For Persimmon, this was the strongestperformance of the three divisions in terms of maintainingsales volumes,whilst pricing has remained under pressurewith an underlying reduction of 7%.This stronger volumeperformance has resulted in only two operating businessesbeing closed.This division retains nine businesses.

Charles Church

Despite challenging conditions the Charles Church brand hasperformed well completing 1,924 homes (2007:2,579),withthe volume of homes sold increasing in Southern andWales,where we legally completed three large apartment schemes thathad strong forward sales from 2007.The reduction in thenumber of homes sold year on year by Charles Church was lessmarked than for Persimmon, although the average sales pricereduced by 13% to £222,535 as compared to £257,009 in2007.We completed 301 affordable homes from the CharlesChurch business representing 16% of its total output.

Westbury Partnerships

Our specialistWestbury Partnerships operation is continuingto grow having completed 341 units (2007: 296), a 15%increase on 2007 figures.The team continues to develop itsclose working relationships with a number of HousingAssociations and has successfully completed schemes inBristol and Portishead,which should lead to further business

in these locations in the future.Westbury Partnerships hasrecently been granted preferred bidder status with SarsenHousing Association for a PFI scheme of 400 homes inWestWiltshire.

In 2008 the Persimmon Group completed 2,389 affordablehome units, an increase of 22% over the prior year.As aGroup we recognised the need for the expansion ofaffordable housing in this country and therefore our decisionto invest in this activity has proved to be particularlybeneficial when the general housing market is so difficult.Our close working relationship with Homes & CommunitiesAgency and strong contacts with a number of substantialHousing Associations throughout the UK will enable us tosustain affordable housing volumes for the Group in 2009.

Space4

This has been a very challenging year for the Space4 businesswhich completed 1,238 units compared to 2,629 in 2007.This reduction is a combination of reduced demand from thePersimmon Group and a loss of sales to external purchasersdue to a lower level of demand for new homes. In order tomeet increasing sustainability requirements for our newhomes and improve operational efficiency Space4 hasdeveloped a new Eco-housing range which has been wellreceived by both our business and external partners and hasresulted in an increase of our forward order book to c. 1,900units compared to c. 1,550 units a year ago.



10


< £150,000 £150,000 to £199,999

£200,000 to £249,999

> £250,000

32 31

18 19

27

19

2727

Detached

1 Source NHBC – New House Building statistics (2008 calendar year).

Semidetached

Town house Apartment Bungalow

21

15

32 31

1 2

14

20

50

14

Landbank

Currently our landbank stands at 69,279 plots owned andunder control.This compares to 78,863 plots in 2007.Basedon current output this equates to 6.8 years’ land supply andprovides us with significant flexibility.

Since last April we have reviewed the Group’s entire landholding and have been very selective when deciding whichsites we propose to start developing. In light of the currentmarket conditions we have taken the opportunity to re-plan anumber of sites, reducing the number of apartments andreplacing them with more marketable traditional two andthree storey family homes.On our larger strategic housingschemes we are negotiating revisions to Section 106 planningobligations for infrastructure with local authorities to reducethe impact of cash flow requirements for these schemes.


Sustainable Homes

Our commitment to build sustainable homes remains.Our approach to sustainability is a practical one and weincorporate proven technology into many of our homes tomake them more energy efficient. In 2008 we built 1,653homes to the Eco-homes standard, representing over 16%of all the new homes we completed, an increase of over 7%on the previous year.

Waste

We continue to monitor the efficiency of our buildingoperations by monitoring the amount of waste generated.We minimise waste generation through careful ordering ofmaterials and by using modern methods of construction.During 2008 we reduced the amount of waste generated perproperty completed to 8.9 tonnes, a reduction of over 6%.Most importantly we increased the amount of waste that werecycled to 70% resulting in only 2.7 tonnes of waste perhome going to landfill.



11


Building affordablehomes for all.

Westbury Partnerships affordable homes at:Above Sandfields, Lichfield, StaffordshireBelow MalvernVale,Malvern,Worcestershire

Health and Safety

The health and safety of our employees continues to be a toppriority for us.We take a proactive approach to managingrisk, based on assessment and prevention, and we work hardto embed this philosophy across the Group.Our policy hasbeen rewarded by a substantial reduction in the number ofincidents reported to the Health and Safety Executive underthe Reportable Injuries Disease and Dangerous OccurrencesRegulations (RIDDORs), reducing by 25% the number ofRIDDORs to 9.1 per 1,000 employees (2007: 12.2).

Employees

During the course of 2008 the restructuring of our businesshas unfortunately resulted in a significant proportion of ouremployees being made redundant.Our HR Department andmanagement teams have worked diligently to ensure thatredundancy consultations have been undertaken in a practicaland sympathetic manner, in accordance with the obligationsplaced on us.Notwithstanding this redundancy programme,we have continued to invest in training and development forour employees, particularly in the area of health and safetywhere we delivered 274 days of health and safety training.

I am particularly pleased that David Bullock, Site Manager atWyncliffe Gardens Cardiff won the NHBC Supreme Awardin the large housebuilder category of the NHBC Pride in theJob Awards.This demonstrates the business’ continuingcommitment to deliver quality homes to our customers.Indeed our customers’ satisfaction improved during the yearwith 89% of our customers confirming that they wouldrecommend Persimmon or Charles Church to a friend.

Current Trading Outlook

The Market

Despite the current economic climate we have seen anincrease in site visitors in January when compared with thelast quarter of 2008,which is typical for this time of year.Dueto the postponement of new site starts we have reduced thenumber of our developments to c. 420 which compares toc. 500 schemes in early 2008.Therefore, in the first few weeksof 2009 whilst total visitors are down on last year, the numberof visitors per site remains resilient.Cancellation rates havealso recently improved to a level of c. 17% (2008: c. 21%), animprovement on the c. 35% cancellation rate experiencedduring the last quarter of 2008. Sales rates in the first fewweeks of 2009 have picked up and are ahead of those



12


High levels ofcustomer serviceand trust remainessential.

experienced through the second half of last year.However,the market is still very competitive and prices, hence margins,are under pressure.

We are encouraged by the Government’s new HomeBuyDirect Scheme. Persimmon has been successful in beingallocated one of the largest shared equity grant allocations forc. 2,800 properties on c. 200 sites under the HomeBuy DirectScheme.The scheme will enable more buyers to purchase aPersimmon or Charles Church home by allowing them toborrow a minimum of 70% of a property’s price,with theremaining 30% of the price being provided equally by theGovernment and Persimmon as shared equity.

Our own shared equity scheme has also been popularwith purchasers and we believe this will provide a goodsource of sales in the future.The value of the anticipated cashreceipt of the shared equity debt is recognised on the balancesheet at fair value at inception, in line with InternationalAccounting Standard 18 - Revenue.This has resulted in areduction in turnover and profits of £9.8m in 2008,whichwill reverse over future years as a proportion of the deferredelement of sale proceeds will be recognised annually asinterest receivable.

Part exchange continues to be a popular and successfulmarketing tool for our customers.The value of part exchangestock properties owned has reduced significantly to c.£55m,from a peak of £150m in 2008.

At this stage we have not seen any increase in the provisionof mortgage lending.The Government’s recent announcementregarding theAsset Protection Scheme for the Banks, andconfirmation that Northern Rock will recommence mortgagelending, should benefit the market in the longer term.

We currently have forward sales of c.£698m,which totals4,907 units and of these sales c. 40% are contracted.We arescheduled to open c. 60 new developments in the first sixmonths of 2009 which will increase availability of newhomes in new locations.

SummaryThis has been a year of transition for the Persimmon Group,in which the business has changed its focus and deliveredgood cash flow generation in difficult circumstances.Thisstrategy is set to continue with further debt reductionsexpected in 2009.

The Group has now successfully been restructured to a sizeappropriate to the level of current demand,whilst retainingthe ability to expand in the future.Our continued focus onaffordable housing will generate positive cash flows for thebusiness.The Government’s HomeBuy Direct Scheme and alow interest rate environment should assist our sales this year.However, the current economic situation, in particular thelatest information regarding job losses and the continuedmortgage shortage, indicate that 2009 will be a challengingyear for both the Group and the industry as a whole.

The Group retains a strong balance sheet with assets of over£1.55bn after the impairments previously mentioned and ayear end gearing of 39%. In addition, our recently agreedrefinancing gives the business a strong platform forthe future.

Finally, I would like to thank all our staff for their loyalty andcommitment during this transitional period for the business.With our experienced and dedicated management teams theGroup is well placed to meet the challenges in the future.

Mike Farley Group Chief Executive2 March 2009



13


Performance

The performance in 2008 reflectsone of the most challengingenvironments our Group and ourindustry has faced.The keyfeatures reflected in the results are:• Unprecedented market conditions

• Significant deterioration in trading

• Major restructuring of the business

• Large asset impairments

• Cessation of dividends

Performance features are:

• Unit completions decreased by 36% to 10,202(2007: 15,905)

• Revenue was down 42% to £1,755.1m (2007:£3,014.9m)

• Average selling price reduced 8.7% to £172,994*

(2007:£189,558)

• Profit from operations before exceptional items andgoodwill impairment decreased 70% to £198.3m(2007:£657.3m) to deliver an operating margin of11.3% (2007: 21.8%)

• Exceptional items of £904.8m

• Loss before tax was £780.0m (2007: profit £582.7m)

• Adjusted earnings per share before exceptional itemsand goodwill impairment was 35.3p (2007: 138.3p)

• Basic earnings per share was -208.3p (2007: 137.5p)* Stated before IAS 18 adjustment of £9.8m to fair value shared equity sales (2007:£nil).

Exceptional itemsThe Group recognised a number of items separately onthe basis that they are material to an understanding of itsfinancial performance, either by their nature or their size,and significantly distort the comparability of financialperformance between periods.

Exceptional items comprised an impairment of inventoriesof £652.3m, an impairment of goodwill of £201.0m, animpairment of trade receivables of £35.9m and restructuringcosts of £21.9m offset by interest receivable of £6.3m.

Impairment of inventories

During the year,management conducted a review of thecarrying value of inventories in accordance with currentaccounting standards.This review incorporated all sitesheld with the benefit of planning, including those not yetstarted. It was carried out on a site by site basis usingvaluations incorporating forecast sales rates and selling pricesas assessed at the balance sheet date. In addition, considerationwas given to strategic sites without the benefit of a planningpermission and held for longer term development, to reducethe carrying value to net realisable value.

As a result of the review, the Group recognised animpairment of the housing landbank of £552.0m andassociated work in progress and professional fee balancesof £100.3m.

Impairment of intangibles

At 31 December 2007, the Group recognised goodwill of£406.4m arising from the acquisition of Beazer in 2001 andWestbury in 2006, of which £50.0m had been allocated tothe Charles Church brand and the remainder to strategicland holdings. In addition, there was an asset of £60.0mrelated to the acquiredWestbury brand.


Financial Review

14


Mike Killoran,Group Finance Director

In accordance with current accounting standardsmanagement conducted its annual review of the carryingvalue of goodwill and intangible assets.This was achieved bycomparing discounted future cash flows with the carryingvalue of assets at the balance sheet date. Further details areincluded in note 15 to the financial statements.

As a result of the review,Westbury goodwill was impaired by£188.5m (of which £0.5m was considered as underlyingimpairment) and the Charles Church brand suffered anexceptional impairment of £13.0m leaving carrying valuesof £38.1m and £37.0m respectively.The carrying value ofBeazer goodwill allocated to strategic land holdings of£126.3m (after £1.3m of underlying impairment) and theWestbury acquired brand of £60.0m were not subjectto any exceptional impairment charge.

Impairment of trade receivables

During the year ended 31 December 2008,we have writtenoff £24.5m of option fees, deposits and pre-acquisition fees,where we have decided not to pursue a number of landpurchases.

In addition,we have impaired the carrying value of otherreceivables by £11.4m to recognise the difference betweenthe carrying amounts of these receivables and the presentvalue of any expected recoveries.

Restructuring costs

During the year the Group incurred £21.9m of restructuringcosts.These include redundancy costs and contract severancecosts, arising from the reorganisation of the Divisions, andcosts related to office closures.

TaxThe Group corporation tax credit for the year was£155.0m, an effective rate of (19.9%).When the impairmentof goodwill of £202.8m,which is not allowable for taxpurposes, is excluded the effective rate reduces to (27.3%).The tax credit of £155.0m includes £134.3m of exceptionalprior year adjustments arising from the carry back ofcorporation tax losses to 2007.The carry back of lossesresulted in a net corporation tax cash receipt in the yearof £106.2m.

The effective corporation tax rate (before the impairmentof goodwill) of (27.3%) is higher than the standard rate of(28.5%) because the Group has not recognised deferred taxon corporation tax losses carried forward, pension obligationsand share based payments together with disallowableexpenditure, partially offset by a prior year tax credit.

DividendsThe Board has decided that no final dividend will be paidfor the year ended 31 December 2008.Therefore, the totaldividend for the year is the interim dividend of 5.0 penceper share,which was paid in October 2008.The Board willdetermine any future dividend policy in the light of marketconditions, the Group’s trading performance and availablecash resources.

Balance sheetThe net assets of the Group decreased by £790.2m to£1,555.2m (2007:£2,345.4m) with net assets per sharedecreasing by 34% to 518.0p (2007: 781.4p).The decreasereflects the retained loss of £625.0m, after the charging ofexceptional items including inventory and goodwillimpairments,£113.1m of dividends paid in the year, a posttax movement in the pension deficit of £55.4m, and otherreserve movements of (£3.3m).

Our landbank of plots owned and under control at31 December 2008 at 69,279 plots (2007: 78,863 plots)represented c. 6.8 years supply.The Group’s book valueof land was £1,779.5m (2007:£2,346.1m), a decrease of£566.6m.This decrease includes land additions of £399.0moffset by land usage and the impairment of land as explainedabove. For the foreseeable future, it is our intention to onlycommit cash to land purchases where the land is alreadyunder contract.

Work in progress of the Group at 31 December 2008 was£634.0m (2007:£814.8m).We are actively reducing ourinvestment in work in progress through tight control overbuild and our focus on selling through stock units.As a resultthe value of our work in progress investment has fallen by£180.8m since the end of 2007 including the impairmentdetailed above.

The value of part exchange properties held at the year endwas £54.5m (2007:£146.9m). In the light of current marketconditions, the Group is actively managing the use of partexchange as an incentive,with the intention of tradingthrough these existing properties.

Goodwill and intangible assets decreased by £203.1mto £264.7m primarily reflecting the impairmentsexplained above.

Financial Review continued


15


The deficit on our defined benefit pension schemes,Persimmon plc Pension and Life Assurance Scheme and theProwting Pension Scheme, increased by £34.6m in the yearto £95.3m.This reflects the reduction in the value of assetsdue to the current market turbulence mitigated in part bylower pension liability valuation due to elevated “AA” ratedcorporate bond yields.

Trade and other payables decreased by £157.5m to £683.9mreflecting a £132.1m decrease in trade payables arising fromthe significant reduction in build in the period as the Groupliquidated existing stock units.

Group net debt (borrowings net of cash balances, includingforward currency swaps and excluding finance leases) hasdecreased by £122.3m to £598.8m (2007:£721.1m).

Other assets, net of other liabilities, have increased by £7.5mduring the year.

Borrowings and cash flowGearing was 39% as at 31 December 2008 (2007: 31%)on net debt of £598.8m (2007:£721.1m).Gearing hasincreased despite lower borrowings due to the exceptionalitem related reduction to net worth.

The decrease in net debt of £122.3m during the year ismade up of an outflow of £184.4m in the first half ascommitted land purchases were completed and an inflow of£306.7m in the second half.The inflow during the secondhalf reflects our strategy of decreasing land expenditure andwork in progress whilst liquidating stocks of new build andpart exchange properties.Other cash movements includenet interest payments of £63.5m, tax receipts of £106.2mand dividend payments of £113.1m.

Free cash flow, stated after interest and tax amounted to£239.2m (2007:£67.0m).The Directors continue to befocused on reducing the level of borrowings and maximisingfree cash generation.



16


Net assets per share (pence)

2004 2005 2006 2007 2008

486.5

574.9

680.2

781.4

518.0

1 Before goodwill impairment and exceptional items. Interest charge excludes imputedinterest on deferred land creditors.

Interest cover (x)1

2004 2005 2006 2007 2008

18.9

21.5

10.2 10.0

3.0

Landbank (plots)

2004 2005 2006 2007 2008

59,94763,336

80,085 78,863

69,279

Treasury policy and related risksThe Group’s objectives when managing capital are tosafeguard the Group’s ability to continue as a going concernin order to provide returns for shareholders and meet itsliabilities as they fall due whilst maintaining an appropriatecapital structure to reduce the cost of capital.The Group canmanage its short term and long term capital structure byadjusting the level of ordinary dividends paid to shareholders,issuing new share capital and arranging debt to meet liabilitypayments.

The Group finances its operations through a combination ofshareholders’ funds, bank loans, overdrafts, cash in hand andprivate placement loan notes.The Directors ensure that thereare appropriate controls over the purchase of land and levelsof work in progress.Head office manages the drawn creditlines of each operating business,which are allocated oncommercial terms,within overall facility limits which maybe subject to offset arrangements.Head office arranges allborrowing facilities and invests short term cash deposits atcompetitive rates when available.

The Group’s operations and debt financing expose it to avariety of financial risks that include the effects of changesin debt market prices, credit risks, liquidity risks, foreigncurrency risks and interest rates.

We address liquidity risk by ensuring we maintain secure,flexible facilities with an extended maturity profile from avariety of sources.There is a regular, detailed system for thereporting and forecasting of cash flows from the operationsto Group management so as to ensure that risks are promptlyidentified and appropriate action taken.

In addition, the Group has in place a risk managementprogramme that seeks to limit the adverse effects of the otherrisks on its financial performance in particular the use offinancial instruments, including debt and derivatives, to fixinterest rates and currency rates.We do not set a pre-definedbalance between fixed, and floating, interest rate debt.TheGroup has not entered into any new swap arrangementsduring the period.The Group does not use derivativefinancial instruments for speculative purposes.

Details of the Group’s borrowings and financial instrumentsare disclosed in notes 20 and 22 to the financial statements.



17


Borrowing facilities and refinancingAt the year end, the Group’s committed facilities had anaverage life of 2.6 years, headroom of £735m and wecontinued to operate within all of our banking covenants.However,with the progressive deterioration in marketconditions during 2008, the Directors assessed that theGroup’s liquidity risk had increased in relation to compliancewith the interest cover covenant (based on income statement)as set out in the terms of the Company’s existing creditfacilities.Accordingly, the Directors have taken pre-emptiveaction to amend certain covenants including but not limitedto the interest cover covenant, (now based on operating cashflows), conditions within the Group’s funding arrangementsand to reduce the level of committed facilities to reflect theGroup’s forecast requirements.

On 27 February 2009, the Company reached agreement withits syndicate of banks providing the current revolving creditfacility on amendments to the amount, terms and conditionsof its existing credit facilities.The Company has also agreed anew revolving credit facility.This Forward Start Facility of£322m will become available for drawing on 24 November2010 on the maturity of the existing facility and matures on31 March 2012. Full documentation has been signed relatingto these facilities and the amended terms and conditionsbecome final upon the private placement investordocumentation being signed.

In addition, on 27 February 2009 the Company reachedagreement in principle with its private placement investorson amendments to the terms and conditions of its existingcredit facilities.The full amendment documentation iscurrently in the process of being finalised.

Taken together, the Company will have committed fundinglines of £1,085m at the outset of these arrangements(26 February 2009:£1,235m), reducing to £560m during2011.On the basis of the Company’s working capitalprojections, the Directors believe that these new facilitiesprovide ample headroom and support for the continuingeffective management of the business.

Mike Killoran Group Finance Director2 March 2009


Since the inception of ourapproach to corporate responsibilityand the emergence of the broadersustainability agenda we havecontinued to develop our strategyand communicate our approach toour stakeholders to reflect ourresponsibilities as a nationalhousebuilder.Our CorporateResponsibility Committeecoordinates activities across theGroup with implementation beingcarried out by our managementteams in each operating business.

Building Sustainable HomesOur approach is to imbed sustainability issues into all aspectsof the construction of new homes.We do so in a practicalway to make sure that, as we create sustainable homes andcommunities, they are both affordable to our customers andefficient in environmental terms.

Whilst we do not aim for a fixed percentage of brownfielddevelopment, favouring a flexible approach based on demand,the decontamination and remediation of brownfield siteshas a very positive impact on the local environment. In 200862% of the homes we built were on previously developedbrownfield land (2007: 52%) which exceeded theGovernment’s target.

Overall the homes that we built during 2008 weresignificantly more energy efficient than the homes that wewere building a decade ago.The energy efficiency of homesis measured by a Government standard assessment procedure(SAP) and during 2008 the average SAP rating for allproperties we completed was 86 out of a maximum ratingof 100.

During the year we constructed 1,653 homes to Eco-homesstandards, being over 16% of the homes we built, a significantincrease on the 10% of homes we constructed to this standardin 2007.The proportion of our Eco-homes constructed to“very good”or “excellent” standard increased by 74%.

Recent changes in the SAP ratings scales and theintroduction of the Code for Sustainable Homes are beingmonitored and assessed by our commercial directors,who provide advice and guidance to our operating businesseson their implementation.

During the course of 2008 we have continued to promotethe use of modern methods of construction techniqueswith our pre-fabricated timber frame manufacturingsubsidiary Space4 producing our new and highly efficientEco-housing range.


18



19


Environmental ManagementWe have an Environmental Management System (EMS)that ensures our Environmental Policy is integrated intoour operational activity. Space4 has its own EnvironmentalManagement System certified to ISO 14001.Theimplementation of our policy and procedures is directlymonitored by our Health and Safety Management teamsand we are pleased to report that during 2008 we had noenvironmental prosecutions.

The generation and disposal of waste is our most significantoperational environmental impact.We have a dedicatedWaste Management policy, developed in consultation withthe Government’sWaste and Resources Action Programme(WRAP) which is implemented across the Group. Inaddition, since April 2008 all of our new sites have SiteWasteManagement Plans ensuring that our approach to wastemanagement on each new site is documented with detailedrecords maintained.

We minimise the waste we produce through careful orderingof materials and if possible by pre-specifying the size anddimensions of components, such as pre-fabricated supportbeams rather than traditional timber joists.All waste generatedis subject to either onsite or offsite segregation and recycling.

In 2008 our sites generated just over 91,000 tonnes ofconstruction waste, a 40% reduction on the prior year,with the amount of waste that we recycled increasingto 70% (2007: 68%).Whilst we are pleased with thisperformance, a better indication of our efficiency is theamount of waste generated per home completed. In 2008we generated 8.9 tonnes of waste per home completed,compared to 9.5 tonnes in 2007, a reduction of just over 6%.These figures demonstrate that even though we built fewerhomes in 2008,we are building them more efficientlyand producing less waste as a consequence.

In accordance with our Climate Change Position Statement,we can again report on operational carbon footprint relatingto emissions produced through the use of fuel in our officesand our company vehicle fleet.Our CO2 emissions havereduced by 19% to 11.8 thousand tonnes (2007: 14.7thousand tonnes).During 2008 we have for the first timecollated data on water use in our offices and we are currentlyundertaking a review of this data and how we use wateracross our businesses.

Sustainability issuesremain key in adiscerning market.

Above QE3 building,GlasgowBelow Space4 homes

Corporate Responsibility continued

Working with Local CommunitiesOur operating businesses are firmly rooted in thecommunities which they serve.We have a regionalstructure which allows our operating businesses to act in asemi-autonomous way.This means we are able to respondin a collaborative way to take into account the needs of thelocal communities.

As an example at Ironstone in Lawley,Telford we haverecently opened a visitor centre at the new sustainable villagewe are developing with our joint venture partners.The visitorcentre will play a pivotal role in helping to create andstrengthen a community spirit and bring the people ofIronstone together in actively managing theirneighbourhood.

We substantially increased the number of social affordablehomes we built to 2,389, representing over 23% of our homessold last year.We have also continued to promote our sharedequity scheme which helps first time buyers to purchase theirfirst property.This is a scheme where the Group retains asubstantial equity share enabling first time buyers to obtainmortgages at favourable interest rates.

We also continued our charitable support and in particular,our support of theYork Minster Fund and the training ofapprentices in the ancient crafts used to repair and conservethe Minster.

Promoting Health and SafetyWe use a proactive approach based on the risk assessmentprinciple of implementing reasonably practical health andsafety control measures, to minimise the likelihood ofincidents happening on our building sites and to promote ahealthy and safe working environment for our employees.Health and safety is incorporated into our daily managementprocesses across our operating businesses to ensure thatmanagement and staff understand their responsibilities.During the year we also carried out 274 days of specialisttraining.

We are pleased to report that during 2008 the numberof incidents reportable under the UK Reporting ofIncidents Disease and Dangerous Occurrences Regulations(RIDDORs) fell from 172 in 2007 to 78 in 2008.Whilstthis was in part due to fewer houses completed and thereforefewer workers on site, there has been a significant reductionin the number of reportable incidents per home wecompleted. In 2007 the Group experienced an averageof one RIDDOR per 92 house completions,which hadimproved to one RIDDOR per 131 house completionsin 2008, showing that our sites are significantly safer.



20


Ironstone visitors centre



21


Waste generated per home sold (tonnes)

2005 2006 2007 2008

10.1

9.09.5

8.9

Customers that would recommend Persimmon to a friend (%)

2005 2006 2007 2008

86 86 8689

RIDDORS* (per 1,000 employees)

2005 2006 2007 2008

10.3

12.912.2

9.1

Non-financial Key Performance Indicators

* The Reportable Injuries Disease and Dangerous Occurrences Regulations.

Caring for our CustomersWe continue to develop our management systems to ensurethat the quality of the houses that we build for our customersimproves and the service that they receive satisfies theiraspirations.We undertake regular customer satisfactionsurveys, the results of which we monitor to ensure that weare maintaining our high standards.

We are pleased to report that during 2008 the numberof customers who would recommend Persimmon to afriend increased by 3% over the prior year to 89%.This demonstrates our ongoing commitment to ensuringthat customers have the best possible experience whenpurchasing a Persimmon or Charles Church home.

ConclusionAlthough 2008 has been a very challenging year for ourbusiness,we have again shown our commitment to buildingsustainable homes and we remain committed to our keyresponsibilities set out in our sustainability strategy.

Further information is contained within our SustainabilityReport 2008 which can be found on our website atwww.persimmonhomes.com, together with informationon our sustainability and other policies.

Neil Davidson ChairmanCorporate Responsibility Committee2 March 2009


Board of Directors

22

1

2

3

4

5

6

7

8

9

1. John WhiteGroup Chairman (age 57)

JohnWhite was appointed Group Chairman in April 2006,previously having been Group Chief Executive for 13 years.He has spent all his working life in the housing industry.After joining Persimmon in 1979 he was responsible forestablishing the Group’s operations in the Midlands, followingwhich he was appointed Regional Chairman for the South.MrWhite was appointed to the Board in 1986 and is Chairmanof the Nomination Committee and the Risk Committee.

2. Mike Farley BSC (HONS.) MCIOBGroup Chief Executive (age 55)

Mike Farley was appointed Group Chief Executive inApril 2006 following a very successful period as ChiefExecutive of the original South Division.He joinedPersimmon in 1983 and was appointed to the Board in 1989.Mr Farley is a member of the Chartered Institute of Buildingand was responsible for establishing theWessex operatingbusiness and for developing the business in the Midlands.Mr Farley is a member of the Risk Committee.

3. Mike Killoran BA (HONS.) ACAGroup Finance Director (age 47)

Mike Killoran joined the Company in 1996 and wasappointed to the Board in January 1999.A charteredaccountant by profession,Mr Killoran worked inmanufacturing, distribution and retail sectors beforejoining the Group.He took over his present role inApril 1999 and is a member of the Risk Committee.

4. David BryantGroup Development Director (age 56)

David Bryant joined the Company in 1985 and wasappointed to the Board in 1991.Appointed GroupDevelopment Director on 1 July 2005 he has responsibilitiesfor a number of Group functions including Sales andMarketing,Media and PR,Health and Safety andProcurement.

Mr Bryant is also Chairman of the East Midlands,Angliaand Essex operating businesses.

5. Hamish Leslie MelvilleNon-Executive Director (age 64)

Hamish Leslie Melville is a Managing Director andChairman of the European Investment Banking Committeeof Credit Suisse Securities (Europe) Limited.He is Chairmanof The Mercantile InvestmentTrust Plc.Mr Leslie Melvillewas appointed to the Board in 1995 and is a member of theNomination Committee.

6. David ThompsonSenior Independent Director (age 54)

DavidThompson is Chairman of Marston’s PLC andChief Executive of Anglia Maltings (Holdings) Limited.He is also a non-executive director of Caledonia InvestmentsPlc andTheTribal Group Plc.Appointed to the Board inAugust 1999, he is the Senior Independent Director,Chairman of the Audit Committee and a member of theNomination and Remuneration Committees.

7. Neil Davidson CBENon-Executive Director (age 58)

Neil Davidson is Chairman of the Nickerson RothwellGroup,Leicestershire County Cricket Club Limited andYorkshire Carbon Liaison, a division ofYorkshire Forwardand a Director of Emerging Media.He was previouslyChief Executive of Arla Foods UK PLC until he retired inJune 2005.He is Chairman of the Corporate ResponsibilityCommittee and a member of the Audit and RemunerationCommittees.

8. Nicholas WrigleyNon-Executive Director (age 53)

NicholasWrigley is Managing Director of RothschildLondon and a member of its Global Investment BankingCommittee and Global Management Committee.He hasover 25 years’mergers and acquisitions experience atRothschild including three years in Australia. Before joiningRothschild he qualified as an accountant.MrWrigley wasappointed to the Board on 1 February 2006 and is Chairmanof the Remuneration Committee and a member of theAudit and Nomination Committees.

9. Richard PennycookNon-Executive Director (age 45)

Richard Pennycook was appointed to the Board on 14 March2008.A chartered accountant and graduate of Bristol University,he has been the Group Finance Director of Wm MorrisonSupermarkets PLC since 2005. Previous roles includeGroup Finance Director of RAC plc, Finance Director ofJ DWetherspoon plc,CEO of Welcome Break HoldingsPLC and Non-Executive Director of Richer Sounds plc.Mr Pennycook was appointed to the Audit Committee on19 June 2008.


23

The Directors present their Annual Report and the financial statements for the year ended 31 December 2008.

Principal activitiesPersimmon Plc is the holding company of the Persimmon Group of companies (the ‘Group’) and is a public company, listed on the London StockExchange.The principal activity of the Group is house building,which is carried out within England,Wales and Scotland and is unchanged from lastyear.The Group trades under the brand names of Persimmon Homes,Charles Church,Westbury Partnerships,City Developments and Space4.

Business reviewA review of the development and performance of the Group’s business during the year and the position at the end of the year may be found in theBusiness Review on pages 6 to 21 and in the Key Performance Indicators shown on pages 2 and 21 of this Annual Report.

A description of the Group’s future prospects, research and development, the principal risks and uncertainties facing the business and details of anyfinancial instruments are also contained within the Business Review.Details of the financial risk management objectives, policies and associated riskexposure are given in note 22 to the financial statements.

Results and dividend paymentThe Group’s revenue was £1,755.1m and its loss before taxation was £780.0m.

As a result of the continued focus on conserving cash due to the current market conditions, the Board does not recommend the payment of a finaldividend this year.This will result in a total dividend of 5p per share for the year (2007: 51.2p), being the interim dividend which was paid toshareholders on 17 October 2008.

Post balance sheet eventOn 27 February 2009, the Company reached agreement with its syndicate of banks providing the current revolving credit facility on amendments tothe amount, terms and conditions of its existing credit facilities.The Company has also agreed a new revolving credit facility.This Forward StartFacility of £322m will become available for drawing on 24 November 2010 on the maturity of the existing facility and matures on 31 March 2012.Full documentation has been signed relating to these facilities and the amended terms and conditions become final upon the private placementinvestor documentation being signed.

In addition, on 27 February 2009 the Company reached agreement in principle with its private placement investors on amendments to the termsand conditions of its existing credit facilities.The full amendment documentation is currently in the process of being finalised, and whilst not withoutrisk the Directors believe that this process will be completed promptly.The Directors remain confident that should the need arise alternative fundingarrangements can be made.

Taken together, the Company will have committed funding lines of £1,085m at the outset of these arrangements (26 February 2009:£1,235m),reducing to £560m during 2011.On the basis of the Company’s working capital projections, the Directors believe that these new facilities provideample headroom and support for the continuing effective management of the business.

Directors and Directors’ interestsThe Directors of the Company and their biographical details are shown on page 23.All of the Directors served for the whole of the year exceptRichard Pennycook who was appointed to the Board on 14 March 2008.None of the Directors have any contracts of significance with theCompany.Details of the executive Directors’ service contracts are given in the Remuneration Report on page 30.

The beneficial and non-beneficial interests of the Directors in the shares of the Company at 31 December 2008 and as at the date of this report aredisclosed in the Remuneration Report on page 32.Details of the interests of the Directors in share options and awards of shares can be found onpages 32 and 33 within the same Report.

In accordance with the Company’s Articles of Association, JohnWhite,DavidThompson and NicholasWrigley will retire by rotation at theCompany’s Annual General Meeting on 23 April 2009 and, being eligible, offer themselves for re-election.

Hamish Leslie Melville is standing for annual re-election in accordance with provision A.7.2 of the Combined Code on Corporate Governance2006, as he has served on the Board in excess of nine years.The Directors’ reasons for supporting his re-election are set out on page 35 of theCorporate Governance Report.

Qualifying third party indemnity provisions and qualifying pension scheme indemnity provisionsThe Company has not issued any qualifying third party indemnity provision or any qualifying pension scheme indemnity provision.

Persimmon PlcAnnual Report December 2008

Directors’Report

24

Significant shareholdingsThe Company has been notified, pursuant to Disclosure &Transparency Rule 5, of the following interests of 3% or more of the voting rights of theCompany as at 2 March 2009:

Number ofordinary Nature of

Name shares Percentage holding

Allianz SE 18,098,600 6.03% Direct & Indirect

Lloyds Banking Group plc 16,117,168 5.37% Direct & Indirect

Templeton Foreign Fund 15,276,482 5.09% Indirect

AXA SA 14,923,488 4.97% Direct & Indirect

D H Davidson & family 14,577,539 4.87% Direct

Prudential plc group of companies 12,005,262 3.99% Direct

Legal & General Group Plc 11,946,417 3.97% Direct

Credit Suisse Securities (Europe) Limited 11,023,568 3.67% Direct

Barclays Global Investors 10,698,064 3.54% Indirect

Significant agreementsThe following significant agreements contain provisions entitling the counterparties to exercise termination or other rights in the event of a changeof control of the Company:

• Under the syndicated loan facility agreement dated 24 November 2005, as amended and restated by further agreement on 27 February 2009, allamounts become due and payable under the terms of the facility if any person or group of persons acting in concert gains control of the Company.Similar provisions apply to the Forward Start Facility dated 27 February 2009 disclosed in notes 2 and 34 to the accounts.

• Under the private placement of senior loan notes detailed in note 20 to the financial statements (the ‘Loan Notes’), the holders of the Loan Noteshave an option upon being notified by the Company within five business days of the change of control to require the Company to prepay theLoan Notes held by each holder. If the holders exercise this option, the amount of prepayment is the principal amount of the Loan Note togetherwith interest accrued thereon to the date of the prepayment.The date of prepayment must be within 65 days of the change of control.

Control has the same meaning as S416 Income and CorporationTaxes Act 1988 and acting in concert has the meaning given to it in theCity Code onTakeovers and Mergers.Change of control is deemed to occur if at any time any person, or group of persons acting in concert,acquires control of the Company.

Employee involvementThe Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them asemployees and on the various financial and economic factors affecting the performance of the Group. Each of the Group’s operating businessesmaintains employee relations and consults employees as appropriate to its own particular needs.

Regrettably in view of the significant downturn in the housing markets the Group had to carry out a large redundancy programme during 2008which included several operating business closures.During the year all employees involved in redundancy programmes have been afforded fullconsultation in accordance with current employment legislation.

The Company makes various benefit schemes available to employees, including a Save AsYou Earn Scheme which encourages the involvement ofemployees in the Company’s performance.All permanent employees are encouraged to participate, subject to having six months’ service at the dateof invitation.

Equal opportunitiesEqual opportunities for training, career development and promotion are available to all employees regardless of race, colour, nationality, ethnic origin,religion, sex, gender, sexual orientation,marital status, age or disability.Applications for employment by disabled persons are always fully consideredwith appropriate regard to the aptitude and abilities of the person concerned. In the event of an employee becoming disabled every effort is made toensure that their employment with the Group continues, that appropriate training is arranged and/or any reasonable adjustments are made to theirworking environment.

Creditor payment policyThe Group agrees payment with its trade creditors and other suppliers on an individual contract basis at the time the goods and services areordered rather than following a standard code.The policy is to abide by the agreed terms once satisfied that the goods or services have beenprovided in accordance with the contract terms and conditions.The Company’s average creditor payment period at 31 December 2008 was 47 days(2007: 51 days).

Directors’Report continued


25

Charitable and political donationsThe Group as a whole has made donations of £89,000 to charitable organisations during the year. Further details of the Company’s communityinvolvement and charitable activities can be found in the Sustainability Report on our website at www.persimmonhomes.com.No politicaldonations were made during the year.

Acquisition of own sharesAt the Annual General Meetings held on 19 April 2007 and 24 April 2008 shareholders granted the Company authority to purchase up to anaggregate of 29,926,110 and 29,989,731 of its own shares respectively.

During the year ended 31 December 2008 the Company purchased 250,000 ordinary shares using the authority granted on 19 April 2007,with anominal value of £25,000 representing 0.08% of the issued ordinary share capital (excluding treasury shares) as at 2 March 2009, for a consideration(including expenses) of £1,715,160.The shares were purchased as part of the share buyback programme initiated on 22 October 2007 and are allheld in treasury.The Directors implemented the share buyback programme because they considered the weakness in share prices of companieswithin the house building sector provided an attractive opportunity for the Company to purchase its own shares at that time.During the year underreview, 290,378 treasury shares were transferred to employees to satisfy the exercise of share options/awards under the Group’s various share schemesfor a total consideration of £1,833,995.

At 31 December 2008 the Company had authority to purchase up to 29,989,731 of its own shares.This authority expires on 23 April 2009 anda resolution to renew this authority will be put to shareholders at the Annual General Meeting.

Annual General MeetingThe Annual General Meeting will commence at 12 noon onThursday 23 April 2009 atYork Racecourse,The Knavesmire,York.The notice of themeeting and an explanation of the ordinary and special business is given in the accompanying circular.

AuditorsA resolution for the reappointment of the auditors,KPMG Audit Plc,will be proposed at the Annual General Meeting.

Audit statementThe Directors who held office at the date of approval of this Report confirm that, so far as they are each aware, there is no relevant audit informationof which the Company’s auditors are unaware and that each Director has taken all the steps that he ought to have taken as a Director in order to makehimself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.This confirmation is givenand should be interpreted in accordance with the provisions of section 234ZA of the Companies Act 1985.

Articles of AssociationThe following description summarises certain provisions of the current Articles of Association of the Company (last amended by special resolutionon 24 April 2008 (the ‘Articles’) and applicable English law concerning companies (the Companies Act 1985 and the Companies Act 2006,together the ‘Companies Acts’)).This is a summary only and the relevant provisions of the Companies Acts and Articles should be consulted if furtherinformation is required.A copy of the Articles of Association may be obtained by writing to the Group Company Secretary at the Registered Office.

Any amendments to the Articles of the Company may be made in accordance with the provisions of the Companies Acts by way of specialresolution.

Share capitalThe Company has one class of share, being ordinary shares with a nominal value of 10p each.At 2 March 2009 the issued share capital of theCompany was 302,591,431 (including shares held inTreasury) ordinary shares with a nominal value of £30,259,143. Further details are providedin note 24 to the financial statements.

Shares may be issued with such preferred, deferred or other rights, or such restrictions,whether in regard to dividend, return of capital, voting orotherwise, as the Company may from time to time by ordinary resolution determine (or failing such determination as the Directors may decide),subject to the provisions of the Companies Acts and other shareholders’ rights.

Unissued shares are under the control of the Directors who may allot, grant options over, or otherwise dispose of them to such persons (includingthe Directors themselves) at such times and on such terms as the Directors may think proper, subject to the Articles, the Companies Acts andshareholders’ rights.At the AGM on 24 April 2008, shareholders gave the Directors authority to issue shares up to an aggregate nominal amount of£6,240,856 and to disapply pre-emption rights on the issue of shares up to an aggregate nominal amount of £1,512,957.These authorities willexpire at the conclusion of the Annual General Meeting on 23 April 2009.



26

Votes of membersOn a show of hands each member (being an individual) present in person or by one or more proxies has in total one vote and each member(being a corporation) present by either one or more proxies, or one or more duly authorised representatives (or both) has in total one vote.

On a poll, each member present in person or by proxy or (being a corporation) by a duly authorised representative has one vote for each shareof which he is the holder.

Details of employee share schemes are set out in note 24 and note 31 to the financial statements.TheTrustee of the Persimmon Employee BenefitTrust may vote or abstain as it sees fit.

All issued shares in the Company are fully paid and therefore there are currently no restrictions on voting rights.Votes may be exercised in person, byproxy, or in relation to corporate members by a corporate representative.The deadline for delivering either written or electronic proxy forms is notless than 48 hours before the time for holding the meeting.

Dividends and distributionsThe Company may by ordinary resolution declare dividends not exceeding the amount recommended by the Directors, subject to the provisionsof the Companies Acts.The Directors may pay interim dividends and any fixed rate dividend whenever the financial position of the Company, inthe opinion of the Directors, justifies its payment.

All dividends and interest shall belong and be paid (subject to any lien of the Company) to those members whose names shall be on the Registerof Members at the record date fixed in accordance with the Articles notwithstanding any subsequent transfer or transmission of shares.

Transfer of sharesAny member may transfer their shares in writing in any usual or common form or in any other form acceptable to the Directors and permitted bythe Companies Acts and the UK Listing Authority.

Appointment and replacement of DirectorsDirectors shall be no less than two and no more than fifteen in number.Directors may be appointed by the Company by ordinary resolutionor by the Board of Directors.A Director appointed by the Board of Directors holds office until the next following Annual General Meetingand is then eligible for election by the members.

Each Director shall retire from office at the first Annual General Meeting following his appointment and shall be eligible for reappointment.At eachAnnual General Meeting one third of the Directors shall retire from office and shall be eligible for reappointment. In any event each Director shallretire from office and shall be eligible for reappointment at the Annual General Meeting held in the third year following his last reappointment.A non-executive Director who has been in office for more than nine years consecutively shall retire at each Annual General Meeting and shall beeligible for reappintment.

The Company may by special resolution remove any Director before the expiration of his term of office.

The office of Director shall be vacated if (a) he resigns by notice in writing to the Company; (b) he offers in writing to resign and the Directorsresolve to accept such offer; (c) a bankruptcy order or an interim order is made against him or he makes any arrangement or composition with hiscreditors generally; (d) he is, or may be, suffering from mental disorder; (e) he is absent from meetings of the Directors for six successive monthswithout the permission of the Directors; (f) he becomes prohibited by law from acting as a Director; or (g) he is removed from office pursuant tothe Articles.

Powers of the DirectorsThe business of the Company shall be managed by the Directors who may exercise all the powers of the Company, subject to the Company’sMemorandum and Articles of Association, the Companies Acts and any directions given by the Company in general meeting. In particular theDirectors may exercise all the powers of the Company to borrow money, issue shares, buy back shares with the approval of shareholders, appoint andremove Directors and recommend and declare dividends.

Directors’ ResponsibilityThe Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations. Furtherdetails are provided on page 38.

By order of the Board

Neil Francis Group Company Secretary2 March 2009



27

The Board of Directors presents its Remuneration Report for the year ended 31 December 2008.A resolution to approve this report will be put toshareholders at theAnnual General Meeting on 23April 2009.

Remuneration CommitteeThe Remuneration Committee (the ‘Committee’) is responsible for setting the Chairman’s and each executive Director’s remuneration.The Committee’scurrent terms of reference were adopted on 25 February 2004 and are available on the Company’s website or from the Group Company Secretary. TheCommittee is comprised of three non-executive Directors,NicholasWrigley (Chairman),DavidThompson and Neil Davidson, all of whom the Boardconsiders to be independent.The number of meetings held during the year and the Committee members’ attendance is set out on page 36 of theCorporate Governance Report.

ChairmanAs previously announced JohnWhite’s retention of executive duties was transitional and during 2008 his executive responsibilities were transferred toother Board members.As a result the Committee reviewed its policy on the Chairman’s remuneration and amended it to be more consistent with thatof a Chairman of a FTSE 250 company.MrWhite has a letter of appointment dated 25 February 2009 to his role as Group Chairman which is subjectto a six month notice period. JohnWhite’s salary was reduced to £290,000 p.a.with effect from 1 October 2008 and from that date he will notparticipate in a bonus scheme, receive a pension salary supplement,LTIP awards or other benefits, save he will remain a member of the Group’s privatemedical scheme.

Remuneration policyThe objective of the policy is to have a remuneration package which will retain the talented executive team and be performance orientated.The executiveDirectors’ remuneration policy has a higher than typical emphasis on performance related pay.The Committee considers that the policy ensures that theexecutive Directors’ remuneration is in line with market standards and best practice, closely aligning the Directors’ interests with those of shareholders.

The Committee reviewed its policy for the remuneration of executive Directors in light of the current market conditions for UK housebuilders, andsought independent advice from Hewitt New Bridge Street (‘HNBS’),who are leading advisors on executive remuneration.HNBS were appointed bythe Committee and do not provide any other service to the Company;however their parent company does provide advice on the Group’s pensionschemes. In addition, the Committee consulted with the Group Chairman and the Group Chief Executive, although neither participated in anydiscussion relating to their own remuneration.

The remuneration of the executive Directors consists of different elements of pay and benefits,which make up the whole remuneration package.The components include basic salary, annual bonus, long term incentive plan awards and pension.Basic salaries were set on 1 January 2007 at broadlymarket median levels and increased by 3% on 1 January 2008.Annual bonus is performance related and the performance targets are set on measures thatthe Committee considers will align executive remuneration with shareholders’ interests.The performance conditions were previously set on profit beforetax and earnings per share targets.As the Company’s current strategic targets are geared towards cash generation, in 2009 the annual bonus targets willbe based one half on profit before tax and one half on a cash generation target.The performance targets will be set annually to incentivise executiveDirectors to achieve excellent Company performance in accordance with both the Company’s strategy and market conditions.

LongTerm Incentive Plan (LTIP)Awards are also designed to align the executive Directors interests with the Company’s longer term financial performanceand with the interests of shareholders.The performance conditions attached to the vesting of LTIPAwards granted in 2008 were based on the Company’sTotal Shareholder Return versus a comparator group of the constituents of the FTSE 100 and the Company’s Return on Capital Employed (ROCE).Asthe Company’s current strategic targets are geared towards cash generation, the Committee considers that the ROCE performance condition is no longeran appropriate measure of future performance.For 2009 awards the ROCE performance condition will be replaced with a new cash generationperformance condition.

David Bryant has informed the Board that he intends to retire at the end of 2009 and step down as an executive Director at theAnnual GeneralMeeting on 23April 2009. It has been agreed that his Group responsibilities will be transferred to other Group directors on 1 July 2009,when MrBryant will assume the role of Eastern Regional Chairman, a senior role below board level.As a result of this change of role the Committee hasdetermined that Mr Bryant’s remuneration will be amended from 1 July 2009.Mr Bryant will not be granted an LTIP award in 2009.

Full details of both the quantum of the individual components of the packages, payable to executive Directors and the structure of annual bonus,LTIPawards and pension provision, are summarised on the following pages.


Remuneration Report

28

Basic salaryIn view of current trading conditions no increase has been awarded to executive directors’ basic salaries for 2009.The basic salaries will be as set outbelow:

2009 2008

Mike Farley £633,450 £633,450

Mike Killoran £412,000 £412,000

David Bryant £272,950 £272,950

Mr Bryant’s basic salary will reduce on 1 July 2009 to reflect his change in role until his retirement on 31 December 2009.

Annual bonusAnnual bonuses are performance related and non-pensionable.No annual bonus payments will be made to executive Directors for 2008 as performancetargets were not met.

Previously an executive Director could receive a maximum of 100% of a bonus in cash,with any excess bonus being paid in shares which vested intwo equal tranches one year and two years after the date on which the bonus was awarded.Details of Bonus Shares are shown on page 32.

There are two performance targets for annual bonuses that may be earned for 2009,Group profit before tax (‘PBT’) and cash generation.TheCommittee considers that these targets will incentivise the Directors in line with the Group’s strategic aims set out on page 6.The Committee hasdetermined that the total level of potential annual bonus payable to the executive Directors in 2009 will be changed and capped at one hundredpercent of basic salary.

For 2009 annual bonuses the Committee has determined an appropriate sliding scale around a target figure for both PBT and cash generation.Recognisingthe difficult market conditions faced by the housebuilding industry the Committee has amended the sliding scale and target figures to reflect the currentconditions but also to incentivise the executive Directors in 2009.Mr Bryant will participate in the executive Directors’bonus scheme until 30 June 2009,his annual bonus targets will be pro rated accordingly.

Maximum annual bonus potential for 2009 (as a percentage of salary) 2009 2008

Mike Farley 100% 250%

Mike Killoran 100% 250%

David Bryant 100% 175%

LongTerm Incentive Plan (‘LTIP’)The executive Directors may be granted awards under the Company’s LTIP up to a maximum value of 250% of basic salary.During 2008 Mike Farleyreceived an LTIP award of 200% of basic salary and Mike Killoran and David Bryant received an award of 150% of basic salary. In 2009 the Committeeintends to make awards at 150% and 100% of basic salary to Mike Farley and Mike Killoran respectively. In 2008 JohnWhite received an LTIP award of200% of his then basic salary.Neither JohnWhite or David Bryant will be granted any further LTIP awards.

LTIP awards vest after a three year performance period if the performance conditions attached to the awards are met.The performance conditionsrelating to LTIP awards made in 2006 have not been achieved and as a result no shares will vest in 2009 in respect of these awards.

For the awards made in 2007 and 2008 the performance conditions were based onTotal Shareholder Return (TSR) versus a comparator group of theconstituents of the FTSE 100 and Return on Capital Employed (ROCE),with 50% of an award linked toTSR and 50% linked to ROCE.TheTSRperformance condition was median to upper quartile performance for between 25% to 100% of this part of the award to vest.The ROCE target was15% to 22% for between 25% to 100% of this part of the award to vest.The Committee considered this provided a good blend between rewarding stockmarket performance and long term financial performance.

The Committee is however amending the performance conditions for awards to be made in 2009.Reflecting that the Company is now a constituentof the FTSE 250 the award based onTSR performance will measure the Company’sTSR against the constituents of the FTSE 250 Index (excludingInvestmentTrusts) as at the date of grant.The Committee considers the FTSE 250 to be the most appropriate benchmark against which to compare theCompany’sTSR, as there are an insufficient number of large housebuilders to provide a robust comparator group.One half of an award will be linkedtoTSR performance and the vesting schedule will be 25% of this part of the award for median performance,with sliding scale increases until full vestingat or above upper quartile performance.

As the Company’s current strategic targets are geared to cash generation, the Committee considers that the performance condition relating to ROCEis not appropriate in the current circumstances. For awards granted in 2009, the ROCE performance condition will be replaced with a new cashgeneration performance condition.One half of an award will be linked to cash generation. If the Group’s cumulative cash generated from operatingactivities over the three year period is 85% of target then 20% of this part of the award will vest, rising to 100% of this part of the award vesting for cashgeneration of 125% over target,with a sliding scale in between.The precise target range is considered to be too sensitive to be able to disclose in advance.There will be full details of the range in the disclosure of vested awards in the future.

For grants in future years, the Committee will review the performance conditions in the light of the outlook for the house building sector at that time.

Remuneration Report continued


29

PensionThe executive Directors are members of the Group’s defined benefit pension scheme.The normal retirement age for executive Directors is 60.TheCommittee had previously agreed that an executive Director who elected to cease accruing further service in the Group’s defined benefit scheme from 6April2006 would instead receive a salary supplement of 30% of basic salary.The Committee considers that the salary supplement is cost neutral to the Company.

Mike Farley and David Bryant have elected not to accrue any further service in the scheme.However their pension will continue to be based on theirpensionable salary at the date of leaving the Group or scheme and they remain members of the scheme for life insurance purposes.A salary cap forpension purposes was introduced in 2007.Mike Farley and David Bryant’s pensionable salary caps are £432,600 and £266,255 respectively,which isbelow their basic salaries.David Bryant will remain an active member of the Scheme after 1 July 2009, and he will continue to receive a salarysupplement of 30% of his revised basic salary.

Mike Killoran elected to continue service in the scheme and accrues benefit after 6April 2006 at 1/45th of his basic salary for each year of service.Mike Killoran’s service in the scheme prior to this date was subject to the HMRC Earnings Cap and his scheme cap for service up to 5April 2006 iscurrently £119,645.

The pensionable salary caps for the executive Directors will increase annually in accordance with their increase in basic salary, up to a maximumof 5% p.a.As basic salaries have not increased for 2009,neither will the pensionable salary caps.

Benefits in kindEach of the executive Directors’ remuneration also includes fully financed cars or cash car allowance,membership of the Group private medical scheme,the Group income protection scheme, subscriptions and some telephone costs.These benefits are not pensionable.David Bryant will continue to receivethese benefits when he assumes his new role until his retirement on 31 December 2009.

All employee share schemeThe executive Directors may also participate in the Company’s Save asYou Earn Scheme,which is open to all permanent employees who have morethan six months’ service.

Service contractsAll executive Directors have service contracts and in line with the recommendations of the Combined Code on Corporate Governance, the noticeperiod for each executive Director does not exceed 12 months.The contracts expire on the Director’s 60th birthday. In circumstances following a changeof control or where dismissed in breach of contract, an executive Director is entitled to payments for termination of employment,but in no circumstanceswill such payments exceed 12 months’ remuneration.The executive Directors’ contracts are all dated 24April 2002 but are effective from 1 January 2002.

JohnWhite,Hamish Leslie Melville,DavidThompson and NicholasWrigley will retire at the 2009Annual General Meeting and are offering themselvesfor re-election.None of these Directors have service contracts.

Share ownership guidelinesThe Committee has for some time encouraged significant long term share ownership of the Company’s shares by the executive Directors. In order tocomply with best practice, formal share ownership guidelines were established in 2002.As a result, the Committee now requires each executive Directorto hold Persimmon shares.Mike Farley has to hold a minimum value of shares equivalent to three times his basic salary and the other executive Directorsare required to maintain shareholdings equivalent in value to two times their basic salary.

JohnWhite is required to hold shares which vest pursuant to the Synergy Incentive Plan for the period of his term as Chairman, except for sales ofshares to pay income tax and National Insurance due on the exercise of the award.

The Committee recognises that executive Directors may be required to sell sufficient shares in the Company to satisfy any tax liability arising on the vestingof Bonus Shares or the exercise of options and vesting of awards granted under the Company’s LTIP and Synergy Incentive Plans from time to time.

External appointmentsNone of the executive Directors currently has an external appointment. Should an executive wish to take up an external appointment, he must first seekapproval from the Group Chairman and/or the Group Chief Executive.



30

Performance graphShown below is the Company’sTSR performance against the FTSE 250 Index over the last five financial years.The Board has chosen this comparatorfor the 2008 report as it is the index of which the Company is a member.

Non-executive DirectorsThe Directors’ remuneration policy for non-executive Directors is to pay fees commensurate with their experience which are non-pensionable.Non-executive Directors do not have service contracts and their appointments may be terminated on one month’s notice.Non-executive Directors donot qualify for performance related bonuses.The Board as a whole determines the fees of the non-executive Directors.The fees for 2009 are £48,000p.a., plus an additional fee of £8,500 p.a. for additional responsibilities in chairing a committee.These fees will not increase in 2009.

The auditors are required to report on the information contained in the following part of this report.

Schedule of Directors’ emoluments for the year ended 31 December 2008Salary

Performance supplementSalaries related cash in lieu of 2008 2007and fees bonus Benefits pension Total Total

£ £ £ £ £ £

Chairman

JWhiteI 547,588 – 35,771 142,526 725,885 1,813,625

Executive

M P Farley 633,450 – 38,835 190,035 862,320 1,801,461

M H Killoran† 375,460 – 29,820 – 405,280 1,035,173

D G Bryant 272,950 – 37,292 81,885 392,127 699,149

Non-executive

I H Leslie Melville* 48,000 – – – 48,000 46,750

D G FThompson 56,500 – – – 56,500 55,000

R C N Davidson 56,500 – – – 56,500 46,750

N HTWrigley* 56,500 – – – 56,500 46,750

R J Pennycook 38,125 – – – 38,125 –

Totals 2,085,073 – 141,718 414,446 2,641,237 5,544,658

I JohnWhite’s basic salary was reduced to £290,000 p.a. on 1 October 2008.

† The Group’s defined benefit pension scheme became non-contributory on 1August 2005.As a result the salary paid to Mike Killoran as a member accruing service inthis scheme was reduced by 9% of his pensionable salary,which would have been the member rate of contribution to the scheme.Salary related benefits remain based onhis salary published on page 29.

* Hamish Leslie Melville and NicholasWrigley’s non-executive fees are paid in full to their respective employing companies,Credit Suisse Securities (Europe) Ltd andN M Rothschild & Sons Ltd.

During the year no Director waived his entitlement to any emoluments.

Mr J Millar,who retired as a Director in April 2006 received a salary and bonus for 2008 of £300,000 (2007:£300,000) and benefits of £17,742 (2007:£14,294) inhis capacity as a Group Special Projects Director.Mr D H Davidson who retired as Chairman in April 2006 remains Life President and received a payment of£7,500 (2007:£7,500) and benefits of £37,815 (2007:£36,422) for the year to 31 December 2008.Mr G Grewer,who retired as a Director in December 2001received £40,000 (2007:£40,000) for his role as Chairman of theTrustees of the Persimmon Plc Pension and Life Assurance Scheme.



31

250

200

150

100

50

0

Source: DATASTREAM

Dec 04 Dec 05 Dec 06 Dec 07 Dec 08

Persimmon Plc FTSE 250 Index

Directors’ Pension EntitlementsTransfer value

of netof inflation

increase/Increase/ (decrease)

Total accrued Total accrued (decrease) Transfer Transfer Increase in in accruedpension at pension at Increase in in accrued value at value at transfer value, pension

31 December 31 December accrued pension (net 31 December 31 December less member less member2007 2008 pension of inflation) 2007 2008 contributions contributions

£ p.a. £ p.a. £ p.a. £ p.a. £ £ £ £

JWhite 254,257 265,166 10,909 (1,804) 4,473,205 5,772,857 1,299,652 (39,274)

M P Farley 183,667 201,808 18,141 8,958 3,015,587 3,975,232 959,645 176,455

M H Killoran 38,004 48,318 10,314 8,413 479,997 649,605 169,608 104,058

D G Bryant 111,896 116,700 4,804 (791) 1,913,953 2,424,344 510,391 (16,432)

The total accrued pension as at 31 December 2007 for MessrsWhite, Farley and Bryant has been restated and reduced as these figures had previouslybeen incorrectly calculated by the Company’s advisers.

Directors’ Interests in SharesThe interests of Directors serving at the end of the year in the ordinary share capital of the Company are as shown below:

Interests inshare options and awards

Beneficial holdings (excluding Bonus Shares)

31 December 1 January 31December 1 January2008 2008 2008 2008

JWhite 2,074,922 2,060,227 688,833 557,631

M P Farley 1,007,001 968,535 502,625 358,357

M H Killoran 430,981 489,177 325,380 277,095

D G Bryant 524,778 512,945 148,128 117,462

I H Leslie Melville 150,000 150,000 – –

D G FThompson 60,032 31,155 – –

R C N Davidson 38,350 38,350 – –

N HTWrigley 4,000 4,000 – –

R J Pennycook 643 643 – –

Total 4,290,707 4,255,032 1,664,966 1,310,545

The Directors’ beneficial holdings represent 1.4% of the Company’s issued share capital as at 31 December 2008 (excluding shares held inTreasury).D G FThompson also has non-beneficial interests of 5,454 ordinary shares (2007: 12,155 ordinary shares).Otherwise all interests of the Directors arebeneficial.There has been no change in the interests set out above between 31 December 2008 and 2 March 2009.

Bonus SharesThe interests of Directors in Bonus Shares are as shown below:

2007 2005/2006Bonus Shares Bonus Shares

31December awarded vested 1 January2008 during year during year 2008

JWhite 32,496 5,673 60,979 87,802

M P Farley 24,914 5,673 37,030 56,271

M H Killoran 11,978 5,685 12,492 18,785

D G Bryant – – 75 75

Total 69,388 17,031 110,576 162,933

Bonus Shares vest over a two year period.There will be no Bonus Share awards for 2008.Persimmon PlcAnnual Report December 2008


32

Directors’ interests in share options, LongTerm Incentive Plan and Synergy Incentive Plan awardsExercise Notional

price/market Market gain onPerformance price price exercise of

1 January Granted Exercised Lapsed 31 December Exercisable Expiry condition at date at date option2008 in year in year in year 2008 from date end date of award of exercise £

JWhite 57,602(1) – 48,961 8,641 – Mar 08 Sep 08 Dec 07 746.5p 558.5p 273,447

32,306(1) – – – 32,306 Mar 09 Sep 09 Dec 08 1,331.0p – –

93,750(4) – – – 93,750 Feb 09 Aug 09 Dec 06 1,336.0p – –

281,250(4) – – – 281,250 Feb 10 Aug 10 Dec 07 1,336.0p – –

91,449(2) – – – 91,449 May 10 Nov 10 Dec 09 1,345.0p – –

1,274(3) – – 1,274 – Dec 10 May 11 – 753.0p – –

– 187,134(2) – – 187,134 Mar 11 Sep 11 Dec 10 677.0p – –

– 2,944(3) – – 2,944 Dec 11 May 12 – 326.0p – –

Total 557,631 190,078 48,961 9,915 688,833 273,447

M P Farley 42,866(1) – 36,436 6,430 – Mar 08 Sep 08 Dec 07 746.5p 558.5p 203,495

24,042(1) – – – 24,042 Mar 09 Sep 09 Dec 08 1,331.0p – –

50,000(4) – – – 50,000 Feb 09 Aug 09 Dec 06 1,336.0p – –

150,000(4) – – – 150,000 Feb 10 Aug 10 Dec 07 1,336.0p – –

91,449(2) – – – 91,449 May 10 Nov 10 Dec 09 1,345.0p – –

– 187,134(2) – – 187,134 Mar 11 Sep 11 Dec 10 677.0p – –

Total 358,357 187,134 36,436 6,430 502,625 203,495

M H Killoran 1,804(3) – 1,804 – – Dec 07 May 08 – 525.0p 707.5p 3,292

42,866(1) – 36,436 6,430 – Mar 08 Sep 08 Dec 07 746.5p 558.5p 203,495

24,042(1) – – – 24,042 Mar 09 Sep 09 Dec 08 1,331.0p – –

40,625(4) – – – 40,625 Feb 09 Aug 09 Dec 06 1,336.0p – –

121,875(4) – – – 121,875 Feb 10 Aug 10 Dec 07 1,336.0p – –

44,609(2) – – – 44,609 May 10 Nov 10 Dec 09 1,345.0p – –

1,274(3) – – 1,274 – Dec 10 May 11 – 753.0p – –

– 91,285(2) – – 91,285 Mar 11 Sep 11 Dec 10 677.0p – –

– 2,944(3) – – 2,944 Dec 11 May 12 – 326.0p – –

Total 277,095 94,229 38,240 7,704 325,380 206,787

D G Bryant 31,480(1) – 26,758 4,722 – Mar 08 Sep 08 Dec 07 746.5p 558.5p 149,443

17,655(1) – – – 17,655 Mar 09 Sep 09 Dec 08 1,331.0p – –

9,375(4) – – – 9,375 Feb 09 Aug 09 Dec 06 1,336.0p – –

28,125(4) – – – 28,125 Feb 10 Aug 10 Dec 07 1,336.0p – –

29,553(2) – – – 29,553 May 10 Nov 10 Dec 09 1,345.0p – –

1,274(3) – – 1,274 – Dec 10 May 11 – 753.0p – –

– 60,476(2) – – 60,476 Mar 11 Sep 11 Dec 10 677.0p – –

– 2,944(3) – – 2,944 Dec 11 May 12 – 326.0p – –

Total 117,462 63,420 26,758 5,996 148,128 149,443

(1)Persimmon Plc LongTerm Incentive Plan 1998. (3)Persimmon Plc Save AsYou Earn Scheme.(2)Persimmon Plc LongTerm Incentive Plan 2007. (4)Persimmon Plc Synergy Incentive Plan (SIP).



33

All options and awards were granted for nil consideration. The 2008 LTIP awards were made on 11 March 2008 and the SAYE options weregranted on 21 October 2008.The performance conditions for the LTIP awards granted in 2007 and 2008 are shown on page 29.

Vesting of awards under the Persimmon Plc Long Term Incentive Plan 1998 are subject to the achievement of performance conditions based onTSR relative to other housebuilders (median to upper quartileTSR for between 40% to 100% of this part of the award to vest) and a range ofROCE targets (13% to 20% for between 50% and 100% of this part of the award to vest).The performance conditions for the awards granted in2006 have not been met and no shares will vest in respect of these grants.

The Synergy Incentive Plan (SIP) will vest in two tranches.The performance conditions for both tranches of the SIP awards have been met.TheCompany achieved synergy savings of c.£32m by the year ended 31 December 2006 and further synergy savings of over £50m in the year ended31 December 2007; both figures were approved by the Audit and Remuneration Committees advised by external auditors.The awards will vest inFebruary 2009 and February 2010.The Committee has confirmed that the dividend equivalent will be paid to Directors in shares.

Details of the market value of the Company’s shares during 2008 were: closing price at 31 December 2008:£2.29¾; lowest closing price in 2008:£1.83¾; highest closing price in 2008:£8.87.

Approved by the Board and signed on its behalf by

NicholasWrigley Chairman Remuneration Committee2 March 2009



34

The Board recognises that it is very important to maintain high standards of corporate governance as it sets the standard and values for the entireGroup.The Board seeks to comply with best practice in all areas of corporate governance and sets out below how the principles of the CombinedCode on Corporate Governance 2006 (the Code) have been adopted and implemented by the Company.

DirectorsThe Board consists of the Chairman, three executive Directors and five non-executive Directors.The executive Directors provide a direct lineof control between the Company and its operating businesses.The non-executive Directors provide a balance to the Board and bring a widebreadth of experience.The Board considers all non-executive Directors to be independent.The Senior Independent Director is DavidThompson.

The Board routinely meets six times a year and has a formal schedule of matters reserved for its consideration and decision.This schedule includesthe approval of financial and marketing strategy, dividend policy, approval of annual and half year results,major investments, review of performance,monitoring risk, ensuring adequate financial resources are available and reporting to shareholders.

The Board met on eight occasions in 2008, reflecting the significant change in market conditions affecting the Company.There was full attendanceby all Directors at Board and Committee meetings during the year except that David Bryant was unable to attend the two extra Board meetings.

The Senior Independent Director is DavidThompson.DavidThompson joined the Board in August 1999 and has now served more than nineyears on the Board.As Senior Independent Director his primary responsibility is relationships with the Company’s major shareholders.TheCompany consulted with its major shareholders setting out the reasons why it would be appropriate for DavidThompson to remain as SeniorIndependent Director beyond nine years and received a positive response.Hamish Leslie Melville has also completed more than nine years’ serviceas a non-executive Director.

The Board considers both DavidThompson and Hamish Leslie Melville to be independent, despite their long service.This is because their longstanding appointments do not in any way affect their objectivity and their ability to advise and question the executive Directors, particularly inrespect of strategy and the Company’s financial affairs.Their long association with the Company has given them a sound and detailed knowledgeof the Company’s business which has enabled them to consider and evaluate information and responses from the executive Directors quickly andconcisely.

The Chairman has reviewed both DavidThompson and Hamish Leslie Melville’s performance and he believes that their performance continuesto be very effective.The Board considers it important to continue to have access to the wise counsel of both DavidThompson and Hamish LeslieMelville in managing the Company in the current difficult market conditions.

DavidThompson and Hamish Leslie Melville will retire at the AGM and be available for re-election to the Board on an annual basis in the future.

The Board and the Audit Committee undertake a written self-evaluation of their performance.A verbal evaluation of the performance of theRemuneration and Nomination Committees are undertaken by the Committees.The non-executive Directors undertake a verbal annualperformance evaluation of the Chairman, taking into account the views of the executive Directors.The Chairman undertakes a verbal evaluationof the executive Directors’ performance.As a result of the evaluations, a number of procedural and other changes have been implemented during2008; for example the Board are provided with additional executive management reports and management accounts to ensure they have detailedknowledge of the Company’s progress in the current challenging market conditions.

All Directors have access to the advice and services of the Group Company Secretary and may also seek independent professional advice and training,at the Company’s expense, if so required to carry out their duties.All executive Directors have 12 month rolling contracts.The Chairman and thenon-executive Directors do not have service contracts.

Conflicts of InterestThe Company has procedures in place to ensure that Directors disclose any situation in which they may have an interest, direct or indirect,whichconflicts or possibly may conflict with the interests of the Company.No authority to authorise a conflict of interest has been necessary.

Nomination CommitteeThe members of the Nomination Committee are JohnWhite (Chairman),Hamish Leslie Melville,DavidThompson and NicholasWrigley.

The Board instructed the Committee in late 2007 to make recommendations for a non-executive Director who would bring new different skillsand expertise to the Board.The Nomination Committee consulted the Board, some major shareholders and its merchant bankers in connectionwith the appointment.The Committee did not use a recruitment agency or open advertising as it did not consider that this would have assisted inthe recruitment of a high calibre non-executive Director with the right skills to compliment the Board.

The Committee met twice during 2008, to review and consider the composition of the Board.There was full attendance by Directors at theCommittee meetings.

Corporate Governance Report


35

The Committee recommended Richard Pennycook to the Board and he was subsequently appointed on 14 March 2008.Mr Pennycook’sbiography is on page 23.Mr Pennycook has undertaken a comprehensive induction with the Company and has had detailed discussions with theChairman,Group Chief Executive,Group Finance Director,Chairman of the Audit Committee and the Group Company Secretary.

David Bryant informed the Board that he will step down from the Board at the 2009 AGM.Mr Bryant will transfer his Group responsibilitiesto other Group directors so that his management role will be solely Eastern Regional Chairman on 1 July 2009 until his retirement on31 December 2009.

The Committee is satisfied that appropriate succession planning for the Board and senior management is in place.

Remuneration CommitteeThe members of the Remuneration Committee are NicholasWrigley (Chairman),DavidThompson and Neil Davidson.

The Remuneration Committee is responsible for setting the remuneration of the Chairman and the executive Directors.The RemunerationCommittee met twice during the year to consider and approve the remuneration arrangements for these Directors from 1 January 2008.The Committee members all attended each meeting.Details of the remuneration package for each Director serving during 2008 are setout in the Remuneration Report on pages 28 to 34.

The Remuneration Report will be put to shareholders for their approval at the Annual General Meeting on 23 April 2009, in accordance withthe Directors’Remuneration Report Regulations 2002.

Accountability and AuditThe Company has an established Audit Committee to whom the external auditors,KPMG Audit plc report.During 2008 the Audit Committeewas wholly comprised of independent non-executive Directors.The members of the Committee are DavidThompson (Chairman),Neil Davidson,NicholasWrigley and Richard Pennycook,who was appointed to the Committee on 19 June 2008.All members of the Committee have recentrelevant financial experience; please see the Directors’ biographies on page 23.

The role of the Audit Committee is to review the Company’s financial reporting,monitor the Company’s internal controls and Group Riskmanagement function and oversee the Company’s relations with external auditors.

The Committee’sTerms of Reference were adopted on 25 February 2004.During the year the Board reviewed the Committee’sTerms of Referenceand no amendments were made.The terms of reference of the Group Risk management function (which are recommended by theAudit Committeeand approved by the Board) were unchanged in 2008.

The Committee met on four occasions during the year and all members were in attendance at each meeting.The Committee agreed the natureand scope of the audit with the auditors and monitored the quarterly findings of the auditors and Group Risk.The Committee regularly meet theauditors without the presence of the Company’s management.

The Audit Committee formulates and oversees the Company’s policy on monitoring auditor objectivity and independence in relation to non-auditservices.The policy is to ensure that the nature of non-audit services performed or the fee income relative to the audit fee does not compromiseor is seen to compromise the auditor’s independence, objectivity or integrity.The auditors are excluded from undertaking a range of work on behalfof the Company which includes appraisal or valuation services,management functions and litigation support, legal accounting and remunerationservices. From time to time non-audit services are put out to tender to a number of accountants.The Committee recommend the reappointment ofKPMG as auditors.

The Company has had a whistle blowing procedure in place for a number of years which is publicised in the Staff Handbook and from January 2009on Company noticeboards.All employees may raise concerns about malpractice or improper or potentially illegal behaviour in confidence withoutconcern of victimisation or disciplinary action.

Going concernAfter making enquiries, the Directors have formed a judgement at the time of approving the financial statements, that there is a reasonableexpectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directorscontinue to adopt the going concern basis in preparing the financial statements.

Further details are provided in note 2 to the financial statements.

Internal ControlThe Board has overall responsibility for the Company’s system of internal control and for the review of its effectiveness. It is the role of managementto implement the Board’s policies on risk and control through the design and operation of appropriate internal control systems.All employees havesome responsibility for internal control as part of their accountability for achieving objectives.

The Company has complied with the Code provisions on internal control, having continued to operate the procedures necessary to implement theguidance issued in theTurnbull Committee Report (revised October 2005) throughout the year.


Corporate Governance Report continued

36

The Risk Committee has the delegated task of overseeing the Board’s responsibilities with respect to risk and internal control. Specifically thisincludes determining appropriate control procedures and the review of the effectiveness of internal control.The members of the Risk Committeeduring 2008 were JohnWhite,Mike Farley,Mike Killoran and the Divisional Chief Executives, Jeff Fairburn,DavidThornton and Nigel Greenaway.The Risk Committee are supported by the Group Risk Manager.The Risk Committee reports to the Audit Committee,which oversees the RiskCommittee’s activities.

As part of its ongoing activities, the Group Risk management function has updated the Group’s risk assessment during the year.The results of thisprocess have been reported to the Risk Committee and have been used to drive a risk focused programme of work designed to improve businessprocesses and increase internal control effectiveness.The Group Risk Management function has updated the risk register during the year to reflectthe changing risk profile facing the Group.The risk register has been approved by the Risk and Audit Committees.

The Risk Committee met six times during 2008 ensuring that there has been an ongoing process for the identification, evaluation and managementof the significant risks that are faced by the Company.The processes that the Risk Committee has applied in 2008 in reviewing the effectiveness ofthe system of internal control include the following:

• Review of reports produced by the Group Risk management function on internal control and risk management;

• Review of representations on risk and control from all managing directors of operating businesses following individual reviews of internal controlwithin their operating businesses;

• Review of representations on risk and control from key head office and divisional management;

• Reviewing reports from the Corporate Responsibility Committee with particular reference to the social, environmental, sustainability andreputational risks facing the Group.

The members of the Risk Committee completed the following tasks as essential parts of the Group’s control framework:

• Maintaining a continuous detailed involvement in monitoring and controlling work in progress and controls over land acquisition assessment;

• Regular site visits and discussion with site based personnel by senior management;

• Ongoing review of Company performance in comparison to operational forecasts and financial budgets;

• Involvement in individual operating businesses board discussions, specifically operational board meetings where all aspects of operationalperformance are analysed.

Upon completion of these processes the Risk Committee formally considers the Annual Review of the Effectiveness of the Group’s Systemof Internal Control.The review for 2008 has been completed and approved by both the Risk and Audit Committees.

A detailed Group Risk programme of work for 2009 has been approved by both the Risk and Audit Committees.

The Company’s system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can onlyprovide reasonable and not absolute assurance against material misstatement or loss.

Combined CodeThe Board supports high standards in corporate governance and continues to review the Code as well as the Company’s procedures to maintainproper control and accountability.The Company complied with the Code throughout 2008.

Relations with ShareholdersThe Board continues to seek good relations with the Company’s shareholders and believes it is important that shareholders receive timelyinformation on their Company’s progress.As well as the announcement of half year and final results, the Company issues regular trading and interimmanagement statements to the London Stock Exchange.

The Directors recognise that it is important for both private and institutional shareholders to have the opportunity to raise concerns or discussmatters with them.The Group Chairman JohnWhite and the Senior Independent Director DavidThompson maintain contact with majorshareholders to understand their issues and concerns and report relevant information to the Board.Mike Farley and Mike Killoran have responsibilityfor maintaining appropriate communications with institutional investors and analysts.The Board is provided with reports and feedback fromshareholders and analysts.

All the Directors attend the Company’s Annual General Meeting and are available to answer questions at the meeting or privately.


Neil Francis Group Company Secretary2 March 2009

Corporate Governance Report continued


37

The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance withapplicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year.Under that law they arerequired to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to preparethe Parent Company financial statements on the same basis.

The Group and Parent Company financial statements are required by law and IFRSs as adopted by the EU to present fairly the financial position ofthe Group and the Parent Company and the performance for that period; the Companies Act 1985 provides in relation to such financial statementsthat references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.

In preparing each of the Group and Parent Company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company willcontinue in business.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of theParent Company and enable them to ensure that its financial statements comply with the Companies Act 1985.They have general responsibility fortaking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors’Report,Directors’Remuneration Report andCorporate Governance statement that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors’ Responsibility StatementWe confirm to the best of our knowledge:

1. The financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fairview of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as awhole; and

2. The Business Review,which forms part of the Directors’Report, includes a fair review of the development and performance of the business andthe position of the Company and the subsidiaries included in the consolidation taken as a whole, together with a description of the principal risksand uncertainties they face.


Mike Farley Group Chief Executive Mike Killoran Group Finance Director2 March 2009 2 March 2009


Statement of Directors’Responsibilities

38

We have audited the Group and Parent Company financial statements (the ‘financial statements’) of Persimmon Plc for the year ended 31 December 2008which comprise the Consolidated Income Statement, the Group and Parent Company Balance Sheets, the Group and Parent Company Cash Flow Statements,the Group and Parent Company Statements of Recognised Income and Expenses, and the related notes.These financial statements have been prepared underthe accounting policies set out therein.We have also audited the information in the Directors’Remuneration Report that is described as having been audited.

This report is made solely to the Company’s members, as a body, in accordance with section 235 of the CompaniesAct 1985.Our audit work has beenundertaken so that we might state to the Company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose.To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders as a body,for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditorsThe Directors’ responsibilities for preparing theAnnual Report, the Directors’Remuneration Report and the financial statements in accordance with applicablelaw and International Financial Reporting Standards (IFRSs) as adopted by the EU are set out in the Statement of Directors’Responsibilities on page 38.

Our responsibility is to audit the financial statements and the part of the Directors’Remuneration Report to be audited in accordance with relevant legal andregulatory requirements and International Standards onAuditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Directors’Remuneration Report to be audited have been properly prepared in accordance with the CompaniesAct 1985 and, as regards the Group financial statements,Article 4 of the IAS Regulation.We also report to you whether in our opinion the information given in the Directors’Report is consistent with the financialstatements.The information given in the Directors’Report includes that specific information presented in the Business Review that is cross referred from theDirectors’Report.

In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanationswe require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed.

We review whether the Corporate Governance Statement reflects the Company’s compliance with the nine provisions of the 2006 Combined Code specifiedfor our review by the Listing Rules of the Financial ServicesAuthority, and we report if it does not.We are not required to consider whether the Board’sstatements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its riskand control procedures.

We read the other information contained in theAnnual Report and consider whether it is consistent with the audited financial statements.We consider theimplications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements.Our responsibilities do notextend to any other information.

Basis of audit opinionWe conducted our audit in accordance with International Standards onAuditing (UK and Ireland) issued by theAuditing Practices Board.An audit includesexamination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors’Remuneration Report tobe audited. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and ofwhether the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficientevidence to give reasonable assurance that the financial statements and the part of the Directors’Remuneration Report to be audited are free from materialmisstatement,whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation ofinformation in the financial statements and the part of the Directors’Remuneration Report to be audited.

OpinionIn our opinion:

• the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU,of the state of the Group’s affairs as at31 December 2008 and of its loss for the year then ended;

• the parent Company financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU as applied in accordance with the provisionsof the CompaniesAct 1985,of the state of the Parent Company’s affairs as at 31 December 2008;

• the financial statements and the part of the Directors’Remuneration Report to be audited have been properly prepared in accordance with the CompaniesAct1985 and, as regards the Group financial statements,Article 4 of the IAS Regulation; and

• the information given in the Directors’Report is consistent with the financial statements.

KPMGAudit PlcCharteredAccountantsRegisteredAuditor1The EmbankmentNeville StreetLeedsLS1 4DW2 March 2009

Independent Auditors’Report to the Shareholders of Persimmon Plc


39


40

Before Exceptionalexceptional items

items (note 6) 2008 2007Note £m £m £m £m

Revenue 5 1,755.1 – 1,755.1 3,014.9

Cost of sales (1,489.8) (688.2) (2,178.0) (2,278.8)

Gross (loss)/profit 265.3 (688.2) (422.9) 736.1

Other operating income 21.4 – 21.4 40.1

Operating expenses (91.0) (222.9) (313.9) (122.3)

Share of results of jointly controlled entities 0.8 – 0.8 1.0

(Loss)/profit from operations before impairment of intangible assets 198.3 (710.1) (511.8) 657.3

Impairment of intangible assets (1.8) (201.0) (202.8) (2.4)

(Loss)/profit from operations 10 196.5 (911.1) (714.6) 654.9

Finance income 9 4.1 6.3 10.4 1.9

Finance costs 9 (75.8) – (75.8) (74.1)

(Loss)/profit before tax 124.8 (904.8) (780.0) 582.7

Tax 11 (20.7) 175.7 155.0 (169.2)

(Loss)/profit after tax (all attributable to equity holders of the parent) 104.1 (729.1) (625.0) 413.5

Earnings per sharei

Basic 14 (208.3p) 137.5p

Diluted 14 (208.3p) 136.8p

Non-GAAP measures

Underlying earnings per shareii

Basic 14 35.3p 138.3p

Diluted 14 35.2p 137.6p

i Earnings per share is calculated in accordance with IAS 33 ‘Earnings Per Share’.

ii Underlying earnings per share excludes exceptional items and impairment of intangible assets.

Consolidated Income StatementFor the year ended 31 December 2008

Group Group Company Company2008 2007 2008 2007

Note £m £m £m £m

Effective portion of changes in fair value of cash flow hedges (0.8) 11.9 – 3.3

Net actuarial (losses)/gains on defined benefit pension schemes 31 (43.8) 36.1 (43.8) 36.1

Taxation on items taken directly to equity (11.3) (15.6) (11.6) (13.0)

Net (expense)/income recognised directly in equity (55.9) 32.4 (55.4) 26.4

(Loss)/profit for the year (625.0) 413.5 (204.7) 17.7

Total recognised (expense)/income for the year(all attributable to equity holders of the parent) (680.9) 445.9 (260.1) 44.1

Statements of Recognised Income and ExpenseFor the year ended 31 December 2008


41



Assets

Non-current assets

Intangible assets 15 264.7 467.8 3.7 4.0

Property, plant and equipment 16 45.1 47.8 2.9 3.5

Investments 17 3.9 3.2 3,586.2 3,741.8

Trade and other receivables 19 31.4 17.2 – –

Forward currency swaps 96.0 – 59.0 –

Deferred tax assets 23 6.5 51.4 2.4 21.4

447.6 587.4 3,654.2 3,770.7

Current assets

Inventories 18 2,546.5 3,386.6 – –

Trade and other receivables 19 138.2 180.2 262.1 259.6

Forward currency swaps 20.8 – 20.8 –

Cash and cash equivalents 0.8 2.1 – –

2,706.3 3,568.9 282.9 259.6

Total assets 3,153.9 4,156.3 3,937.1 4,030.3

Liabilities

Non-current liabilities

Interest bearing loans and borrowings 20 (571.2) (527.5) (308.1) (344.1)

Forward currency swaps – (58.0) – (15.9)

Deferred tax liabilities 23 (26.5) (32.0) – (0.1)

Retirement benefit obligation 31 (95.3) (60.7) (95.3) (60.7)

Other liabilities 21 (132.0) (92.4) (0.4) (2.2)

(825.0) (770.6) (403.8) (423.0)

Current liabilities

Interest bearing loans and borrowings 20 (147.6) (130.9) (141.9) (86.5)

Forward currency swaps – (10.0) – (2.7)

Trade and other payables 21 (551.9) (749.0) (3,034.4) (2,787.4)

Current tax liabilities (74.2) (150.4) (1.2) (4.1)

(773.7) (1,040.3) (3,177.5) (2,880.7)

Total liabilities (1,598.7) (1,810.9) (3,581.3) (3,303.7)

Net assets 1,555.2 2,345.4 355.8 726.6

Shareholders’ equity

Ordinary share capital issued 24, 25 30.3 30.3 30.3 30.3

Share premium 25 233.6 233.6 233.6 233.6

Hedge reserve 25 0.1 0.7 – –

Other non-distributable reserve 25 281.4 281.4 4.6 4.6

Retained earnings 25 1,009.8 1,799.4 87.3 458.1

Total shareholders’ equity 25 1,555.2 2,345.4 355.8 726.6

The financial statements on pages 40 to 79 were approved by the Board of Directors on 2 March 2009 and were signed on its behalf by:

M P Farley M H KilloranGroup Chief Executive Group Finance Director

Balance SheetsAt 31 December 2008


42



Cash flows from operating activities:

(Loss)/profit for the year (625.0) 413.5 (204.7) 17.7

Adjustments for:

Tax 11 (155.0) 169.2 5.0 9.9

Finance income 9 (4.1) (1.9) (7.3) (1.8)

Finance costs 9 75.8 74.1 40.4 40.4

Depreciation charge 16 8.7 9.8 0.8 0.8

Amortisation of intangible assets 15 0.3 0.2 0.3 0.2

Impairment of intangible assets – utilisation of strategic land holdings 15 1.8 2.4 – –

Share of results of jointly controlled entities 17 (0.8) (1.0) – –

Profit on disposal of property, plant and equipment (0.7) (1.0) – –

Share-based payment charge 31 4.4 6.0 4.4 6.0

Exceptional non-cash items 6, 17 892.7 – 281.7 –

Other non-cash items (3.1) – (3.5) (0.9)

Profit from operations before working capital movements 195.0 671.3 117.1 72.3

Movements in working capital:

Decrease/(increase) in inventories 187.8 (426.7) – 0.2

(Increase)/decrease in trade and other receivables (8.1) (7.2) (2.5) 316.6

(Decrease)/increase in trade and other payables (173.6) 25.6 245.2 220.9

Net cash from operations 201.1 263.0 359.8 610.0

Interest paid (67.6) (66.2) (43.3) (39.1)

Interest received 4.1 1.9 6.6 1.8

Tax received/(paid) 106.2 (126.3) (3.6) (12.1)

Net cash from operating activities 243.8 72.4 319.5 560.6

Cash flows from investing activities:

Received from jointly controlled entities 0.1 0.6 – –

Additional investment in subsidiaries – – (126.1) (475.0)

Purchase of property, plant and equipment (6.9) (10.6) (0.2) (0.4)

Proceeds from sale of property, plant and equipment 2.2 4.6 0.3 0.2

Net cash used in investing activities (4.6) (5.4) (126.0) (475.2)

Cash flows from financing activities:

Repayment of borrowings (162.2) (68.0) (95.1) (17.2)

Drawdown of loan facilities 65.0 75.0 65.0 75.0

Finance lease principal payments (1.4) (1.4) (0.6) (0.4)

Own shares purchased (2.4) (25.5) (1.7) (22.3)

Exercise of share options 0.8 2.3 0.5 2.3

Dividends paid to Group shareholders (113.1) (114.1) (113.1) (114.1)

Net cash used in financing activities (213.3) (131.7) (145.0) (76.7)

Increase/(decrease) in net cash and cash equivalents 26 25.9 (64.7) 48.5 8.7

Net cash and cash equivalents at beginning of year (48.8) 15.9 (67.4) (76.1)

Net cash and cash equivalents at end of year 27 (22.9) (48.8) (18.9) (67.4)

Cash Flow StatementsFor the year ended 31 December 2008


Notes to the Financial StatementsFor the year ended 31 December 2008

43

1 Adoption of new and revised standardsIn the current year, there is only one relevant Interpretation issuedby the International Financial Reporting Interpretations Committee,endorsed by the European Union and effective for the currentperiod.This is IFRIC 11: IFRS 2 – Group and Treasury ShareTransactions.The adoption of this Interpretation has not led to anychanges in the Group’s accounting policies.

At the date of authorisation of these financial statements, the followingrelevant Standards and Interpretations which have not been appliedin these financial statements were in issue and endorsed by theEuropean Union but not yet effective:

IAS 1 (Revised) Presentation of financial statements.IAS 23 (Revised) Borrowing costs.Amendment to IAS 32 Financial Instruments: Presentation.Amendment to IFRS 2 Share Based Payments.IFRS 8 Operating Segments.IFRIC 14: IAS 19 – The limit on a defined benefit asset, minimumfunding requirements and their interaction.

The Directors do not expect the adoption of these Standards andInterpretations will have a material impact on the financial statementsof the Group except for IAS 23 (Revised) should the Groupundertake the acquisition, construction or production of a qualifyingasset.

2 Principal accounting policiesBasis of accounting

Both the consolidated Group and Parent Company financialstatements have been prepared in accordance with InternationalFinancial Reporting Standards, adopted by the European Union andeffective at 31 December 2008 (IFRSs) and therefore the financialstatements comply with Article 4 of the EU IAS Regulation.

The financial statements have been prepared on the historical costbasis, except where stated below.

The Group’s business activities, together with the factors likely to affectits future development, performance and position are set out in theBusiness Review on pages 6 to 21.The financial position of the Group,its cash flows, liquidity position and borrowing facilities are describedin note 20 to the financial statements. In addition, note 22 to thefinancial statements includes the Group’s objectives, policies andprocesses for managing its capital; its financial risk managementobjectives; details of its financial instruments and hedging activities; andits exposures to credit risk and liquidity risk.

The Group finances its operations through a combination ofshareholders’ funds, bank loans, overdrafts and private placementloan notes.

The current economic conditions create uncertainty particularly overthe level of demand for the Group’s products and the availability ofadequate financing.The Group has a forward order book withnumerous customers and long term contracts with a number ofHousing Associations throughout the United Kingdom.Throughout2008 the Group operated within all of its banking covenants. However,with the progressive deterioration in market conditions during 2008,

the Directors assessed that the Group’s liquidity risk had increased inrelation to compliance with the interest cover covenant (based onincome statement) as set out in the terms of the Company’s existingcredit facilities.Accordingly, the Directors have taken pre-emptiveaction to: amend certain covenants including but not limited to, theinterest cover covenant (now based on operating cash flows), conditionswithin the Group’s funding arrangements and to reduce the level ofcommitted facilities to reflect the Group’s forecast requirements.

On 27 February 2009, the Company reached agreement with itssyndicate of banks providing the current revolving credit facility onamendments to the amount, terms and conditions of its existing creditfacilities.The Company has also agreed a new revolving credit facility.This Forward Start Facility of £322m will become available fordrawing on 24 November 2010 on the maturity of the existing facilityand matures on 31 March 2012. Full documentation has been signedrelating to these facilities and the amended terms and conditionsbecome final upon the private placement investor documentationbeing signed.

In addition, on 27 February 2009, the Company reached agreement inprinciple with its private placement investors on amendments to theterms and conditions of its existing credit facilities.The full amendmentdocumentation is currently in the process of being finalised, and whilstnot without risk the Directors believe that this process will becompleted promptly.The Directors remain confident that should theneed arise alternative funding arrangements can be made.

Taken together, the Company will have committed funding lines of£1,085m at the outset of these arrangements (26 February 2009:£1,235m), reducing to £560m during 2011. On the basis of theCompany’s working capital projections, the Directors believe that thesenew facilities provide ample headroom and support for the continuingeffective management of the business.

As a consequence of the above agreements the Directors believe thatthe Group is well placed to manage its business risks successfullydespite the current uncertain economic outlook.

After making due enquiries, the Directors have a reasonableexpectation that the Company and the Group have adequate resourcesto continue in operational existence for the foreseeable future.Accordingly, they continue to adopt the going concern basis inpreparing the Annual Report and Accounts.

The principal accounting policies are set out below:

Basis of consolidation

The consolidated financial statements include the financial statementsof the Company and its subsidiaries up to 31 December each year.The results of subsidiaries acquired or disposed of during the year,are included in the consolidated financial statements from theeffective date of acquisition or up to the effective date of disposal,as appropriate.Where necessary, adjustments are made to the financialstatements of subsidiaries to bring the accounting policies used intoline with those used by the Group. All intra-group transactions,balances, income and expenses are eliminated on consolidation.

Business combinations

The acquisition of subsidiaries is accounted for using the purchasemethod.The subsidiary’s identifiable assets, liabilities and contingentliabilities are recognised at their fair value at the acquisition date.


Notes to the Financial Statements continued

44

2 Principal accounting policies (continued)Goodwill

Goodwill arising on consolidation represents the excess of the costof acquisition over the Group’s interest in the fair value of theidentifiable assets, liabilities and contingent liabilities of the acquiredentity at the date of the acquisition. Goodwill arising on acquisitionof subsidiaries and businesses is capitalised as an asset. Goodwillallocated to the strategic land holdings is recognised as an asset, beingthe intrinsic value within these holdings in the acquired entities,which is realised upon satisfactory planning permission beingobtained and sale of the land. Goodwill is subsequently measured atcost less any accumulated impairment losses.

Goodwill is assessed for impairment at each reporting date byperforming a value in use calculation, using a discount factor basedon the pre-tax rate implicit in current market transactions of similarassets, covering the expected period of realisation and consideringcurrent market conditions. It is tested by reference to the proportionof legally completed plots in the period compared to the total plotswhich are expected to receive satisfactory planning permission in theremaining acquired strategic land holdings, taking account of historicexperience and market conditions and comparing the carrying valueof the assets with their recoverable amounts.Any impairment loss isrecognised immediately in the income statement.

Goodwill arising on acquisitions before the date of transition toIFRSs has been retained at the previous UK GAAP amounts subjectto being tested for impairment at that date.The allocation of thisgoodwill for impairment testing is disclosed in note 15. Goodwillwritten off to reserves under UK GAAP prior to 1998 has not beenreinstated and is not included in determining any subsequent profitor loss on disposal.

Brand intangibles

Internally generated brands are not held on the balance sheet.The Group carries assets on the balance sheet only for brands thathave been acquired.Acquired brand values are calculated basedon discounted cash flows. No amortisation is charged on brandintangibles, as the Group believes that the value of the brands ismaintained indefinitely.The factors that result in the durability ofthe brands capitalised is that there are no material legal, regulatory,contractual, competitive, economic or other factors that limit theuseful life of these intangibles.The acquired brands are tested annuallyfor impairment by performing a value in use calculation, using adiscount factor based on the Group’s pre-tax weighted average costof capital, on the branded incremental income stream.

Where a brand’s life is not deemed to be indefinite it is writtenoff over its expected useful life on a straight-line basis.

Revenue recognition

Revenue in respect of the sale of residential properties is recognisedat the fair value of the consideration received or receivable on legalcompletion. Part exchange property resales are included within costof sales.

Government grants

Grants are included within work in progress in the balance sheetand are credited to the income statement over the life of thedevelopments to which they relate. Grants related to income arededucted from the related expense in the income statement.

Other operating income

Other operating income comprises profits from the sale of landholdings, freehold reversions, rent receivable, and other incidentalsundry income.

Operating expenses

Operating expenses represent the administration costs of the business,which are written off to the income statement as incurred.

Borrowing costs

Borrowing costs are recognised in profit or loss in the period inwhich they are incurred based on the effective rate.

Exceptional items

Exceptional items comprise items of income and expense that arematerial in amount and unlikely to recur and which merit separatedisclosure in order to provide an understanding of the Group’sunderlying financial performance. Examples of events giving rise tothe disclosure of income and expense as exceptional items include,but are not limited to, reorganisation of operations and economicevents which necessitate a review of asset valuations.

Dividends

Dividends are recorded in the Group’s financial statements in theperiod in which they are approved or paid.

Share-based payment

Charges for employee services received in exchange for share-basedpayment have been made for all options/awards in accordance withIFRS 2 (Share-based Payment), to spread the fair value of the grantover the vesting period.

The fair value of such options has been calculated using the BinomialOption Pricing Model, based upon publicly available market data atthe point of grant.

Share-based payments are charged wholly in the ultimate ParentCompany, which makes internal management recharges tosubsidiaries for these services as appropriate.

Retirement benefit costs

The Group operates two defined benefit pension schemes, whichare closed to new members. It also has a defined contribution schemefor employees who are not members of a defined benefit scheme.The liability in respect of the defined benefit schemes is the presentvalue of the defined benefit obligation at the balance sheet date, lessthe fair value of the scheme assets, together with adjustments foractuarial gains and losses. Further details of the schemes and thevaluation methods applied may be found in note 31.

Expected scheme gains and losses are recognised via operatingexpenses in the income statement and actuarial gains and lossesvia the statement of recognised income and expense.

Subsidiary entities bear a charge for current employees based upontheir current pensionable salaries. Differences between this charge andthe current service cost are borne by the ultimate Parent Company asthe legal sponsor, as are all experience gains and losses.

Payments to the defined contribution scheme are accounted for onan accruals basis. Once the payments have been made, the Group hasno further payment obligations.



45

2 Principal accounting policies (continued)Taxation

Income tax on the profit for the year comprises current and deferredtax. Income tax is recognised in the income statement except to theextent that it relates to items recognised directly in equity, in whichcase it is recognised in equity.

Current tax is the expected tax payable on the taxable income for theyear, using enacted or substantially enacted tax rates, and adjusted forany tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method,providing for temporary differences between the carrying amounts ofassets and liabilities for financial reporting purposes and the amountsused for taxation purposes.The following temporary differences arenot provided for: goodwill, the initial recognition of assets orliabilities that affect neither accounting or taxable profit, anddifferences relating to investment in subsidiaries to the extent thatthey will probably not reverse in the foreseeable future.The amountof deferred tax provided is based on the carrying amount of assetsand liabilities, using the prevailing tax rates.

Where the deferred tax asset recognised in respect of share-basedpayments would give rise to a credit in excess of the relatedaccounting charge at the prevailing tax rate the excess is recogniseddirectly in equity.

A deferred tax asset is recognised only to the extent that it is probablethat future taxable profits will be available against which the asset canbe utilised. Deferred tax assets are reviewed at each balance sheet dateand reduced to the extent that it is no longer probable that therelated tax benefit will be realised.

Deferred tax assets and liabilities are offset when there is a legallyenforceable right to set off current tax assets against current taxliabilities when the Group intends to settle its current tax assets andliabilities on a net basis.

Leases

Assets financed by means of a finance lease are treated as assets ofthe Group at their fair value or, if lower, at the present value of theminimum lease payments, each determined at the inception of thelease.The corresponding liability to the leasing company is includedas an obligation under finance leases. Depreciation on such assets ischarged to the income statement, in accordance with the statedaccounting policy, over the shorter of the lease term or the asset life.The finance element of payments to leasing companies are calculatedso as to achieve a constant rate of interest on the remaining balanceover the lease term, and charged to the income statement accordingly.

Amounts payable under operating leases are charged to work inprogress or operating expenses on a straight line accruals basis overthe lease term.

Property, plant and equipment

Depreciation on property, plant and equipment is provided using thestraight line method to write off the cost less any estimated residualvalue, over the estimated useful lives on the following bases:

Plant, fixtures and fittings – 3 to 5 years.

Freehold buildings – 50 years.

No depreciation is provided on freehold land.

Investments

Interests in subsidiary undertakings are valued at cost less impairment.Other investments are stated at fair value.

Inventories

Inventories are stated at the lower of cost and net realisable value.Land with planning includes undeveloped land and land underdevelopment.Work in progress comprises direct materials, labourcosts, site overheads, associated professional charges and otherattributable overheads. Net realisable value represents the estimatedselling prices less all estimated costs of completion and overheads.

Investments in land without the benefit of a planning consent areinitially included at cost. Regular reviews are carried out to identifyany impairment in the value of the land considering the existinguse value of the land and the likelihood of achieving a planningconsent and the value thereof. Provision is made to reflect anyirrecoverable amounts.

Jointly controlled entities

Investments in jointly controlled entities are accounted for under theequity method of accounting.

Trade and other receivables

Trade receivables on normal terms do not carry any interest, are stated attheir nominal value and are assessed for recoverability on an ongoing basis.

Receivables on extended terms granted as part of a sales transactionare secured by way of a legal charge on the respective property, andare stated at fair value as described in note 19. Gains and losses arisingfrom changes in fair value are recognised directly in equity inretained earnings, with the exceptions of impairment losses andinterest calculated using the “effective interest rate” method, whichare recognised directly in the income statement.Where the asset isdisposed of, or is determined to be impaired, the cumulative gain orloss previously recognised in equity is included in the incomestatement for the period.

Expenditure relating to forward land, including options and fees, isheld within trade and other receivables until the option is exercisedand the land acquired following the securing of planning permission,at which time the amount is transferred to inventories. If the optionexpires or the Directors no longer consider it likely that the optionwill be exercised prior to the securing of planning permission, theamount is written off on that date.

Derivative financial instruments

The Group uses currency swaps and interest rate swaps to managefinancial risk. Interest charges are stated after taking account of theseswaps. Certain financial liabilities are held in foreign currencies,which are translated at prevailing exchange rates.

The Group has also entered into cross currency hedges to mitigateexposure to both foreign currency and interest rates on these loans.Cash flow hedging instruments are held at fair value in the balancesheet.The effective portion of gains and losses on these instrumentsare taken to the hedge reserve until realised. On realisation such gainsand losses are recognised in the income statement.

Fair value hedging instruments are held at fair value in the balancesheet with gains and losses recognised through the income statement.These are offset against gains and losses on the hedged item insofar asthe hedges are effective.



46

2 Principal accounting policies (continued)Where the Company enters into financial guarantee contracts toguarantee the indebtedness of other companies within the Group, theCompany considers these to be insurance arrangements and accountsfor them as such. In this respect, the Company treats the guaranteecontract as a contingent liability until such time as it becomesprobable that the Company will be required to make a payment underthe guarantee.

Trade and other payables

Trade payables on normal terms are not interest bearing and arestated at their nominal value.Trade payables on extended terms,particularly in respect of land purchases, are recorded at theirfair value.The discount to nominal value is amortised over theperiod to settlement and charged to finance costs.

Deposits

New property deposits and on account contract receipts are heldwithin current trade and other payables until the legal completionof the related property or cancellation of the sale.

Cash and cash equivalents

Cash and cash equivalents are defined as cash balances in hand and inthe bank (including short term cash deposits).The Group routinelyutilises short term bank overdraft facilities, which are repayable ondemand, as an integral part of its cash management policy.These areincluded as a component of net cash and cash equivalents within thecash flow statement. Offset arrangements across Group businesses havebeen applied to arrive at the consolidated cash and overdraft figures.

Interest bearing borrowings

Interest bearing borrowings are carried at amortised cost unlesshedged using fair value hedges.Those interest bearing borrowingshedged using fair value hedges are carried at fair value determinedwith reference to discounted risk-adjusted expected future cash flowsand application of current foreign market exchange rates.

Dividends

Dividends receivable from subsidiaries are accounted for on a cashbasis, once approved by the shareholders of the subsidiary companies.

Own shares held

The Group may acquire holdings in its own shares either directlyor via employee benefit trusts.The acquisition cost of such shares(including associated purchase costs) is treated as a deduction fromretained earnings. Such shares may be used in satisfaction of employeeoptions or rights, in which case the cost of such shares is reversedfrom the profit reserves on a ‘first in first out’ basis.

3 Critical accounting judgements and key sourcesof estimation uncertainty

In applying the Group’s accounting policies the Directors have madeno individual judgements that have a significant impact upon thefinancial statements, excepting those involving estimation which aredealt with opposite.

The key sources of estimation uncertainty at the balance sheet date are:

Land and work in progress

Valuations which include an estimation of costs to complete andremaining revenues are carried out at regular intervals throughoutthe year, during which site development costs are allocated betweenunits built in the current year and those to be built in future years.These assessments include a degree of inherent uncertainty whenestimating the profitability of a site and in assessing any impairmentprovisions which may be required.

In the light of the deterioration in the UK housing market for theyear ended 31 December 2008, the Group conducted a review ofinventory and write downs have been made where the carrying valueexceeded the lower of cost and net realisable value.The review wasconducted on a site by site basis, using valuations that incorporatedselling price reductions, based on local management and the Board’sassessment of market conditions existing at the balance sheet date.If the decline in the UK market exceeds management’s expectationsthen further impairments of land and work in progress may be necessary.

Goodwill

The impairment testing of goodwill is substantially dependent uponthe ability of the Group to successfully progress its strategic landholdings.The assumptions on which this estimate is based may beundermined by any significant changes in the current planningregime, or adverse economic conditions in the United Kingdom.The carrying amount of goodwill at the Balance Sheet date was£203.6m with an impairment of £202.8m recognised duringthe year.

Brand intangibles

The intangible brand assets have been assessed against the discountedcash flows arising.These are based upon estimated returns from therelated businesses, which may be impacted by various factors, mostnotably Government social housing policy and further deteriorationin the economic conditions in the United Kingdom.The carryingamount of indefinite life brands at the balance sheet date was£60.0m, with no impairment recognised during the year.

Pensions

The Directors have employed the services of a qualified, independentactuary in assessing pension liabilities. However, they recognise thatfinal liabilities and asset returns may differ from actuarial estimatesand therefore the pension liability may differ from that included inthe financial statements.

Investment in subsidiaries

Investments in subsidiaries are stated at the lower of cost and netrealisable value, which is dependent upon management assessment offuture trading activity and is therefore subject to a degree of inherentuncertainty.The carrying amount of investments in the Company’sbalance sheet is £3,586.2m with an impairment of £281.7mrecognised during the year.



47

4 Principal activitiesThe Group uses business as the basis for primary segmentation. Operations are carried out within one business segment which ishousebuilding. No additional business segment information is required to be provided.The Group’s secondary segment is geography.It operates in one geographical segment, the United Kingdom; therefore no additional geographical segment information is requiredto be provided.

5 RevenueAn analysis of the Group’s revenue is as follows:

2008 2007£m £m

Sale of goods:

Nominal value of consideration 1,764.9 3,014.9

Discount to future receipts (9.8) –

1,755.1 3,014.9

Other operating income 21.4 40.1

Finance income 10.4 1.9

1,786.9 3,056.9

Sale of goods includes £231.5m (2007: £393.6m) of revenue generated where the sale has been achieved using part exchange incentives.

6 Exceptional itemsExceptional items are items of income and expenditure that, in the judgement of management, should be disclosed separately on the basis that theyare material, either by their nature or their size, to an understanding of the financial performance and significantly distort the comparability offinancial performance between accounting periods. Items of income or expense that are considered by management for designation as exceptionalinclude such items as significant restructuring, write-downs of current assets and impairments of non-current assets.

2008 2007£m £m

Cost of sales:

Inventory impairments (i) 652.3 –

Asset impairment and write-offs (ii) 35.9 –

Operating expenses:

Restructuring costs (iii) 21.9 –

Asset impairment (iv) 201.0 –

Exceptional costs 911.1 –

Finance income:

Other interest receivable (v) (6.3) –

Exceptional items before tax 904.8 –

(i) At 30 June 2008, the Group conducted a review of the net realisable value of its inventory carrying values which resulted in a chargeof £40.0m. In the light of the continuing deterioration in the UK housing market a further review was undertaken.This has resulted ina further impairment of £612.3m. Further details are given in note 18.

(ii) At 30 June 2008, a review of trade and other receivables resulted in a write-off of £9.0m in relation to costs and fees incurred in relationto the withdrawal from land purchase contracts. In the period to 31 December 2008, a further review of trade and other receivables resultedin impairments and write-offs of £26.9m. Further details are given in note 19.

(iii) At 30 June 2008, the Group had incurred £15.0m in relation to reorganising and restructuring the business.At 31 December 2008,restructuring costs comprise staff redundancy and contract severance costs and costs related to office closures of £21.9m.

(iv) At 31 December 2008, the Group conducted an impairment review of its goodwill as explained in note 15.This resulted in animpairment charge of £202.8m of which £201.0m is considered exceptional.

(v) Interest receivable represents monies due following the receipt of tax repayments.

The cash cost of exceptional items in 2008 is £12.1m.There were no exceptional items in 2007.



48

7 Key management remunerationKey management personnel, as disclosed under IAS 24 (Related Party Disclosures), have been identified as the Board and other senioroperational management. Detailed disclosures of individual remuneration, pension entitlements and share options, for those Directors whoserved during the year, are given in the Remuneration Report on pages 28 to 34. Summary key management remuneration is as follows:

2008 2007£m £m

Short-term employee benefits 3.3 6.9

Post-employment benefits 0.2 0.6

Other long-term benefits – 0.3

Share-based payments 3.3 4.1

6.8 11.9

No termination benefits were paid to key management personnel.

8 EmployeesGroup

The average monthly number of persons (including executive Directors) employed by the Group during the year was 3,980 (2007: 5,501).

2008 2007£m £m

Staff costs (for the above persons):

Wages and salaries 114.5 170.3

Social security costs 11.7 17.2

Pensions charge 3.7 7.7


134.3 201.2

The above amounts exclude redundancy payments, which are disclosed separately within exceptional items (note 6).

The Group also uses the services of a substantial number of self employed labour only site operatives.

The pensions charge for the year is stated net of a curtailment credit of £2.1m.

Company

The average monthly number of persons (including executive Directors) employed by the Company during the year was 196 (2007: 223).

2008 2007£m £m

Staff costs (for the above persons):

Wages and salaries 8.5 18.5

Social security costs 1.3 2.4

Pensions credit (3.4) (0.8)


10.8 26.1

The pensions credit for the year includes a curtailment credit of £2.1m.



49

9 Net finance costsBefore

exceptional Exceptionalitems items 2008 2007£m £m £m £m

Recognised in income statement

Other interest receivable 4.1 6.3 10.4 1.9

Finance income 4.1 6.3 10.4 1.9

Interest expense on financial liabilities 62.2 – 62.2 63.2

Imputed interest on deferred land payables 5.6 – 5.6 6.4

Change in the fair value of cash flow hedges transferred from equity 2.2 – 2.2 2.4

Interest expense on financial liabilities 70.0 – 70.0 72.0

Other interest expense 5.8 – 5.8 2.1

Finance cost 75.8 – 75.8 74.1

Net finance cost 71.7 6.3 65.4 72.2

Beforeexceptional Exceptional

items items 2008 2007£m £m £m £m

Recognised in equity

Change in the fair value of cash flow hedges transferred to income statement 2.2 – 2.2 2.4

Effective changes in fair value of cash flow hedges (3.0) – (3.0) (0.9)

Redesignation of cash flow hedges as fair value hedges – – – 10.4

(0.8) – (0.8) 11.9

All amounts recognised in equity have been taken to the hedge reserve (note 25).

There was no hedging ineffectiveness in the period.



50

10 (Loss)/profit from operations2008 2007£m £m

(Loss)/profit from operations is stated after charging/(crediting):

Staff costs (note 8) 134.3 201.2

Exceptional items (note 6) 911.1 –

Profit on sale of land holdings (12.3) (31.0)

Government grants (4.6) –

Rent receivable (2.3) (1.6)

Profit on sale of property, plant and equipment (0.7) (1.0)

Depreciation:

– owned assets 7.8 8.8

– assets held under finance leases 0.9 1.0

Amortisation of intangible assets 0.3 0.2

Impairment of intangible assets – utilisation of strategic land holdings 1.8 2.4

Operating lease charges 7.1 11.7

Amounts receivable by auditors and their associates in respect of:

2008 2007£’000 £’000

Audit of financial statements pursuant to legislation 220 240

Tax services 74 293

Corporate finance services 26 –

Other services 9 23

329 556

The extent of non-audit fees and non-audit related service fees payable to KPMG Audit Plc and its affiliated entities are reviewed by theAudit Committee in the context of fees paid by the Group to its other advisors during the year.The committee also reviews the nature andextent of non-audit services to ensure that independence is maintained.

Fees to major firms of accountants other than KPMG Audit Plc and its affiliated entities for non-audit services amounted to £17,000(2007: £84,834).



51

11 TaxBefore

exceptional Exceptionalitems items 2008 2007£m £m £m £m

Current tax (credit)/expense:

UK corporation tax 38.9 (38.6) 0.3 181.5

Adjustments in respect of prior years (48.4) (134.3) (182.7) (11.0)

(9.5) (172.9) (182.4) 170.5

Deferred tax expense/(credit) (note 23):

Origination and reversal of temporary differences 0.7 (2.8) (2.1) (1.8)

Adjustments in respect of prior years 29.5 – 29.5 0.5

30.2 (2.8) 27.4 (1.3)

Total income tax (credit)/expense in income statement 20.7 (175.7) (155.0) 169.2

The prior year credit relates primarily to the carry back of tax losses from 2008 to 2007.

Reconciliation of effective tax rate

Beforeexceptional Exceptional

items items2008 2008 2007 2007

% £m % £m % £m % £m

(Loss)/profit before tax 124.8 (904.8) (780.0) 582.7

Tax calculated at UK corporation tax rate 28.5 35.6 (28.5) (257.9) (28.5) (222.3) 30.0 174.8

Accounting base cost not deductible fortax purposes 0.2 0.2 0.1 0.9 0.1 1.1 0.2 1.3

Goodwill impairment 0.4 0.5 6.3 57.3 7.4 57.8 0.1 0.7

Losses carried back – – 14.1 127.5 16.3 127.5 – –

Losses carried forward 0.2 0.3 3.4 30.8 4.0 31.1 – –

Expenditure not allowable for tax purposes 2.4 3.0 – – 0.4 3.0 0.5 2.9

Adjustments in respect of prior years (15.1) (18.9) (14.8) (134.3) (19.6) (153.2) (1.8) (10.5)

Effective tax rate and tax (credit)/expensefor the year 16.6 20.7 (19.4) (175.7) (19.9) (155.0) 29.0 169.2

Deferred tax recognised directly in equity

2008 2007£m £m

Relating to equity-settled transactions 0.7 3.2

Relating to actuarial losses/gains on pension schemes 11.6 12.0

Relating to hedged senior loan notes (0.3) 3.6

12.0 18.8

12 (Loss)/profit for the financial yearAs permitted by section 230 of the Companies Act 1985, the Parent Company’s income statement has not been included in these financialstatements.The Parent Company’s loss for the financial year was £204.7m (2007: profit of £17.7m).



52

13 Dividends2008 2007£m £m

Amounts recognised as distributions to equity holders in the period:

2007 final dividend paid of 32.7p (2006: 32.7p) 98.1 97.7

2008 interim dividend paid of 5.0p (2007: 18.5p) 15.0 55.9

113.1 153.6

2008 no final dividend proposed (2007: 32.7p) – 98.1

The scrip dividend scheme ceased after payment of the 2006 final dividend and has been replaced by a Dividend Reinvestment Plan (DRIP).Under the scrip dividend scheme, £nil of the 2007 final dividend (2006 final: £39.5m) and £nil of the 2008 interim dividend (2007 interim:£nil) were settled by way of shares.These amounts have been credited to retained earnings (note 25).

14 Earnings per shareBasic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average numberof ordinary shares in issue during the year, excluding those held in the Employee Share Ownership Trust, the Employee Benefit Trust(see note 24) and treasury shares, all of which are treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentiallydilutive ordinary shares from the start of the accounting period.The Company has only one category of potentially dilutive ordinary sharesbeing those share options and awards granted to directors and employees where the exercise price is less than the average market price of theCompany’s ordinary shares during the year. In accordance with IAS 33, potential ordinary shares are only dilutive when their conversion toordinary shares would decrease earnings per share or increase the loss per share from continuing operations. Diluted earnings per share iscalculated by dividing earnings by the diluted weighted average number of shares.

Underlying earnings per share excludes exceptional items and impairment of intangible assets.The earnings per share from continuingoperations were as follows:

2008 2007

Basic earnings per share (208.3p) 137.5p

Underlying basic earnings per share 35.3p 138.3p

Diluted earnings per share (208.3p) 136.8p

Underlying diluted earnings per share 35.2p 137.6p

a) Earnings

2008 2007£m £m

Underlying earnings attributable to shareholders 105.9 415.9

Exceptional items net of related taxation (including exceptional intangible asset impairment) (729.1) –

Goodwill impairment – utilisation of strategic land holdings (1.8) (2.4)

Earnings attributable to shareholders (625.0) 413.5

b) Weighted average share capital

Weighted Weightedaverage average

number of number ofordinary ordinary

shares shares2008 2007

For basic earnings per share 300,033,700 300,673,519

Options and awards 985,716 1,539,446

For diluted earnings per share 301,019,416 302,212,965



53

15 Intangible assetsGoodwill Brand Know how Total

Group £m £m £m £m

Cost

At 1 January 2007, 1 January 2008 and 31 December 2008 408.8 60.0 1.9 470.7

Accumulated impairment losses/amortisation

At 1 January 2007 – – 0.3 0.3

Impairment losses for the year – utilisation of strategic land holdings 2.4 – – 2.4

Amortisation charge for the year – – 0.2 0.2

At 1 January 2008 2.4 – 0.5 2.9

Impairment losses for the year – utilisation of strategic land holdings 1.8 – – 1.8

Impairment losses for the year – exceptional 201.0 – – 201.0

Amortisation charge for the year – – 0.3 0.3

At 31 December 2008 205.2 – 0.8 206.0

Carrying amount

At 31 December 2008 203.6 60.0 1.1 264.7

At 31 December 2007 406.4 60.0 1.4 467.8

Goodwill brought forward of £182.0m arose on acquisitions before the date of transition to IFRSs and is retained at the previous UK GAAPamounts, subject to being tested for impairment at that date. £50.0m of this amount represented the brand value of Charles Church, acquiredwith Beazer Group plc in 2001.

Acquired brand values are calculated based on discounted cash flows and are tested annually for impairment.The remainder of goodwill isallocated to acquired strategic land holdings and is tested annually for impairment.

The recoverable amounts of the intangibles are determined from value in use calculations.The key assumptions for value in use calculationsare those regarding discount and growth rates. Growth rates incorporate volume, selling price and direct cost changes.

The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management and extrapolated forfour years, to form the basis of the Group’s five year business plan.When performing the impairment review of the brands, the relevantretraction/growth rates included therein vary between –9% to +18% (2007: nil to 2%), reflecting the current volatility of the UK housingmarket.The retraction/growth rates in relation to the impairment review of goodwill allocated to strategic land holdings vary between –6%to +8% (2007: nil to 2%).

After this period the retraction/growth rates applied to the cash flow forecasts vary between nil and 4% reflecting management’s estimate ofthe forecast recovery in the UK housing market, which do not exceed the long term average growth rates for the industry.

Management used pre-tax discount factors between 7.0% and 10.0% (2007: 7.5% and 9.5%) over the forecast period.

At the beginning of the financial year the fair value of goodwill was in excess of its book value. Due to the deterioration in the UK housingmarket and the consequential impact of falling revenues on land values, at the year end the fair value is below book value.

The goodwill allocated to acquired strategic land holdings is further tested by reference to the proportion of legally completed plots in theperiod compared to the total plots which are expected to receive satisfactory planning permission in the remaining strategic land holdings,taking account of historic experience and market conditions.This review resulted in an underlying impairment of £1.8m (2007: £2.4m).The effect of testing goodwill for impairment in the manner set out is that the goodwill will be completely impaired once the final plotthat management expects to receive a satisfactory planning permission, is sold.

As a result of the 2008 impairment review, the Group has an exceptional impairment charge against the goodwill arising from the purchase ofWestbury plc of £188.0m and the Charles Church brand value of £13.0m, which have been recognised in the income statement.

On concluding the annual impairment testing, there remains £126.3m and £38.1m of Beazer andWestbury goodwill allocated to strategicland holdings and £37.0m allocated to the Charles Church brand. In addition, there is £60.0m of carrying value in relation to theWestburybrand.The remaining £2.2m represents goodwill arising on acquisitions before the date of transition to IFRSs.

Acquired know how is amortised over its estimated useful life, which is 10 years from the date of its inception.

Due to the deterioration in the UK housing market the likelihood of impairment losses in the future has increased.



54

15 Intangible assets (continued)Trademarks

Company £m

Cost

At 1 January 2007, 1 January 2008 and 31 December 2008 5.0

Amortisation

At 1 January 2007 0.8

Charge for the year 0.2

At 1 January 2008 1.0

Charge for the year 0.3

At 31 December 2008 1.3

Carrying amount



16 Property, plant and equipmentLand and Fixtures andbuildings Plant fittings Total


Cost

At 1 January 2007 26.8 43.8 10.9 81.5

Additions 2.1 9.1 1.1 12.3

Disposals (3.4) (3.3) (0.3) (7.0)

At 1 January 2008 25.5 49.6 11.7 86.8

Additions 4.5 2.5 0.5 7.5

Disposals (0.3) (4.8) (0.2) (5.3)

At 31 December 2008 29.7 47.3 12.0 89.0

Accumulated depreciation

At 1 January 2007 1.1 23.1 8.4 32.6

Charge for the year 0.5 7.8 1.5 9.8

Disposals (0.5) (2.6) (0.3) (3.4)

At 1 January 2008 1.1 28.3 9.6 39.0

Charge for the year 0.5 7.0 1.2 8.7

Disposals – (3.6) (0.2) (3.8)

At 31 December 2008 1.6 31.7 10.6 43.9

Carrying amount

At 31 December 2008 28.1 15.6 1.4 45.1

At 31 December 2007 24.4 21.3 2.1 47.8

Assets held under finance lease:

Carrying amount at 31 December 2008 – 2.4 – 2.4




55

16 Property, plant and equipment (continued)Land and Fixtures andbuildings Plant fittings Total

Company £m £m £m £m

Cost

At 1 January 2007 2.2 1.3 3.4 6.9

Additions – 0.5 0.3 0.8

Disposals – (0.4) – (0.4)

At 1 January 2008 2.2 1.4 3.7 7.3

Additions – 0.3 – 0.3

Disposals – (0.6) – (0.6)

At 31 December 2008 2.2 1.1 3.7 7.0

Accumulated depreciation

At 1 January 2007 0.3 0.2 2.7 3.2

Charge for the year – 0.4 0.4 0.8

Disposals – (0.2) – (0.2)

At 1 January 2008 0.3 0.4 3.1 3.8

Charge for the year – 0.3 0.2 0.5

Disposals – (0.2) – (0.2)

At 31 December 2008 0.3 0.5 3.3 4.1

Carrying amount

At 31 December 2008 1.9 0.6 0.4 2.9

At 31 December 2007 1.9 1.0 0.6 3.5

Assets held under finance lease:





56

17 InvestmentsInvestmentsin jointlycontrolledentities Total

Group £m £m

Cost

At 1 January 2007 2.8 2.8

Share of results of jointly controlled entities 1.0 1.0

Received from jointly controlled entities (0.6) (0.6)

At 31 December 2007 3.2 3.2


Received from jointly controlled entities (0.1) (0.1)

At 31 December 2008 3.9 3.9

The Group’s investments in jointly controlled entities comprise:

Share ofordinary allotted

capital held Accountingby the Group date

North Oxfordshire Consortium Limited 33% 30 September

Balaia Golf Village Realizacoes Imobiliaria Turisticos Lda 50% 31 December

Sociedade Torre de Marinha Realizacoes Turistocos SA 50% 31 December

Empreendimentos Turisticos da Armacao Nova Lda 50% 31 December

Investments in jointly controlled entities are accounted for under the equity method of accounting.

The Group’s share of assets and liabilities of jointly controlled entities is shown below:

2008 2007£m £m

Non-current assets 0.7 0.5

Current assets 6.3 5.1

Current liabilities (3.1) (2.4)

Net assets of jointly controlled entities 3.9 3.2

The Group’s share of the income and expenses of jointly controlled entities is as follows:

2008 2007£m £m

Income 5.3 5.1

Expenses (4.5) (4.0)

0.8 1.1

Tax – (0.1)




57

17 Investments (continued)Interest insubsidiary

undertakings TotalCompany £m £m

Cost

At 1 January 2007 3,266.8 3,266.8

Addition to investments in existing subsidiaries 475.0 475.0

At 31 December 2007 3,741.8 3,741.8

Impairment of investments (281.7) (281.7)

Addition to investments in existing subsidiaries 126.1 126.1

At 31 December 2008 3,586.2 3,586.2

Additional investments in existing subsidiaries during the year included £79.0m arising on the transfer of an indirect subsidiary investment todirect holding following internal restructuring and an increase in the capitalisation of an existing direct subsidiary of £46.8m.

Following the exceptional impairment of asset values held by subsidiaries, a review was carried out to confirm the recoverability of theinvestment value in existing subsidiaries of Persimmon Plc.As a result of this the carrying value was found to be impaired by £281.7m.

Details of Group undertakings are set out in note 32.

18 InventoriesGroup Group Company Company

2008 2007 2008 2007£m £m £m £m

Land 1,779.5 2,346.1 – –

Work in progress 634.0 814.8 – –

Part exchange properties 54.5 146.9 – –

Showhouses 78.5 78.8 – –

2,546.5 3,386.6 – –

The Directors consider all inventories to be essentially current in nature although the Group’s operational cycle is such that a proportion ofinventories will not be realised within 12 months. It is not possible to determine with accuracy when specific inventory will be realised as thisis subject to a number of issues including consumer demand and planning permission delays.

During 2008 the Group conducted a review of the net realisable value of its inventories in light of the deterioration in the UK housingmarket.Where the estimated net realisable value was less than its carrying value within the balance sheet the Group has impaired theinventory values. Following the impairment £1,088.9m (2007: £96.8m) of inventories are valued at fair value less costs to sell rather than athistorical cost.

The value of inventories expensed in 2008 and included in cost of sales was £1,434.9m (2007: £2,163.6m) excluding the £652.3mexceptional impairment.

Land with a carrying value of £389.5m (2007: £442.1m) was used as security for land payables (note 21).



58

19 Trade and other receivablesGroup Group Company Company

2008 2007 2008 2007£m £m £m £m

Non-current receivables

Available for sale financial assets 33.5 11.6 – –

Impairments (7.3) (2.4) – –

26.2 9.2 – –

Other receivables 5.2 8.0 – –

31.4 17.2 – –

Current receivables

Trade receivables 46.8 63.7 – –

Land options 68.0 77.5 – –

Other receivables 7.8 14.4 2.2 2.9

Amounts owed by Group undertakings – – 251.3 244.0

Other prepayments and accrued income 15.6 24.6 8.6 12.7

138.2 180.2 262.1 259.6

Available for sale financial assets due after more than one year are recorded at fair value, being the amount receivable by the Groupdiscounted to present day values.The difference between the nominal and the initial fair value is credited over the deferred term to financeincome, with the financial asset increasing to its full cash settlement value on the anticipated receipt date. Credit risk is accounted for indetermining fair values and appropriate discount factors are applied.The Group holds a second charge over property sold under shared equityschemes.The impairment of the available for sale financial assets arises due to the impact on the fair value of these assets due to the decline in UKhouse prices and amounts to £4.9m in the period which has been charged as an exceptional item in the income statement. Further disclosuresrelating to financial assets are set out in note 22.

Trade and other receivables are non-interest bearing, and the Group has no concentration of credit risk, with exposure spread over a largenumber of customers.The Directors consider that the carrying value of trade receivables approximates to their fair value.

An allowance of £6.5m (2007: £nil) has been charged to profit and loss account exceptional items to recognise the impairment of individualtrade and other receivables included in current receivables.The impairment recognised represents the difference between the carryingamounts of these receivables and the present value of any expected recoveries.



59

20 BorrowingsGroup Group Company Company

2008 2007 2008 2007£m £m £m £m

Non-current borrowings

US, UK and EU senior loan notes 507.0 450.7 244.8 268.5

Syndicated loan (net of issue costs) 63.1 75.0 63.1 75.0

Finance lease obligations 1.1 1.8 0.2 0.6

571.2 527.5 308.1 344.1

Current borrowings

Bank overdrafts (note 27) 23.7 50.9 18.9 67.4

US and UK senior loan notes 119.4 73.3 119.4 13.4

Other loan notes 3.2 5.3 3.2 5.3

Finance lease obligations 1.3 1.4 0.4 0.4

147.6 130.9 141.9 86.5

Detailed disclosure of the Group’s usage of financial instruments is included in note 22.

Excepting finance leases all borrowings are unsecured.The carrying value of borrowings equates to the face value of borrowings withthe exception of finance leases.The contractual repayment terms of borrowings are as noted below.At the date of signing of the financialstatements the Directors have taken pre-emptive action to amend certain covenants and conditions within the Group’s funding arrangementsto maintain these contractual repayment dates. Further details are given in note 34.

Nominal Year of 2008 2007Currency interest rate maturity £m £m

Bank overdrafts GBP Base +1% 2009 23.7 50.9

Syndicated loan GBP LIBOR +0.35%-0.55% 2010 63.1 75.0

UK senior loan notes GBP 5.09%-7.58% 2009-2021 56.4 77.6

US senior loan notes USD 5.10%-8.28% 2009-2016 565.0 442.7

EU senior loan notes EUR 3.77% 2011 5.0 3.7

Other loan notes GBP LIBOR –0.5% 2011 3.2 5.3

Finance lease obligations GBP 7.00%-9.00% 2009-2011 2.7 3.5

Face value of borrowings 719.1 658.7

Future finance charges on finance leases (0.3) (0.3)

Carrying value of borrowings 718.8 658.4

Hedges have been taken out against all foreign currency denominated borrowings to hedge all principal payments to Sterling and to hedgeforeign currency forward interest payments into Sterling payments at either fixed rates or rates linked to UK LIBOR.These hedges thereforeform both a hedge of foreign exchange rate and interest rate risk.Additional data on the maturity of financial liabilities and effective interestrates after consideration of these hedges is found in note 22.

Finance lease obligations – total minimum lease payments:

Group Group Company Company2008 2007 2008 2007£m £m £m £m

Within one year 1.5 1.5 0.4 0.5

In the second to fifth years inclusive 1.2 2.0 0.3 0.6

Less: future finance charges (0.3) (0.3) (0.1) (0.1)

Present value of finance lease obligations 2.4 3.2 0.6 1.0

There are no finance lease obligations in excess of five years (2007: none).



60

21 Other liabilitiesGroup Group Company Company

2008 2007 2008 2007£m £m £m £m

Non-current liabilities

Land payables 131.0 89.5 – –

Other payables 1.0 2.9 0.4 2.2

132.0 92.4 0.4 2.2

Group Group Company Company2008 2007 2008 2007£m £m £m £m

Current liabilities

Trade payables 174.1 306.2 1.8 2.2

Land payables 182.7 230.0 – –

Amounts owed to Group undertakings – – 3,008.3 2,757.4

Social security and other taxes 4.1 7.6 2.0 2.1

Deposits and on account contract receipts 43.9 45.0 – –

Other payables 23.1 35.6 4.7 9.5

Accrued expenses 124.0 124.6 17.6 16.2

551.9 749.0 3,034.4 2,787.4

Trade payables subject to payment terms were 32 days (2007: 43 days), based on the ratio of year end trade payables (excluding retentions andunagreed claims), to amounts invoiced during the year by trade creditors.The Group has financial risk management policies in place to ensurethat all payables are paid within the pre-agreed terms.The Directors consider that the carrying amount of trade payables approximates to theirfair value.

Land payables are reduced for imputed interest, which is charged to the income statement over the credit period of the purchase contract.

22 Financial risk managementThe Group has exposure to the following risks from its use of financial instruments:

– Market risk

– Liquidity risk

– Capital risk

– Credit risk

This note presents basic information regarding the Group’s exposure to these risks and the Group’s objectives, strategy and processes formeasuring and managing exposure to them. Unless otherwise stated references to Group should be considered to apply to the Company as well.

The Board of Directors has overall responsibility for risk management of the Group.The Board has established the Risk Committee whichhas the delegated task of overseeing the Board’s responsibility with respect to risk and internal control.The Risk Committee reports to theAudit Committee on a regular basis.

The Risk Committee is supported in this task by the Group Risk management function.The Group Risk function performs an annualassessment of the risks faced by the Group.This assessment is used to drive a risk focused programme of work aimed to improve businessprocesses and increase internal control effectiveness.



61

22 Financial risk management (continued)Market risk

Market risk represents the potential for changes in foreign exchange prices and interest rates to affect the Group’s profit and the value of itsfinancial instruments. It also incorporates the effect of the overall UK housing market on the Group.The Group’s objective in market riskmanagement is to minimise its exposures to fluctuations within such variables whilst optimising returns.

The Group has entered into a number of hedge derivative arrangements to limit its exposure to these risks, particularly exchange risk.The Group enters into such transactions only as part of periodic wider refinancing undertakings to take advantage of the mature privateplacement markets in other countries (notably the USA) and only with the approval of the Board of Directors.The Group applies hedgeaccounting to these arrangements in order to minimise profit and loss volatility.

Currency risk

The Group’s currency risk principally resides in senior loan notes issued in US Dollars and Euros to institutional investors.The Group hasentered into hedge arrangements for all such loan notes swapping them into Sterling on issue.These hedges match the contractual maturityof all principal payments and also match foreign currency contractual interest payment maturities, swapping these to either fixed Sterlingpayments (designated cash flow hedges) or Sterling payments linked to UK LIBOR (designated fair value hedges).

In this manner the Group’s foreign currency senior loan notes cash flows are effectively hedged to mirror those of either a fixed or floatingrate Sterling denominated loan.

The Group also has investments in a number of Portuguese jointly controlled entities.These interests are not hedged.These investments areconsidered to be long term in nature.

The Group has no other significant currency exposures.

The following exchange rates applied during the year:

2008 2007

Average Year end Average Year endrate spot rate rate spot rate

US Dollar 1.853 1.438 2.002 2.004

Euro 1.259 1.034 1.462 1.362

The Group’s exposure to foreign currency risk may be summarised as follows:

2008 2007

USD Euro USD Euro$m bm $m am

Investments – 3.5 – 3.7

Senior loan notes (735.2) (5.0) (838.4) (5.0)

Forward exchange contracts 735.2 5.0 838.4 5.0

Net exposure – 3.5 – 3.7

Sensitivity analysis

The hedging arrangements in place over borrowings are such that the Group’s profit will be unaffected by any reasonably expected variationin exchange rate at the reporting date (2007: nil).A rise/fall in the Euro/Sterling exchange rate of 10% would result in a £0.3m loss/gain inrelation to investments.

Interest rate risk

The Group holds a mixture of both fixed and floating interest borrowings to control its exposure to interest rate risk.The Group has noformal target for a ratio of fixed to floating funding.The responsibility for setting the level of fixed rate debt lies with the Board of Directorsand is continually reviewed in the light of economic data provided by a variety of sources.

Fixed rate borrowings are achieved by issuance of fixed rate GBP denominated senior loan notes and by interest rate swaps entered into aspart of the hedging arrangements put in place for foreign currency denominated senior loan notes detailed under currency risk above.

Sensitivity analysis

The Group’s hedging arrangements are such that the Group’s profit would be unaffected by any reasonably expected variation of the interestrate at the balance sheet date (2007: nil).



62

22 Financial risk management (continued)Housing market risk

The Group is fundamentally affected by the level of UK house prices.These in turn are affected by factors such as credit availability,employment levels, interest rates, consumer confidence and supply of land with planning. 2008 has proved an exceptional year, withunprecedented falls in house prices, largely driven by the lack of availability of consumer mortgage lending.

Whilst it is not possible for the Group to fully mitigate such risks on a national macroeconomic basis the Group does continually monitor itsgeographical spread within the UK, seeking to balance its investment in areas offering the best immediate returns with a long term spreadof its operations throughout the UK to minimise the effect of local microeconomic fluctuations. Furthermore the Group has taken steps tominimise its speculative build, restrict its land acquisition and reduce work in progress expenditure so as to manage the exposure of the Groupto any continued market disruption.

Liquidity risk

Liquidity risk reflects the risk that the Group will have insufficient resources to meet its financial obligations as they fall due.The Group’sstrategy to managing liquidity risk is to ensure that the Group has sufficient liquid funds to meet all its potential liabilities as they fall due.

This is true not only of normal market conditions but also of negative projections against expected outcomes, so as to avoid any riskof incurring contractual penalties or damaging the Group’s reputation, which would in turn reduce the Group’s ability to borrow atoptimal rates.Therefore the Group ensures its continued compliance with financial covenants under both syndicated loan and privateplacement arrangements even under adverse market conditions.

The Group has entered into a number of deferred payment guarantees and performance bonds in the normal course of operations.The liabilities to which these guarantees relate are recognised and accounted for in accordance with our standard accounting policies.

Liquidity forecasts are produced on (i) a daily basis to ensure that utilisation of current facilities is optimised; (ii) a monthly basis to ensure thatcovenant compliance targets and medium term liquidity is maintained and (iii) a long term projection basis for the purpose of identifyinglong term strategic funding requirements.

The Directors also continually assess the balance of capital and debt funding of the Group.They consider the security of capital fundingagainst the potentially higher rates of return offered by debt financing in order to set an efficient but stable balance appropriate to the sizeof the Group.

The Group operates short term uncommitted overdraft facilities to meet day to day liquidity requirements.These facilities are cancellableon request from the bank; however the Group generally maintains low levels of borrowing on these in favour of more cost efficient facilities.These overdraft facilities are provided by five leading clearing banks to minimise exposure to any one lender.

The Group has a syndicated revolving credit facility committed to November 2010, at a competitive rate linked to LIBOR. Undrawn facilitiesat the reporting date amount to £735.0m (2007: £725.0m).

Refinancing

As a direct result of the exceptional trading conditions under which the Group has operated during 2008 and its liquidity forecasts incorporatingprojections of these trading conditions into 2009, the Directors assessed that the Group’s liquidity risk had increased in relation to compliancewith the interest cover covenant (based on income statement) as set out in the terms of the Company’s existing credit facilities.Accordingly, theDirectors have taken pre-emptive action to: amend certain covenants including but not limited to, the interest cover covenant (now based onoperating cash flows), conditions within the Group’s funding arrangements and to reduce the level of committed facilities to reflect the Group’sforecast requirements.

Further details are provided in note 34.

Capital risk

The Group’s objective in managing capital is primarily to ensure the continued ability of the Group to meet its liabilities as they fall duewhilst also maintaining an appropriate balance of equity and borrowings and minimising costs of capital. Close control of deployment ofcapital is maintained by detailed management review procedures for authorisation of significant capital commitments, such as land acquisition,capital targets for local management and a system of internal interest recharges, ensuring capital cost impact is understood and considered byall tiers of management.

Decisions regarding the balance of equity and borrowings, dividend policy and all major borrowing facilities are reserved for the Main Board.



63

22 Financial risk management (continued)The following are the contractual maturities of financial liabilities, including interest payments (not discounted).These have been calculatedusing market exchange and LIBOR rates at the year end, except where LIBOR rates are already contracted:

2008Carrying Contractual Less than 1-2 2-5 Overamount cash flows 1 year years years 5 years

Group £m £m £m £m £m £m

Bank overdrafts 23.7 23.7 23.7 – – –

Syndicated loan (net of issue costs) 63.1 68.1 1.7 66.4 – –

UK senior loan notes 56.4 88.3 4.1 7.0 7.8 69.4

US senior loan notes 565.0 593.5 142.2 153.9 235.3 62.1

EU senior loan notes 5.0 5.3 0.2 0.2 4.9 –

Other loan notes 3.2 3.2 3.2 – – –

Finance lease obligations 2.4 2.7 1.5 0.9 0.3 –

Forward currency swaps (116.8) (86.8) (22.6) (11.7) (39.2) (13.3)

Interest bearing financial liabilities 602.0 698.0 154.0 216.7 209.1 118.2

Trade and other payables 322.2 322.2 321.2 0.5 0.5 –

Land payables 313.7 321.4 187.9 66.4 67.1 –

Financial liabilities 1,237.9 1,341.6 663.1 283.6 276.7 118.2

Please note that the table above demonstrates the contracted cash flows in place at 31 December 2008. As detailed in note 34, the Group hassubsequently renegotiated a number of these agreements.This has resulted in an increase in contractual cash flow projections at thecurrent date.


Group £m £m £m £m £m £m

Bank overdrafts 50.9 50.9 50.9 – – –

Syndicated loan (net of issue costs) 75.0 88.3 4.7 4.7 78.9 –






Forward currency swaps 68.0 134.8 21.5 22.8 53.3 37.2


Trade and other payables 469.3 469.3 466.4 1.5 1.2 0.2

Land payables 319.5 321.8 231.3 58.8 31.7 –

Financial liabilities 1,515.2 1,702.7 884.3 197.4 344.3 276.7



64

22 Financial risk management (continued)2008

Carrying Contractual Less than 1-2 2-5 Overamount cash flows 1 year years years 5 years

Company £m £m £m £m £m £m

Bank overdrafts 18.9 18.9 18.9 – – –

Syndicated loan (net of issue costs) 63.1 68.1 1.7 66.4 – –






Forward currency swaps (79.8) (65.7) (21.6) (4.8) (26.0) (13.3)


Trade and other payables 3,032.8 3,032.8 3,032.4 0.3 0.1 –

Financial liabilities 3,403.0 3,464.8 3,166.4 83.5 96.7 118.2

Please note that the table above demonstrates the contracted cash flows in place at 31 December 2008. As detailed in note 34, the Companyhas subsequently renegotiated a number of these agreements.This has resulted in an increase in contractual cash flow projections at thecurrent date.


Company £m £m £m £m £m £m

Bank overdrafts 67.4 67.4 67.4 – – –

Syndicated loan (net of issue costs) 75.0 88.3 4.7 4.7 78.9 –






Forward currency swaps 18.6 50.0 8.0 17.0 11.7 13.3


Trade and other payables 2,787.5 2,787.5 2,785.3 1.4 0.8 –

Financial liabilities 3,236.7 3,349.4 2,899.3 120.8 158.8 170.5



65

22 Financial risk management (continued)Credit risk

The nature of the UK housing industry and the legal framework surrounding it results in the Group having a low exposure to credit risk.In the majority of cases the full cash receipt for each sale occurs on legal completion, which is also the point of revenue recognition underthe Group’s accounting policies.

In certain specific circumstances the Group has entered into shared equity arrangements (not applicable to the Company).The pressures ofrecent market conditions necessitated an increase in this form of sales structure during 2008. In such cases the long term debt is secured uponthe property concerned (the Group does not recognise collateral rights as a separate asset, nor does it have rights to trade such collateral).Recent reductions in property values have led to an increase in the credit risk of the Group in respect of such sales.The charge for provisionfor credit impairment in the year amounted to £4.9m.

The maximum total credit risk is as follows:

2008 2007Group £m £m

Loans and receivables 86.0 95.3

Cash and cash equivalents 0.8 2.1

86.8 97.4

Company

Loans and receivables (including intercompany balances) 253.5 246.9

253.5 246.9

The maximum credit exposure of the Group to overseas parties is £0.2m (2007: £0.5m) (Company £nil (2007: £nil)).The Group’s creditrisk is widely distributed.The maximum credit risk should any single party fail to perform is £2.7m (2007: £4.6m) (Company £115.2m(2007: £114.7m) being a subsidiary debtor).This Group debtor is secured upon property.The Directors consider these financial assets to be ofhigh quality and the credit risk is assessed as low.

Fair value

The fair value of financial assets and liabilities is as follows:

2008 2007

Fair Carrying Fair Carryingvalue value value value


Trade and other receivables 86.0 86.0 95.3 95.3

Cash and cash equivalents 0.8 0.8 2.1 2.1

Bank overdrafts (23.7) (23.7) (50.9) (50.9)

Syndicated loan (net of issue costs) (63.1) (63.1) (75.0) (75.0)

UK senior loan notes (64.0) (56.4) (81.3) (77.6)

US senior loan notes (574.9) (565.0) (450.9) (442.7)

EU senior loan notes (5.0) (5.0) (3.7) (3.7)

Other loan notes (3.2) (3.2) (5.3) (5.3)

Finance lease obligations (2.4) (2.4) (3.2) (3.2)

Trade and other payables (322.2) (322.2) (469.3) (469.3)

Land payables (313.7) (313.7) (319.5) (319.5)

Forward currency swaps 116.8 116.8 (68.0) (68.0)

(1,168.6) (1,151.1) (1,429.7) (1,417.8)

Unrecognised loss 17.5 11.9



66

22 Financial risk management (continued)2008 2007

Fair Carrying Fair Carryingvalue value value value


Trade and other receivables 253.5 253.5 246.9 246.9

Bank overdrafts (18.9) (18.9) (67.4) (67.4)

Syndicated loan (net of issue costs) (63.1) (63.1) (75.0) (75.0)

UK senior loan notes (60.9) (53.5) (57.7) (54.6)

US senior loan notes (305.7) (305.7) (223.6) (223.6)

EU senior loan notes (5.0) (5.0) (3.7) (3.7)

Other loan notes (3.2) (3.2) (5.3) (5.3)

Finance lease obligations (0.6) (0.6) (1.0) (1.0)

Trade and other payables (3,032.8) (3,032.8) (2,787.5) (2,787.5)

Forward currency swaps 79.8 79.8 (18.6) (18.6)

(3,156.9) (3,149.5) (2,992.9) (2,989.8)

Unrecognised loss 7.4 3.1

Income and expense in relation to financial instruments is disclosed in note 9.

Financial assets and liabilities by category:

Group Company

2008 2007 2008 2007£m £m £m £m

Financial assets held at fair value 143.0 – 79.8 –

Loans and receivables 59.8 95.3 253.5 246.9

Cash and cash equivalents 0.8 2.1 – –

Financial liabilities at fair value (811.3) (741.9) (310.7) (245.9)

Financial liabilities at amortised cost (543.4) (773.3) (3,172.1) (2,990.8)

(1,151.1) (1,417.8) (3,149.5) (2,989.8)

Fair values of financial liabilities are determined by reference to the rates at which they could be exchanged between knowledgeable andwilling parties.Where no such price is readily available then fair value is determined by discounting net forward cash flows for the residualperiod of the contract by a risk free rate.



67

22 Financial risk management (continued)Hedge accounting

As outlined under currency risk above the Group operates two forms of hedging.

Certain US senior loan notes, along with all EU senior loan notes, are hedged using fair value hedges.These hedge instruments effectivelyswap fixed US Dollar/Euro interest payments for floating Sterling payments linked to UK LIBOR.They also provide a forward swap for allcapital repayments and therefore these instruments effectively hedge foreign exchange risk.

Other US senior loan notes are hedged via cash flow hedges.These hedge instruments effectively swap fixed US Dollar/Euro interestpayments for fixed Sterling payments.They also provide a forward swap for all capital repayments and therefore these instruments effectivelyhedge both foreign exchange and interest rate risk.

The periods when the forecast cash flows relating to cash flow hedges will occur, and when they will affect profit are as follows:

Group

2008 2007£m £m

Less than 1 year 0.4 8.1

1-2 years (0.1) 1.0

2-5 years – 17.4

Over 5 years – –

Carrying value 0.3 26.5

There was no hedge ineffectiveness during the period.The Company did not operate cash flow hedges during the year (2007: nil).

23 Deferred taxThe following are the deferred tax assets and liabilities recognised by the Group and the movements thereon during the current and prior year:

Accelerated Retirement Othertax benefit Share-based Imputed temporary

depreciation obligation payment interest Derivatives differences Total£m £m £m £m £m £m £m

At 1 January 2007 1.5 31.1 6.1 2.7 3.2 (7.7) 36.9

(Charge)/credit to income (0.2) (2.1) (0.4) – – 4.0 1.3

Charge to equity – (12.0) (3.2) – (3.6) – (18.8)

At 1 January 2008 1.3 17.0 2.5 2.7 (0.4) (3.7) 19.4

Credit/(charge) to income 0.3 (3.3) (1.8) 0.1 – (22.7) (27.4)

(Charge)/credit to equity – (11.6) (0.7) – 0.3 – (12.0)

At 31 December 2008 1.6 2.1 – 2.8 (0.1) (26.4) (20.0)

The charge to income of £22.7m shown in other temporary differences represents the release of a deferred tax asset created in previousperiods.The matching corporation tax provision has also been released as an adjustment in respect of prior years and consequently the netimpact on the Income Statement is £nil.

As permitted by IAS 12 (IncomeTaxes), certain deferred tax assets and liabilities have been offset.The following is an analysis of the deferredtax balances (after offset) for financial reporting purposes:

2008 2007£m £m

Deferred tax assets 6.5 51.4

Deferred tax liabilities (26.5) (32.0)

(20.0) 19.4

The Group has not recognised deferred tax assets on £109.0m of tax losses carried forward, and £87.6m of the total pension deficit of£95.3m.The amount of deferred tax asset recognised in respect of the net pension deficit is £2.1m (2007: £17.0m).



68

23 Deferred tax (continued)The following are the deferred tax assets and liabilities recognised by the Company and the movements thereon during the current andprior year:

Accelerated Retirement Othertax benefit Share-based temporary

depreciation obligation payment Derivatives differences Total£m £m £m £m £m £m

At 1 January 2007 0.2 31.1 6.1 1.0 2.0 40.4

Charge to income (0.3) (1.2) (0.4) – (0.1) (2.0)

Charge to equity – (12.0) (3.2) (1.0) – (16.2)

Other adjustments – (0.9) – – – (0.9)

At 1 January 2008 (0.1) 17.0 2.5 – 1.9 21.3

Credit/(charge) to income 0.4 (0.9) (1.8) – (1.9) (4.2)

Charge to equity – (11.6) (0.7) – – (12.3)

Other adjustments – (2.4) – – – (2.4)

At 31 December 2008 0.3 2.1 – – – 2.4

As permitted by IAS 12 (IncomeTaxes), certain deferred tax assets and liabilities have been offset.The following is an analysis of the deferredtax balances (after offset) for financial reporting purposes:

2008 2007£m £m

Deferred tax assets 2.4 21.4

Deferred tax liabilities – (0.1)

2.4 21.3

24 Share capital2008 2007£m £m

Authorised

365,000,000 (2007: 365,000,000) ordinary shares of 10p each 36.5 36.5

Allotted, called up and fully paid

302,591,431 (2007: 302,591,431) ordinary shares of 10p each 30.3 30.3

The Company has one class of ordinary shares which carry no right to fixed income.All issued shares are fully paid.There have been nomovements in share capital during the year.

The Company has established Employee Benefit Trusts (EBT) to hold shares for participants of the Company’s various share schemes.The Trustee is Persimmon (Share SchemeTrustees) Limited, a subsidiary company. During 2008, the Trustee made market purchases of185,000 shares at an average price of £3.75 and transferred 303,973 shares to employees.At 31 December 2008 the trust held 105,638 shareson which dividends have been waived.The market value of these shares at 31 December 2008 was £0.2m.

During the year the Company made direct market purchases of its own shares.The Company has bought 250,000 shares at an average priceof £6.82 which it holds in treasury. Including associated purchase costs the total cost of the shares bought was £1,715,160. Dividends onthese shares will be waived.At 31 December 2008 the Company held 2,403,740 shares with a market value of £5.5m.



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25 Reconciliation of movements in share capital and reservesOther non-º Total

Share Share Own Hedge distributable Retained shareholders’capital premium shares reserve reserve earnings equity

Group £m £m £m £m £m £m £m

Balance at 1 January 2007 29.9 233.4 (5.1) (4.3) 281.4 1,496.0 2,031.3

Own share reserve transfer – – 5.1 – – (5.1) –

Exercise of share options/share awards 0.1 0.5 – – – 6.5 7.1

Scrip dividends 0.3 (0.3) – – – 39.5 39.5

Own shares purchased – – – – – (25.5) (25.5)

Share option charge and taxation thereon – – – – – 3.4 3.4

Valuation of currency swaps and taxation thereon – – – 8.3 – – 8.3

Movement in pension deficit and taxation thereon – – – – – 24.1 24.1

Dividends approved and paid – – – – – (153.6) (153.6)

Other reserve movement† – – – (3.3) – 0.6 (2.7)

Retained profits for the year – – – – – 413.5 413.5

Balance at 31 December 2007 30.3 233.6 – 0.7 281.4 1,799.4 2,345.4

Exercise of share options/share awards – – – – – 3.2 3.2



Valuation of currency swaps and taxation thereon – – – (0.6) – – (0.6)

Movement in pension deficit and taxation thereon – – – – – (55.4) (55.4)


Other reserve movement – – – – – (0.6) (0.6)

Retained losses for the year – – – – – (625.0) (625.0)

Balance at 31 December 2008 30.3 233.6 – 0.1 281.4 1,009.8 1,555.2

†Other reserve movement in 2007 comprises the transfer of £3.3m from the hedge reserve to retained earnings in respect of hedges inheritedon the acquisition ofWestbury plc, and a charge of £2.7m in respect of losses on options exercised and satisfied from own shares held.ºThe other non-distributable reserve of £281.4m arose prior to transition to IFRSs, and relates to the issue of ordinary shares to acquire theshares of Beazer Group Plc in 2001.



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25 Reconciliation of movements in share capital and reserves (continued)Other non-º Total

Share Share Own Hedge distributable Retained shareholders’capital premium shares reserve reserve earnings equity

Company £m £m £m £m £m £m £m

Balance at 1 January 2007 29.9 233.4 (5.1) (2.3) 4.6 552.1 812.6

Own share reserve transfer – – 5.1 – – (5.1) –

Exercise of share options/share awards 0.1 0.5 – – – 5.0 5.6

Scrip dividends 0.3 (0.3) – – – 39.5 39.5



Valuation of currency swaps and taxation thereon – – – 2.3 – – 2.3

Movement in pension deficit and taxation thereon – – – – – 24.1 24.1


Other reserve movement∆ – – – – – (2.7) (2.7)

Retained profits for the year – – – – – 17.7 17.7

Balance at 31 December 2007 30.3 233.6 – – 4.6 458.1 726.6*

Exercise of share options/share awards – – – – – 1.0 1.0



Movement in pension deficit and taxation thereon – – – – – (55.4) (55.4)


Other reserve movement – – – – – (0.6) (0.6)

Retained losses for the year – – – – – (204.7) (204.7)

Balance at 31 December 2008 30.3 233.6 – – 4.6 87.3 355.8*

Own shares

Own shares purchased are reconciled as follows:

Group Company£m £m

Balance at 31 December 2007 24.0 22.3

Acquired in the period 2.4 1.7

Disposed of on exercise/vesting to employees (4.9) (2.8)

Balance at 31 December 2008 21.5 21.2

*Includes £31.3m of non-distributable items (2007: £33.9m).ºThe other non-distributable reserve arose prior to transition to IFRSs.∆Other reserve movement in 2007 represents £2.7m in respect of losses on options exercised and satisfied from own shares held.



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26 Reconciliation of net cash flow to net debt2008 2007

Group £m £m

Increase/(decrease) in net cash and cash equivalents 25.9 (64.7)

Decrease/(increase) in debt and finance lease obligations 98.6 (5.6)

Decrease/(increase) in net debt from cash flows 124.5 (70.3)

New finance lease obligations (0.6) (1.7)

Non-cash movements (0.8) 11.9

Decrease/(increase) in net debt 123.1 (60.1)

Net debt at 1 January (724.3) (664.2)

Net debt at 31 December (601.2) (724.3)

2008 2007Company £m £m

Decrease/(increase) in net cash and cash equivalents 48.5 8.7

Decrease/(increase) in debt and finance lease obligations 30.7 (57.4)

Decrease/(increase) in net debt from cash flows 79.2 (48.7)

New finance lease obligations (0.2) (0.4)

Non-cash movements – 3.1

Decrease/(increase) in net debt 79.0 (46.0)

Net debt at 1 January (449.2) (403.2)

Net debt at 31 December (370.2) (449.2)

27 Analysis of net debtOther

non-cash2008 Cash flow movements 2007


Cash and cash equivalents 0.8 (1.3) – 2.1

Bank overdrafts (note 20) (23.7) 27.2 – (50.9)

Net cash and cash equivalents (22.9) 25.9 – (48.8)

Bank loans (net of issue costs) (63.1) 11.9 – (75.0)

US and UK senior loan notes due within one year (119.4) 83.2 (129.3) (73.3)

US, UK and EU senior loan notes due after more than one year (507.0) – (56.3) (450.7)

Other loan notes due within one year (3.2) 2.1 – (5.3)

Forward currency swaps 116.8 – 184.8 (68.0)

Finance lease obligations (2.4) 1.4 (0.6) (3.2)

Net debt at 31 December (601.2) 124.5 (1.4) (724.3)



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27 Analysis of net debt (continued)Other

non-cash2008 Cash flow movements 2007


Bank overdrafts (note 20) (18.9) 48.5 – (67.4)

Net cash and cash equivalents (18.9) 48.5 – (67.4)

Bank loans (net of issue costs) (63.1) 11.9 – (75.0)

US and UK senior loan notes due within one year (119.4) 16.1 (122.1) (13.4)

US, UK and EU senior loan notes due after more than one year (244.8) – 23.7 (268.5)

Other loan notes due within one year (3.2) 2.1 – (5.3)

Forward currency swaps 79.8 – 98.4 (18.6)

Finance lease obligations (0.6) 0.6 (0.2) (1.0)

Net debt at 31 December (370.2) 79.2 (0.2) (449.2)

Net debt is defined as cash and cash equivalents, bank overdrafts, finance lease obligations, interest bearing borrowings and related swapinstruments.

28 Capital commitmentsAt 31 December 2008 there were no contracted capital commitments to purchase property, plant and equipment (2007: £1.3m) in the Groupand no contracted capital commitments in the Company (2007: £0.1m).

29 Contingent liabilitiesIn the normal course of business the Group has given counter indemnities in respect of performance bonds and financial guarantees.Management estimate that the bonds and guarantees amount to £326m (2007: £375m), and confirm that the possibility of cash outflow isconsidered minimal and no provision is required.

Provision is made for the Directors’ best estimate of all known legal claims and all legal actions in progress.The Group takes legal advice as tothe likelihood of success of claims and actions and no provision is made where the Directors consider, based on that advice, that the action isunlikely to succeed, or a sufficiently reliable estimate of the potential obligation cannot be made.

The Company has entered into guarantees of certain financial liabilities of related undertakings as detailed in note 33.

30 Operating leasesAt 31 December total outstanding commitments for future minimum lease payments under non-cancellable operating leases were as follows:

2008 2007Group £m £m

Expiring within one year 0.8 0.8

Expiring in the second to fifth years inclusive 5.3 10.2

Expiring after five years 17.1 21.0

23.2 32.0

Company

Expiring within one year 0.1 0.1

Expiring in the second to fifth years inclusive 0.2 0.3

Expiring after five years – –

0.3 0.4

The Group receives sundry rental income under short term leases arising from its long term land holdings.There are no minimum leasereceipts as no lease is held under a non-cancellable agreement.

Operating lease payments represent rentals payable by the Group for certain of its office properties and motor vehicles. Motor vehicles have anaverage term of 1.3 years to expiry (2007: 1.6 years). Property leases have an average term of 9.1 years to expiry (2007: 10.9 years).



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31 Employee benefitsRetirement benefit obligation

At 31 December 2008 the Group operated three employee pension schemes, a stakeholder scheme and two defined benefit schemes.Actuarialgains and losses are recognised in full through the statement of recognised income and expense in accordance with IAS 19 (Revised).All pensionscheme costs that are recognised in the income statement are reported as operating expenses. Expected costs in relation to current employees arecharged to the relevant operating business.All other pension scheme costs are borne by the Company.

Persimmon Group Stakeholder Scheme

The Persimmon Group Stakeholder Scheme is a defined contribution scheme available to new salaried employees.The Group matchesemployees’ own contributions to their individual Stakeholder plans up to 9% of basic salary depending on the length of service. Groupcontributions to this scheme of £1.2m (2007: £1.3m) are expensed through the income statement as incurred.

Persimmon Plc Pension & Life Assurance Scheme

The Persimmon Plc Pension & Life Assurance Scheme (the ‘Persimmon Scheme’) is a defined benefit scheme which was closed to newmembers in 2001.The assets of the Persimmon Scheme are held separately from those of the Group.An actuarial valuation of the PersimmonScheme was carried out as at 1 January 2008 by a professionally qualified actuary and adopted the projected unit method. Under theprojected unit method the current service cost, as a percentage of Persimmon Scheme members’ pensionable pay, will increase as the activemembers approach retirement. Standard 2000 mortality tables applying a medium cohort effect with an underpin of 1.25% p.a. for males and0.75% p.a. for females were used as a basis to calculate the future liability.

Prowting Pension Scheme

On acquisition ofWestbury plc in 2006 the Group assumed control of the Prowting Pension Scheme (the ‘Prowting Scheme’) a definedbenefit scheme.The Prowting Scheme was closed to new members prior to the acquisition.The assets of the Prowting Scheme are heldseparately from those of the Group.The most recent completed actuarial valuation of the Prowting Scheme was carried out as at 31 March2006 by a professionally qualified actuary and adopted the projected unit method. Under the projected unit method the current service cost,as a percentage of Prowting Scheme members’ pensionable pay, will increase as the active members approach retirement. Standard 1992mortality tables, appropriately adjusted and applying a medium cohort effect, have been used as a basis to calculate the future liability.

The assets of both defined benefit schemes have been calculated at fair value and the liabilities, at each balance sheet date, have been calculatedbased on the following financial assumptions (figures presented are an aggregation of both defined benefit schemes):

2008 2007% pa % pa

Discount rate 6.10 5.80

General pay increases 3.50 3.90

Inflation assumption 2.90 3.10

Pension increases – Limited Price Indexation 2.90 3.10

Expected return on Scheme assets:

Equities 7.5 8.5

Bonds 4.9 5.3

Property 6.5 7.5

Cash 3.8 5.5

Persimmon Plc employs a building block approach in identifying the long term rate of return on pension plan assets. Historical marketsare studied and assets with higher volatility are assumed to generate higher returns consistent with widely accepted capital market principles.The assumed long term rate of return on each asset class is set out above.The overall expected rate of return on assets is then derived byaggregating the expected return of each asset class over the actual asset allocation for the scheme at 31 December 2008 and rounded to thenearest 0.1% per annum.



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31 Employee benefits (continued)The major categories of scheme assets as a percentage of the total fair value of scheme assets are as follows:

2008 2007% %

Equities 60 64

Bonds 31 26

Property – 2

Other 9 8

The amounts recognised in income are as follows:

2008 2007£m £m

Current service cost 4.8 6.7

Curtailment credit (2.1) –

Interest cost 19.4 18.3

Expected return on scheme assets (19.6) (18.6)

Total (included in staff costs) 2.5 6.4

Net actuarial loss/(gain) 43.8 (36.1)

Total loss/(gain) recognised in the Statement of Recognised Income and Expense in the period 43.8 (36.1)

Total defined benefit scheme loss/(gain) recognised in the period 46.3 (29.7)

The overall expected rate of return on scheme assets is a weighted average of the individual expected rates of return on each asset class.

The cumulative loss recognised in the Statement of Recognised Income and Expense since the adoption of IAS 19 (Revised) is £31.1m(2007: £12.7m gain).

2008 2007£m £m

Expected return on scheme assets 19.6 18.6

Actuarial loss on scheme assets (66.5) (1.2)

Actual return on scheme assets (46.9) 17.4

The amounts included in the balance sheet arising from the Group’s obligation in respect of its defined benefit schemes is as follows:

2008 2007£m £m

Present value of funded obligations 324.0 340.0

Fair value of scheme assets (228.7) (279.3)

Deficit in the scheme and net liability in the balance sheet 95.3 60.7

A deferred tax asset totalling £2.1m (2007: £17.0m) has been recognised on the balance sheet in relation to the net pension obligation.



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31 Employee benefits (continued)Movements in the liability recognised on the balance sheet were as follows:

2008 2007£m £m

At 1 January 60.7 103.7

Total loss/(gain) recognised in the period 46.3 (29.7)

Company contributions paid in the period (11.7) (13.3)

At 31 December 95.3 60.7

Changes in the present value of the defined benefit obligation were as follows:

2008 2007£m £m

At 1 January 340.0 360.8

Current service cost 4.8 6.7

Interest cost 19.4 18.3

Actuarial losses on liabilities (22.7) (37.3)

Gain on curtailment (2.1) –

Benefits paid (15.4) (8.5)

At 31 December 324.0 340.0

Changes in the fair value of scheme assets were as follows:

2008 2007£m £m

At 1 January 279.3 257.1

Expected return 19.6 18.6

Actuarial losses on assets (66.5) (1.2)

Contributions 11.7 13.3

Benefits paid (15.4) (8.5)

At 31 December 228.7 279.3

A three year history of experience adjustments is as follows:

2008 2007 2006£m £m £m

Present value of defined benefit obligation (324.0) (340.0) (360.8)

Fair value of scheme assets 228.7 279.3 257.1

Deficit in the scheme (95.3) (60.7) (103.7)

Experience adjustments on scheme liabilities – – 0.8

Percentage of scheme liabilities – – 0.2%

Experience adjustments on scheme assets (66.5) (1.2) (0.8)

Percentage of scheme assets 29.1% 0.4% 0.3%

The expected employer contributions to the defined benefit schemes during 2009 is £18.3m.



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31 Employee benefits (continued)Post retirement life expectancy assumptions for retirement aged staff are as follows:

2008 2007Years Years

Male current pensioner 22.4 21.5

Female current pensioner 24.3 23.8

Male future pensioner 23.9 22.2

Female future pensioner 25.3 24.4

The Company does not present valuations of its own separate assets and liabilities under the defined benefit schemes as this is a multi-employer plan in existence for many years and it has been impractical to separately identify such assets and liabilities subsequent to thetransition to IFRS.

Share-based payment

The Group operates a number of share option schemes, the details of which are provided below.All schemes are equity settled. In accordancewith IFRS 2, only costs relating to options issued after 7 November 2002 have been charged to the income statement.

The Save AsYou Earn Scheme is an HMRC approved scheme open to all employees. Options can normally be exercised three years after thedate of grant.

Options have been issued to senior management (including the executive Directors) under the Group’s various executive share option schemes,which includes two long term incentive plans (LTIPs).Vesting of options granted under the LTIPs is dependent on the Group’s return oncapital employed and its total shareholder return versus (i) a comparator group of house building companies for options granted before 2007;(ii) a comparator group of the constituents of the FTSE 100 at date of grant for options granted in 2007 and March 2008 and (iii) totalshareholder return versus a comparator group of the constituents of the FTSE 250 at date of grant and cash generation for options granted inSeptember 2008 to senior employees.These conditions have been factored into the option value applied.

Reconciliations of share options outstanding during each period, under each type of share scheme are as follows:

2008 2007Save As You Save AsYou

Earn Schemes Earn Schemes

Number Weighted Number Weightedof shares average of shares average

under exercise under exerciseGroup and Company option price (p) option price (p)

Outstanding at the beginning of the year 1,478,294 803.1 1,369,381 725.4

Granted during the year 1,512,333 326.0 738,068 753.0

Forfeited during the year (920,200) (763.6) (212,508) (711.5)

Exercised during the year (43,388) (541.7) (416,647) (505.7)

Outstanding at the end of the year 2,027,039 448.7 1,478,294 803.1

Exercisable at the end of the year 282,385 697.9 51,431 525.0

2008 2007Executive Share Schemes Executive Share Schemes

Number Weighted Number Weightedof shares average of shares average

under exercise under exerciseGroup and Company option price (p) option price (p)

Outstanding at the beginning of the year 249,754 368.6 308,399 362.3

Granted during the year – – – –

Forfeited during the year – – (7,639) (986.6)

Exercised during the year (146,483) (325.1) (51,006) (483.1)

Outstanding at the end of the year 103,271 430.3 249,754 368.6

Exercisable at the end of the year 103,271 430.3 248,282 364.9



77

31 Employee benefits (continued)2008 2007

Bonus Shares Scheme Bonus Shares Scheme

Number of Number ofGroup and Company shares under option shares under option

Outstanding at the beginning of the year 198,392 338,975

Granted during the year 80,812 125,479

Forfeited during the year (1,921) (314)

Exercised during the year (136,472) (265,748)

Outstanding at the end of the year 140,811 198,392

Exercisable at the end of the year – –

2008 2007LongTerm Incentive Plans Long Term Incentive Plans


Outstanding at the beginning of the year 1,037,232 1,066,050

Granted during the year 1,440,181 448,597

Forfeited during the year (126,474) (63,744)

Exercised during the year (258,346) (413,671)

Outstanding at the end of the year 2,092,593 1,037,232

Exercisable at the end of the year 252,300 2,750

2008 2007Synergy Incentive Plan Synergy Incentive Plan


Outstanding at the beginning and end of the year 775,000 775,000

Exercisable at the end of the year – –

31 Employee benefits (continued)The weighted average share price at the date of exercise for share options exercised during the period was 580.4p (2007: 1,075.1p).The options outstanding at 31 December 2008 had a range of exercise prices from zero to 1,331.0p and a weighted average remainingcontractual life of 1.9 years (2007: 2.2 years).

The inputs into the binomial option-pricing model for options that were granted in the year were as follows:

LTIP LTIPSAYE March September2008 2008 2008

Grant date 21 October 11 March 16 September

Risk free interest rate 3.76% 3.83% 4.21%

Exercise price 326.0p nil nil

Share price at date of grant 236.0p 679.0p 383.0p

Expected dividend yield 2.50% nil nil

Expected life 3 years 3 years 3 years

Date of vesting 1 December 2011 11 March 2011 16 September 2011

Expected volatility 50% 50% 45%

Fair value of option 32.0p 515.0p 294.0p

Expected volatility was determined by calculating the historic volatility of the Group’s share price over various timescales.

The expected life used in the model has been adjusted, based on best estimates, to reflect exercise restrictions and behavioural considerations.

In 2008, the Group and Company recognised total expenses of £4.4m (2007: £6.0m) in relation to equity-settled share-based paymenttransactions in the income statement.These option charges have been credited against the retained earnings reserve.All share-based paymentsare expensed by the Company.The Company makes management charges to its subsidiaries which include the cost of providing this benefitto their employees.

32 Details of Group undertakingsThe Directors set out below information relating to the major subsidiary undertakings (those that principally affect the profits and assetsof the Group) of Persimmon Plc at 31 December 2008.All of these companies are registered in England. 100% of voting rights are heldby companies within the Group. Having made use of the exemption in section 231 of the Companies Act 1985, a full list of subsidiaryundertakings and jointly controlled entities will be annexed to the Company’s next annual return.

Major subsidiary undertakings

Persimmon Homes Limited� Charles Church Developments Limited� Westbury Limited**

Persimmon Holdings Limited* Beazer Group Limited**

� The shares of this company are held by Persimmon Holdings Limited and Persimmon Plc.� The shares of this company are held by Persimmon Holdings Limited.* The shares of this company are held by Persimmon Finance Limited and Persimmon Plc.** The shares of these companies are held by Persimmon Plc.



78

33 Related party transactionsThe Board and certain members of senior management are related parties within the definition of IAS 24 (Related Party Disclosures).Summary information of the transactions with key management personnel is provided in note 7. Detailed disclosure of the individualremuneration of Board members is included in the Remuneration Report on pages 28 to 34.There is no difference between transactionswith key management personnel of the Company and the Group.

During 2008, the Group engaged N M Rothschild & Sons Limited to act as advisor to the Company on the amendment of its bankingfacilities, and entering into new banking facilities.The maximum fee due to N M Rothschild & Sons Limited under the terms of theengagement is £1.5m.

N M Rothschild & Sons Limited is a related party to the Persimmon Group because NicholasWrigley, a non-executive director ofPersimmon Plc, is the Managing Director of Rothschild London and a member of its Global Investment Banking Committee and GlobalManagement Committee.At 31 December 2008, there was an outstanding balance owed by the Group to N M Rothschild & Sons of£0.7m (2007: £nil).

There have been no other transactions between key management personnel and the Company, apart from those referred to above.

The Company has entered into transactions with its subsidiary undertakings in respect of the following: internal funding loans and provisionof Group services (including Senior Management, IT, accounting, marketing, purchasing, legal and conveyancing services). Recharges are madeto subsidiary undertakings for Group loans, based on funding provided, at an interest rate linked to the prevailing base rate. No recharges aremade in respect of balances due to or from otherwise dormant subsidiaries. Recharges are made for Group services based on utilisation ofthose services.

During the year these recharges amounted to:

2008 2007£m £m

Interest charges on intra-group funding 34.1 78.0

Group services recharges 17.4 27.0

51.5 105.0

In addition to these services the Company acts as a buying agent for certain Group purchases, such as insurance.These are recharged at costbased on utilisation by the subsidiary undertaking.

The amount outstanding from subsidiary undertakings to the Company at 31 December 2008 totalled £251.3m (2007: £244.0m).Amounts owed to subsidiary undertakings by the Company at 31 December 2008 totalled £3,008.3m (2007: £2,757.4m).

The Company provides the Group’s defined benefit pension scheme. Expected service costs are charged to the operating businesses at cost.There is no contractual arrangement or stated policy relating to the net defined benefit cost. Experience and actuarial gains and losses arerecognised in the Company.

Certain subsidiary undertakings have entered into guarantees of external bank loans and overdrafts of the Company.The total value of suchborrowings at 31 December 2008 was £449.3m (2007: £424.3m).The Company has entered into guarantees over bank loans and borrowingsof the subsidiary undertakings.The total value of such borrowings at 31 December 2008 was £279.4m (2007: £293.0m).

The Company has suffered no expense in respect of bad or doubtful debts of subsidiary undertakings in the year (2007: £nil).

34 Post balance sheet eventOn 27 February 2009, the Company reached agreement with its syndicate of banks providing the current revolving credit facility onamendments to the amount, terms and conditions of its existing credit facilities.The Company has also agreed a new revolving credit facility.This Forward Start Facility of £322m will become available for drawing on 24 November 2010 on the maturity of the existing facility andmatures on 31 March 2012. Full documentation has been signed relating to these facilities and the amended terms and conditions becomefinal upon the private placement investor documentation being signed.

In addition, on 27 February 2009, the Company reached agreement in principle with its private placement investors on amendments to theterms and conditions of its existing credit facilities.The full amendment documentation is currently in the process of being finalised, andwhilst not without risk the Directors believe that this process will be completed promptly.The Directors remain confident that should theneed arise alternative funding arrangements can be made.

Taken together, the Company will have committed funding lines of £1,085m at the outset of these arrangements (26 February 2009:£1,235m), reducing to £560m during 2011. On the basis of the Company’s working capital projections, the Directors believe that thesenew facilities provide ample headroom and support for the continuing effective management of the business.



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80

North DivisionNorth Division Board

Central DivisionCentral Division Board

Directory

Jeff FairburnDivision Chief Executive

John CassieScotland Regional Chairman

Corinne GillAssociate Director – Group Finance

David JenkinsonNorth East Regional Chairman

David ThorntonDivision Chief Executive

Andrew HammondShires Regional Chairman

Persimmon HomesYorkshire

Persimmon HouseFulfordYorkYO19 4FETelephone (01904) 642199Fax (01904) 656142Managing Director:Andrew Bowes

Persimmon HomesWestYorkshireCharles ChurchYorkshire

3 Hepton CourtYork RoadLeeds LS9 6PWTelephone (0113) 2409726Fax (0113) 2408967Managing Director:Wayne Gradwell

Persimmon Homes North EastCharles Church North East

Persimmon HouseClasperWaySwalwellNewcastle upon Tyne NE16 3BETelephone (0191) 4990011Fax (0191) 4991211Managing Director: David Jenkinson

Persimmon Homes Teesside

Charles Church HouseBowburn North Industrial EstateDurham RoadBowburnCounty Durham DH6 5PFTelephone (0191) 3774000Fax (0191) 3774001Managing Director: Neil Foster

Persimmon HomesWest ScotlandPartnerships Scotland

180 Findochty StreetGarthamlockGlasgow G33 5EPTelephone (0141) 7662600Fax (0141) 7662605Managing Director: Douglas Law

Persimmon Homes East ScotlandCharles Church Scotland

Unit 1Wester Inch Business ParkOldWell CourtBathgate EH48 2TQTelephone (01506) 638300Fax (01506) 638301Managing Director: John Cassie

Persimmon Homes NorthWestCharles Church NorthWest

Persimmon HouseStonecross ParkYewTreeWayGolborneWarringtonCheshireWA3 3JDTelephone (01942) 277277Fax (01942) 276490Managing Director: Neil Follows

Persimmon Homes Lancashire

Persimmon HouseLancaster Business ParkCaton RoadLancaster LA1 3RQTelephone (01524) 542000Fax (01524) 542001Managing Director: Mark Cook

Persimmon Homes North MidlandsCharles Church North Midlands

Davidson HouseMeridian EastMeridian Business ParkLeicester LE19 1WZTelephone (0116) 2815600Fax (0116) 2815601Managing Director: Paul Hurst

Persimmon HomesWest Midlands

Venture CourtBroadlandsWolverhamptonWest MidlandsWV10 6TBTelephone (01902) 787989Fax (01902) 624333Managing Director: Dominic Harman

Persimmon Homes South MidlandsCharles Church South Midlands

Persimmon HouseBirmingham RoadStudleyWarwickshire B80 7BGTelephone (01527) 851200Fax (01527) 851222Managing Director: ChrisWalker

Persimmon Homes MidlandsCharles Church Midlands

3WatersideWayBedford RoadNorthampton NN4 7XDTelephone (01604) 884600Fax (01604) 884601Managing Director:Andrew Hammond


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David BryantGroup Development Director andEastern Regional Chairman

Judith PotterDivision Finance Director

Nigel GreenawayDivision Chief Executive

Adrian MorganWestern Regional Chairman

Judith PotterDivision Finance Director

Persimmon Homes East MidlandsCharles Church East Midlands

Persimmon House19 Commerce RoadPeterborough Business ParkLynchWoodPeterborough PE2 6LRTelephone (01733) 397200Fax (01733) 397255Managing Director:Adrian Evans

Persimmon Homes ThamesValleyCharles Church ThamesValley

Persimmon HouseVanwall Business ParkMaidenheadBerkshire SL6 4UBTelephone (01628) 502800Fax (01628) 502801Managing Director:Andrew Hammond

Persimmon Homes EssexCharles Church Essex

10 Collingwood RoadWithamEssex CM8 2EATelephone (01376) 518811Fax (01376) 521145Managing Director: Ian Jeffrey

Persimmon Homes AngliaCharles Church Anglia

Persimmon HouseColville RoadWorksOulton BroadLowestoftSuffolk NR33 9QSTelephone (01502) 516784Fax (01502) 561656Deputy Managing Director:Andrew Fuller

Persimmon Homes South East

Persimmon HouseBrooklands Business ParkWeybridgeSurrey KT13 OYPTelephone (01932) 350555Fax (01932) 350022Managing Director: Edward Owens

Persimmon Homes South Coast

Persimmon House100Wickham RoadFarehamHampshire PO16 7HTTelephone (01329) 514300Fax (01329) 514333Managing Director:Andrew Golawski

Persimmon HomesWessexCharles ChurchWessex

Verona HouseTetbury HillMalmesburyWiltshire SN16 9JRTelephone (01666) 824721Fax (01666) 826152Managing Director: Steve Roche

Persimmon Homes SevernValleyCharles Church SevernValley

Churchward HouseChurchward RoadYateBristol BS37 5NNTelephone (01454) 333877Fax (01454) 327123Managing Director: Carl Haley

Persimmon HomesWales

Persimmon HouseLlantrisant Business ParkLlantrisantMid Glamorgan CF72 8YPTelephone (01443) 223653Fax (01443) 237328Managing Director: SteveWilliams

Persimmon Homes SouthWestCharles Church SouthWest

Mallard RoadSowton Trading EstateExeterDevon EX2 7LDTelephone (01392) 252541Fax (01392) 430195Managing Director: Simon Perks

Charles Church Southern

Charles Church HouseKnoll RoadCamberleySurrey GU15 3TQTelephone (01276) 808080Fax (01276) 808081Managing Director: Darren Jones

Charles ChurchWales

34-37 Lambourne CrescentCardiff Business ParkLlanishenCardiff CF14 5GGTelephone (02920) 768400Fax (02920) 761044Managing Director:Andrew Crompton

Westbury Partnerships

Tameside DriveCastle BromwichBirmingham B35 7AGTelephone: 0121 748 8350Fax: 0121 748 3583Managing Director: Mark PlattsDirectorWestbury Partnerships Projects:Ashley Lane

Space4 Ltd

Tameside DriveCastle BromwichBirmingham B35 7AGTelephone: 0121 748 8383Fax: 0121 776 7369Director in Charge: Chris Hagan

South DivisionSouth Division Board


82

FiveYear Record

2008* 2007 2006† 2005 2004

Unit sales 10,202 15,905 16,701 12,636 12,360

Revenue £1,755.1m £3,014.9m £3,141.9m £2,285.7m £2,131.3m

Average selling price� £172,994 £189,558 £188,129 £180,892 £172,431

Profit from operations £198.3m £657.3m £637.3m £527.8m £498.0m

Profit before tax £126.6m £585.1m £566.7m £495.4m £468.0m

Basic earnings per share 35.3p 138.3p 133.8p 118.4p 113.5p

Diluted earnings per share 35.2p 137.6p 133.1p 118.0p 112.8p

Dividend per share 5.00p 51.20p 46.50p 31.00p 27.50p

Net assets per share 518.0p 781.4p 680.2p 574.9p 486.5p

Total shareholders’ equity £1,555.2m £2,345.4m £2,031.3m £1,692.0m £1,405.6m

Return on capital employed 6.2% 21.7% 23.1% 28.8% 30.6%

All figures shown before goodwill amortisation/impairment where applicable.

* 2008 figures stated before exceptional items.† 2006 figures stated after reorganisation costs.� Average selling price calculated from nominal value of revenue (before IAS 18 adjustment to fair value shared equity).

Number ofSize of shareholding shareholders %

1 – 5,000 12,641 92.32

5,001 – 50,000 658 4.81

50,001 – 250,000 209 1.53

250,001 and over 184 1.34

Total 13,692 100.00

Share price – year ended 31 December 2008

Price at 31 December 2008 £2.293/4

Lowest for year £1.833/4

Highest for year £8.87

The above share prices are the middle-market closing share prices as derived from the London Stock Exchange Daily Official List.


Shareholder InformationAnalysis of shareholding at 31 December 2008

83

Financial Calendar 2009

Annual General Meeting 23 April 2009

Interim Management Statement 23 April 2009

Trading Update 7 July 2009

Announcement of Half Year Results 25 August 2009

Interim Management Statement 17 November 2009


Directors

84

JohnWhite Group ChairmanMike Farley Group Chief ExecutiveMike Killoran Group Finance DirectorDavid Bryant Group Development Director

Group Company SecretaryNeil Francis

Registered officePersimmon HouseFulford,YorkYO19 4FETelephone (01904) 642199Fax (01904) 610014

Company number1818486Incorporated in England

AuditorsKPMG Audit Plc

BankersThe Royal Bank of Scotland plcLloyds TSB Bank plcBarclays Bank PLCHSBC plcNational Australia Bank Ltd

Financial advisors/stockbrokersCitigroup Global Markets LimitedMerrill Lynch International

SolicitorsMayer Brown International LLP

RegistrarsComputershare Investor Services PLCThe PavilionsBridgwater RoadBristolBS99 6ZZTelephone (0870) 7030178

Company Information

Our website contains:

Find a home

A buyers guide to Persimmon and Charles Church new homes.

Persimmon Group

Financial and corporate information on the Group including currentshare price.

Recruitment

Information on the careers and positions available within thePersimmon Group.


This section includes the Sustainability Report, our report oncorporate responsibility and the sustainability of our new homes.

Information on the Internet: www.persimmonhomes.com

Hamish Leslie Melville Non-executive DirectorDavid Thompson Senior Independent DirectorNeil Davidson Non-executive DirectorNicholasWrigley Non-executive DirectorRichard Pennycook Non-executive Director

Designed and produced by RadleyYeldar www.ry.comCover picture Port Glasgow,Kingston Dock, Scotland

13 March 2009

Dear Shareholder,

In my statement dated 2 March 2009, issued with the preliminary results for the yearended 31 December 2008, I confirmed that we had successfully agreed new terms andconditions with our banking partners and private note holders for the amendment ofour existing credit facilities and the arrangement of a new Forward Start Banking Facility.

I also gave an undertaking to notify you when the full documentation relating to thesecredit facilities had been finalised and signed.

I am pleased to report that on 13 March 2009, the full documentation was signed andall necessary formalities completed.

Yours faithfully

John WhiteGroup Chairman

PERSIMMON PLCPersimmon House

FulfordYork

YO19 4FETel: 01904 642199Fax: 01904 610014DX 711680 Fulford

www.persimmonhomes.com

Chairman’s letter to shareholders March 2009

Persimmon PlcPersimmon HouseFulfordYorkYO19 4FETelephone 01904 642199Fax 01904 610014www.persimmonhomes.com

Persimmon

PlcD

ecember2008

Annual Report December 2008and Chairman’s letter to shareholders March 2009

AnnualReport December 2008 and March 2009 … · 83 Financial Calendar 2009 84 Persimmon Plc...

Documents

Transcript of AnnualReport December 2008 and March 2009 … · 83 Financial Calendar 2009 84 Persimmon Plc...