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

Where the heart isAnnual Report December 2007Where the heart isAnnual Report December 2007

Persimm

onPlc

AnnualR

eportD

ecember

2007

Financial Highlights

Contents

Δ

Revenue (£m)*

2003 2004 2005 2006 2007

2,131.32,285.7

3,141.9 3,014.9

1,883.0

Dividend per share (pence)

2003 2004 2005 2006 2007

27.5031.00

46.5051.20

18.30

Profit from operations (£m)*

2003 2004 2005 2006 2007

498.0 527.8

637.3 654.9

381.7

Return on average capital employed (%)*

2003 2004 2005 2006 2007

30.628.8

23.121.6

25.5

Profit before tax (£m)*

2003 2004 2005 2006 2007

468.0 495.4566.7 582.7

352.5

Basic earnings per share (pence)*

2003 2004 2005 2006 2007

113.5 118.4133.8 137.5

86.8

* 2004-7 stated under IFRS. Comparative for 2003 prepared under frozen UK GAAP Comparative for 2003 as restated for UITF 38 (Accounting for ESOP trusts)Δ

01 An Introduction

02 Understanding Persimmon

04 Chairman’s Statement

Business Review:

08 Review of Strategy

12 2007 Performance Review

20 Financial Review

32 Corporate Responsibility

36 Board of Directors

38 Directors’ Report

42 Remuneration Report

48 Corporate Governance Report

50 Statement of Directors’ Responsibilities

51 Independent Auditors’ Report to theShareholders of Persimmon Plc

Financial Statements:

52 Consolidated Income Statement

53 Consolidated Balance Sheet

54 Company Balance Sheet

55 Consolidated Cash Flow Statement

56 Company Cash Flow Statement

57 Consolidated Statement of RecognisedIncome and Expense

57 Company Statement of RecognisedIncome and Expense

58 Notes to the Financial Statements

91 Directory

94 FiveYear Record

94 Financial Calendar

95 Shareholder Information

96 Persimmon Plc Directors &Company Information

01 Persimmon Plc

As the UK’s leading housebuilder, our priorityis to deliver affordable, quality homes wherepeople want to live.

Our divisional structure ensures we cover the UKfrom Exeter to Edinburgh, where we providecustomers with a choice of homes to suit theirindividual budgets.

We are committed to a sustainable future, withenvironmental issues at the heart of what we do.This includes protecting and improving localsurroundings, adopting new technologies andinvesting in strategic land for the longer term.

02 Persimmon Plc

Understanding Persimmon

Financial Highlights:

£189,558Average selling price +1%

£654.9mProfit from operations +3%

£582.7mProfit before tax +3%

137.5pBasic earnings per share +3%

51.20pDividend per share +10%

Our Divisions:

North DivisionThis division includesPersimmon Homes operatingbusinesses in Scotland,the North East andYorkshire.

Central DivisionOur Central Division includesour North West, Birmingham,Shires and Eastern regions ofPersimmon Homes.

South DivisionThis division includes ourPersimmon Homes Southern,Western and Wales regionsand incorporates WestburyPartnerships and Space4.

Charles ChurchCharles Church builds homesacross the UK from nineregional offices which areintegrated into each division.

3,765Units sold

5,656Units sold

3,905Units sold

2,579Units sold

03 Persimmon Plc

Our Brands:

Charles Church provides a rangeof premium homes, in bothmodern and traditional styles.Charles Church is one of thecountry’s foremost house buildingbrands with an unrivalledreputation for the design andquality of the homes it builds.

The Westbury Partnershipsbusiness focuses on social housing,in conjunction with Space4,our timber frame manufacturingoperation. By working closelytogether with Housing Associations,this business aims to offer solutionsto some of the affordable housingproblems the Government wishesto resolve.

The Persimmon Homes businessis our core operation.There are24 regional Persimmon offices fromExeter to Edinburgh, buildingquality homes which provide thevery best in design, constructionand service.The wide range ofproperty types includes three, fourand five-bed detached properties;two and three-bed terraced andsemi-detached houses; bungalowsand apartments.

04 Persimmon Plc

Chairman’s Statement

ResultsPre-tax profits for the year ended 31 December 2007 were £585.1m(2006: £582.1m).These results are stated before a goodwill impairmentcharge of £2.4m (2006: stated before reorganisation costs of £15.4m).After charging goodwill, pre-tax profits were £582.7m which is a 2.8%increase on last year (2006: £566.7m after charging reorganisation costs).Earnings per share (after all charges) increased to 137.5p (2006: 133.8p).

As already reported, legal completions for 2007 were 15,905, a decreaseof 4.8% on 2006, whilst average selling prices increased to £189,558(2006: £188,129).Turnover for the year was £3.015bn, down 4% on theprior year.

Operating profit (after charging goodwill) increased to £654.9m (2006:£637.3m after reorganisation costs) and operating margins, already at anindustry high level, increased to 21.7% (2006: 20.3%).

The increase in margins during the period reflects the strict disciplineswe apply to all our costs.We also continued to benefit from the synergiesachieved following the acquisition of Westbury. During 2007 we deliveredannual synergy savings of over £50m which is above the target of £45msavings previously stated.

Another focus for our management continues to be strong cash control.We have generated net cash inflows from operations of £263m, despiteinvesting an additional £427m in stocks and work in progress.This wasdue to a combination of investments in good quality land opportunities,particularly in the early part of the year, and an increase in work inprogress as we increased outlets by c. 7%. Free cash inflow for the yearbefore the payment of dividends and buyback of Persimmon shareswas £67m.

Net borrowings at the year end were £721m representing a gearing levelof 31% (2006: 33%).We achieved a return on average capital employed of21.6% (2006: 23.1% after reorganisation costs).

Our landbank at 1 January 2008 consisted of 78,863 plots which wereeither owned or under control.This land has been acquired over anumber of years at attractive prices and provides a strong asset base for ourbusiness. In addition we had a further 11,124 plots proceeding to contract.

Persimmon has once again deliveredan excellent result during what hasbeen a very challenging year.The resultswe announce today show a furtherimprovement over the record resultsof the previous year.

05 Persimmon PlcChairman’s Statement

We remain focused on progressing planning on numerous strategic landopportunities, and during the year this accounted for more than 50% ofthe plots we acquired.This successful strategy will allow us to continue tobe very selective with regard to new land acquisitions.

As previously stated, we are proposing to increase the full year dividend by10% this year to a total of 51.2p per share.This is the eleventh consecutiveyear we have grown the dividend.The interim dividend paid was 18.5p.Therefore the final dividend which will be payable on 25 April 2008 willbe 32.7p per share.The full year dividend is well covered at 2.7 times.

OutlookWe came into 2008 with a forward sales order book of £603m. Sincethen reservations have been lower than the same strong period of 2007.Visitor levels have improved each week since the beginning of the yearbut conversion to sales ratios have remained challenging.

Understandably, potential purchasers are currently taking longer to makedecisions about the timing of their house purchase.There remains anunderlying demand and desire for new homes but we have beenexperiencing a period of a ‘wait and see’ approach. However, the negativecustomer reaction to the credit squeeze during the autumn now appearsto be easing a little following recent interest rate reductions.Whilstmortgage lending has tightened, the new criteria are now more clearlyunderstood and our good long term relationships with all the majorlenders continue to work well. Encouragingly, cancellation rates havereduced since last autumn, and are now at more normal levels whilstweekly sales volumes have been gradually improving. New house sellingprices across the UK are holding firm, although we expect incentives tocontinue to be offered and marketing costs to increase.

We are confident that the underlying supply and demand fundamentalsfor the house building industry will once again produce an upturn inmarket conditions.As planned, we continue to increase the number ofpartnership homes we are building in line with the Government’s agenda.

Our order book for 2008, including legal completions to date, is now atc. £1.05bn (2007: £1.30bn).Whilst this is lower than the equivalentfigure for 2007 it nevertheless represents a healthy level of sales at thisearly stage of the year. Comparatives will become less pronouncedthrough the summer and autumn months following the slow down ofsales from August 2007.Against the current backdrop we expect thetiming of sales and completions this year to be more weighted to thesecond half of the year than usual.

During the autumn months we took the opportunity to review our buildcosts and overhead efficiency. By working closely with our suppliers andsub-contractors we have managed to reduce our input costs from thebeginning of this year.We also announced in January the merger of someof our regional offices which resulted in the closure of 3 offices andassociated redundancies.This increased overhead efficiency and thereduction in some of our build costs will assist in mitigating the impactof a more difficult housing market whilst setting a clear course for themedium and long term.

Traditionally the housing market has fluctuated as trading conditions, thegeneral economy and interest rates change. Our management teams haveexperienced many years of these changing markets and have been usingthis experience to tackle the challenges and opportunities presented bythe current market conditions.When confidence returns and sentimentimproves we anticipate a return to a stronger market; in the meantimewe remain cautious. However, with an experienced management team,strong balance sheet and excellent landbank we remain confident forthe future.

Finally, I once again thank each and every one of our dedicated staff,advisers, suppliers and contractors for their assistance and hard work inachieving these results.

John White Group Chairman25 February 2008

06 Persimmon Plc

Affordable

Edge End Farm, Mitton, Staffordshire

07 Persimmon Plc

Premium Affordability and quality are key.Persimmon delivers a wide choiceof lower cost houses and apartmentsas well as more aspirational yetaffordable homes.

The Lawns, StallingtonVillage, Staffordshire

08 Persimmon Plc

Business Review:Review of Strategy

Mike Farley, Group Chief Executive

Our StrategyOur business is the construction and sale of new homes in the UKmarket, which includes land acquisition and development. Our longterm strategy is to continue to profitably grow our business.We followa strategy of reducing exposure to local market volatility by maintainingoperations across geographically and economically diverse markets toenhance our growth potential.

Our growth strategy is a controlled process of managing our balancesheet while we grow both organically, through land acquisition anddevelopment in existing business units and markets, and through theacquisition of other house building companies where there is anopportunity to strengthen our presence in our existing markets.

We believe that our business requires in-depth knowledge of localmarkets in order to acquire land, to engage subcontractors, to plan sitesin accordance with local demand, to anticipate customer tastes in specificmarkets and to assess the regulatory environment. Our divisional structureis designed to utilise our local market expertise.

LandOur strategy is to maintain a landbank sufficient to ensure a continuedsupply of land with residential planning consent, our basic raw material.We acquire land only after we have completed appropriate due diligence,including site investigations and evaluation of the planning status.Although we purchase land primarily to support our house buildingactivities, we also trade land with other housebuilders, primarily to secureadditional sales outlets.We control a substantial amount of land, bothowned and through option agreements, which we promote through theplanning process.

DevelopmentOur management teams supervise and control the design, developmentand construction of our housing sites.We are not dependent on any singlesupplier or subcontractor.We have a number of fixed price contractswith subcontractors and material suppliers, which help limit the effectof commodity price increases.We also attempt to maintain efficientoperations by utilising standardised materials available from a varietyof sources. Our supply agreements also allow us to leverage our volumethrough quantity purchase discounts for a number of products.

We believe that the implementationof our strategy has placed us in anexcellent position to continue to growour business and we have confidencein the future.

09 Persimmon PlcBusiness Review

FaringtonVillas, Farington, Lancashire

SalesWe monitor our sales to ensure that the mix of our new homes is alignedto meet demand and to ensure that we are not over exposed in any oneparticular house type.We build show houses and view homes to enableour customers to see the finished product and then closely match ourbuild programmes with our customer orders.We look after our customersand aim to ensure that they receive good service, both during and afterthe house buying process.

Risk FactorsWe plan to continually mitigate and minimise the risks inherent withinthe residential development process. However there are many substantialrisks outside of our control which could affect our business.The principalrisks are:

• National and regional economic conditions: the house building industryis sensitive to changes such as job growth, housing demand, interest ratesand consumer confidence.Any deterioration in economic conditionscould decrease demand and pricing for new homes which could havea material affect on our business, revenues or profits.

• Competitive markets: we operate in a market with many other national,regional and local housebuilders. Increasing levels of competition couldreduce the number of homes we build and affect revenues or profits.

• Land supply: there is a shortage of supply of land with residentialplanning consent and increasing competition may affect our abilityto acquire suitable land at reasonable prices.

• Regulatory compliance: our business is subject to extensive and complexlaws and regulations principally relating to planning, the environmentand health and safety. Our obligations to comply with legislation canresult in delays in land development and house building activity causingus to incur substantial costs and prohibit or restrict land developmentand construction.

• Capital requirements: our ability to continue to grow our businessdepends upon our ability to access capital on favourable terms.We couldbe adversely affected by a change in our credit rating or a disruption inthe capital markets.

Corporate ResponsibilityWe understand the need to take into account our impact on theenvironment, our effect on the communities in which we build,the morale and welfare of our employees and the satisfactionof our customers.

Our key responsibilities are to build sustainable homes, to operateefficiently and minimise our impact on the environment, to work withlocal communities, to promote skills within our workforce, to providea healthy and safe working environment and to care for our customers.Our strategy is to integrate these complex social and environmental issuesinto our management processes in running our business.

10 Persimmon Plc

Length

Keeper’s Field, Kings Hill, Kent

11 Persimmon Plc

Breadth Persimmon’s divisional managementstructure ensures the Group benefitsfrom national coverage.

Lund Farm Collins, Cumbria


This has been another year of significantprogress for the Persimmon Group.Despite difficult market conditions wehave increased our pre-tax profit,improved our operating margins to 21.7%(post goodwill) and have been successfulin gaining planning consent on over8,000 plots from our strategic landbank.

The market has varied considerably this year.At the beginning of the yearwe saw good reservation levels on our sites across the country.The rate ofsales began to reduce following a number of interest rate rises in the firsthalf.We then experienced the normal slower summer trading conditions.

During September, due to the well publicised ‘credit crunch’, we saw aloss in purchaser confidence and also experienced a change in the creditcriteria set by the mortgage lenders.These two factors led to higher thannormal cancellation rates and a lower forward order book for 2008,although in line with the rest of the industry.

Set against this background, the business achieved good results forthe second half of the year completing 7,903 homes with overallprofitability in the second half increasing.This was despite a reductionin the number of homes completed when compared to the first halfcompletions of 8,002.

Throughout the year we have seen underlying price growth of 3% forour private sale housing. However, an increase in the proportion of thelower cost partnership homes, and a reduction in the number of CharlesChurch homes, has resulted in the small increase of 1% in our averageselling price to £189,558 (2006: £188,129).We remained focused onthe completion of competitively priced family homes in all sectors ofthe market and we continue to have limited exposure to high riseapartment schemes with only 2.5% of our completions in 2007 fromthis type of development.

The Government has set out a number of initiatives and targets for theindustry, and the Callcutt Review has outlined a number of strategies toincrease production levels. Persimmon will work with the Governmentand other stakeholders to help meet these ambitious targets. In order toachieve these targets the industry requires improvements to the currentplanning environment together with a stable economic environment.

Divisional StructureThe three Divisions have performed well this year and we have ensuredthat our brands Persimmon, Charles Church and Westbury Partnershipshave been fully integrated into each Division. Each individual Divisionhas carried out a review in their businesses to establish a range of housetypes that retain the local character for their areas of operation, thusgaining enhanced efficiencies for procurement, professional fees andcost reduction.

Business Review:2007 Performance Review


TheVistas,Wychwood Park, Cheshire

North DivisionThis Division has completed 3,765 (2006: 4,069) homes, a slightreduction on last year.This was mainly due to theYorkshire regionexperiencing delays due to planning and more challenging tradingconditions. However, this was offset by a strong financial performancein the North East and Scottish regions.

Price growth in Scotland was 4% due to strong purchaser demand andthe availability of traditional family accommodation. Our new CharlesChurch business in Scotland has been well received and we are gainingrecognition in this market for our premium product.

In the North East the market continues to be challenging. However, withour average selling price only increasing by 3% to £166,954 during theyear our homes remain very affordable in this region.

Due to the challenging market conditions and planning restrictions intheYorkshire region we have merged ourYorkshire and EastYorkshireoperating businesses which will give further operational efficiencies in2008.We retain three Persimmon operating businesses in theYorkshireregion which will ensure that our coverage of this important market iscomprehensive and provides a stronger platform for future growth.

Central DivisionThe Division has seen an overall increase of 4% to its average selling priceof £178,278 from 5,656 homes. In the North West, although the generalmarket has been competitive, underlying average selling prices rose 5%.The overall North West average price of £183,013 has been assisted byan increased level of completions at our high value apartment scheme atLeftbank in Manchester.As part of our review of operations we havemerged two offices in the North West to reduce overheads in this area.

In the Birmingham region prices have been more muted, however weachieved volume growth of 3% mainly due to the provision of moreaffordable homes.We have recently commenced selling on our largeIronstone development at Lawley,Telford with English Partnerships.This scheme for 1,100 homes will sustain our business in this area fora number of years.

South DivisionThe South Division has increased completions by 3% to 3,905 and ournew SevernValley business delivered over 150 completions in its first sixmonths of operation. Our two large strategic sites in Ashford, Kent for1,020 homes and our scheme of 325 homes in Gillingham are now underconstruction and we have taken our first completions this year.These siteswill provide growth for both our Persimmon and Charles Churchbusinesses in this area.

In our Wales business, one of the Group’s largest operations, we completed940 homes.We have been particularly successful in taking a high level ofcompletions at our brownfield mixed use regeneration scheme at SwanseaPoint.We were very pleased that David Bullock our site manager atWyncliffe Gardens, Cardiff was national runner up in the NHBC Pridein the Job Awards.

Charles ChurchOur decision to reposition the Charles Church brand into the mid rangemarket has shown positive results.We have seen good demand for thispremium product and with an average selling price of £257,009 we haveseen underlying price growth of 2% throughout the UK.

It is clear that the market for property values in excess of £300,000 is stillmore challenging.Although volumes this year have reduced by 11% to2,579 (2006: 2,898), this is set against the previous year’s growth of 125%and therefore we believe that in the long term the Charles Church brandwill continue to grow on a national basis.

14 Persimmon Plc

Invest

Cherque Farm, Lee on Solent

15 Persimmon Plc

Deliver Planning and delivering the right typeof houses today remains important,but Persimmon’s strategic landbankis a priority for the future.


Business Review:2007 Performance Review continued

Strategic land at Plymstock Quarry, Plymouth

We have received positive recognition not only from our purchasers butalso from a number of external bodies, including the Welsh Civic Societywho gave us an award for best local design for our traditional housingscheme at Maenol Glasfryn, Llanelli.We were also awarded the bestmarina development for our scheme at Marinus, Cowes, Isle of Wight,by the Mail on Sunday.These awards demonstrate the diversity ofexcellent homes produced by the Charles Church teams.

Westbury PartnershipsWestbury Partnerships continue to grow and this business has expandedby 50% in its second full year of operation.The combination of the useof our Space4 product with the standard core range of HousingCorporation approved house types has delivered good efficiencies forthis business. In return housing associations have received high quality,energy efficient and sustainable homes.The team is developing apartnership with a number of housing associations and this will deliverfurther opportunities in the future.

The number of affordable homes built within the Persimmon Grouphas also continued to grow and this year we completed 1,962 (2006:1,402) partnership homes, an increase of 40%.These numbers will riseas we bring forward more of our large strategic sites.We have completedthe first homes to receive Direct Grant funding from the HousingCorporation and we have been invited to submit a further bid for theperiod 2008-2011.

Space4This year we have seen a substantial increase in volumes manufacturedat our Space4 factory to 2,629 units (2006: 1,475).The technical changeswe have made have simplified the onsite procedures, thereby reducing ourbuild times onsite to the benefit of both Westbury Partnerships and ouroperating businesses using this system.The Space4 system is well set tomeet the Government’s targets regarding the building of sustainable homesand we are looking to further develop Space4 to meet the new zerocarbon home challenge for 2016.

LandbankIn this challenging market we have remained cautious regarding landacquisition and we have seen a slight reduction in the landbank that isowned and under control to 78,863 plots (2006: 80,085 plots).Thishowever represents 4.9 years’ land supply at our current level of output.Within our total landbank only 1,700 plots or c. 2% are for inner-cityhigh rise apartments maintaining our strategy of developing traditionalhousing schemes.

We remain focused on bringing forward our strategic land and in 2007we have obtained planning permission and acquired 8,181 plots (2006:2,927 plots), a substantial increase on the previous year.We have seensignificant success in the Central Division with consent on schemes inPeterborough (350 plots) and in Bridgnorth (317 plots). In the SouthDivision where land is more difficult to acquire we have enjoyed successin Bridgend,Wales (580 plots) and at Liskeard (465 plots). Charles Churchhas also brought forward some smaller schemes in Tunbridge Wells andBurgess Hill totalling 140 plots.

The ability to acquire over 50% of our replacement plots from ourstrategic landbank means we can acquire land selectively in the openmarket given current market conditions.We continue to focus on thedelivery of 30,000 plots over a three year period from our strategiclandbank and this will help support our operating margins in thelong term.

Corporate ResponsibilityThe concept of sustainability is becoming an increasingly important partof our business and we take proper account of all the complex social andenvironmental issues in our core operations.We continually seek toimprove the sustainability and energy efficiency of the houses we build,and where practical incorporate modern methods of construction andtechnologies. During 2007 we increased the number of properties whichwe built to EcoHomes standards to 1,539 units, representing just under10% of our homes sold.


We continue to monitor the amount of waste generated from each newhome that we build as one measure of our operating efficiency. During2007 our total house building waste was similar to the previous year, butwe increased the amount of waste we recycled to 68% (2006: 66%).

The introduction of new Construction Design and ManagementRegulations 2007 resulted in a 61% increase in the number of trainingdays we provided to our construction staff. In conjunction with thisadditional training, the Reportable Injuries Disease and DangerousOccurrences per thousand employees in our workforce notified to theHealth and Safety Executive reduced to 12.2 (2006: 12.9). Having madesignificant progress over recent years we are again resetting all ouroperating businesses performance targets for health and safety to furtherimprove our performance in this vital area of our business.

We continue to invest heavily in training our staff to improve boththe quality of our homes and our customer service.We have systemswhich allow us to monitor how well we are performing, enabling us toidentify particular trends and issues upon which we can focus our efforts.Our internal Customer Care Questionnaire again recorded that 86% ofour customers would recommend Persimmon or Charles Church to afriend. In the NHBC Pride in the Job Awards we achieved 2 RegionalAward winners, 12 Seal of Excellence and 40 Quality Award winnersfor the Group, our highest number of Awards to date.

Current Trading OutlookWe have experienced a slower start to trading in the early part of thisyear.Although the number of visitors to our developments has increasedsince the start of the year, they currently remain 13% lower whencompared to a strong prior year comparative.We have seen cancellationrates return to more normal levels at c. 20%, compared to rates of over30% at the time of the autumn ‘credit crunch’.Although visitor levels arelower the quality of the visitors is good, but in this cautious environmentthey are taking longer to reserve. Prices remain firm for both the new andsecond hand market.We are continuing to be selective in our use ofincentives, with our Part Exchange scheme and mortgage assistanceproving particularly popular.

We have seen the mortgage lenders tighten their lending criteria andthis has, and will, undoubtedly affect prospective purchasers who have apoorer credit history. However, we have good relationships with themajor lenders and we are not currently experiencing problems withpurchasers obtaining mortgages now that the new lending criteria areclearly understood.

We currently have forward sales with a total value of £1.05bn.We plan to open a further 140 new outlets in the first six months of thisyear and the number of our overall sales outlets at the start of 2008 was7% stronger year on year.

The market remains competitive but with our new outlets and committedmanagement team we expect sales to continue to grow through the firsthalf of this year.

SummaryThis has been another successful year for the Persimmon Group inchallenging market conditions.The business has delivered another recordset of profits and we have improved our operating margins.

We have continued a concerted effort on reducing our cost base.Wecontinue to work with our suppliers and sub-contractors to exercise goodcost control and some of the initiatives we have introduced in 2007 willbring benefits to the business in 2008. Our new SevernValley business hasmade a good start in the second half of 2007. However, the closure ofthree other offices at this time will help retain our overall operationalefficiency.This demonstrates the flexibility we retain in managing ourbusiness as planning and market conditions change.We have alsoconcentrated on improving our cash flow, culminating in year end gearingof 31% while maintaining a strong landbank and a solid balance sheet.

I take this opportunity to thank our staff for their skill, hard work andeffort and for their dedication to our business.With our experiencedmanagement team we are well positioned to meet the challenges of thehousing market in 2008.

Mike Farley Group Chief Executive25 February 2008

18 Persimmon Plc

Apprentice

19 Persimmon Plc

Expert Persimmon’s pride in the quality of itshomes can only be achieved througha continuous investment programmeto develop its people.


Business Review:Financial Review

Mike Killoran, Group Finance Director

During the financial year ended 31 December 2007 the PersimmonGroup delivered strong results against a market backdrop which becameprogressively more challenging through the second half.We have workedextremely hard in ensuring the advantages and attractions of buying anewly built home from the Persimmon Group continue to be clearlycommunicated to the market in support of our sales. However, customerconfidence was undermined by the negative media coverage of the globalbanking market turmoil which gave rise to worsening market conditionsfrom the middle of the year.

We have been focused in our efforts to support our partners in theUK mortgage lending market in providing customers with attractiveand affordable options in support of their purchase of a new Persimmonhome. Mortgage lenders have tightened their lending criteria, andoverall lending capacity into the UK housing market has contracted, withsome mortgage providers exiting the market as a result of the global‘credit crunch’.

The action we have taken and our continued focus on building attractivehouse types in good locations, which are offered for sale at affordableprices, has again supported the delivery of this strong performance despite4.8% lower legal completions compared with last year.With resilientselling prices, Group revenues were 4.0% lower than the prior year.

Our headline average selling price increase of 0.8% was diluted by theplanned increase in sales of new homes to our housing associationpartners.

Whilst legal completions in our two private development brands,Persimmon and Charles Church, declined by 8.9%, our partnershiphousing sales increased by 39.9% as follows –

Legal completions (units) 2007 2006

Private Development:– Persimmon 11,498 -8.0% 12,498Charles Church 2,445 -12.7% 2,801

Total private development 13,943 -8.9% 15,299Partnership Housing –including Westbury Partnerships 1,962 +39.9% 1,402

Group total 15,905 -4.8% 16,701

As a result of this change in sales mix the firm pricing performanceachieved by each of our brands delivered a more muted overall averageselling price as follows –

Average selling price (£) 2007 2006

Private Development:– Persimmon 190,997 +3.4% 184,670Charles Church 265,827 +3.0% 258,051

Total private development 204,120 +3.0% 198,104Partnership Housing –including Westbury Partnerships 86,072 +8.6% 79,224

Group total 189,558 +0.8% 188,129

We plan to continue our expansion into the lower cost affordablehousing market in support of the Government’s initiatives to increasethe availability of lower cost housing across many of the UK’s regions.

Over 70% of our total homes sold are from the Persimmon businessat an average price of £190,997.The Persimmon brand continues tooffer a wide variety of house types to the market at affordable prices.Indeed, across the whole of our business we delivered 34% of our salesat prices lower than £150,000, compared to 26% for the market intotal (per National House Building Council statistics).

Our premium Charles Church business continues to provide a moreaspirational option at affordable prices, the average price for the yearbeing £265,827.


House sales by price band (%)

>£250,000£200,000to

£249,999

Persimmon distribution

£150,000to

£199,999

<£150,000

34

26

19

26

19 20

28 28

NHBC distribution** Source: NHBC – New House Building Statistics (2007 calendar year)

Our operational focus remains on maximising profitability and returnsthrough maximising selling prices in all market conditions. Despite thetougher market backdrop gross margins were improved to 24.4% (2006:23.5%) as follows –

Gross margin (%) 2007 2006

Private Development:– Persimmon 26.1% +1.2% 24.9%Charles Church 20.2% +0.4% 19.8%

Total private development 24.8% +1.1% 23.7%Partnership Housing –including Westbury Partnerships 18.0% +0.6% 17.4%

Group total 24.4% +0.9% 23.5%

Gross margins have benefited from tight cost control and procurementsynergy gains following the acquisition of Westbury plc in early 2006.Despite underlying margin pressure in the market due to continuedlabour and material price inflation we have managed to reduce ouraverage build cost per unit by c.5% in 2007 when compared with2006.The average gross profit delivered on each new home sold in2007 of £46,282 was 4.8% higher than 2006.We remain in a strongposition to mitigate cost pressures due to our scale and good qualitylong term relationships with our suppliers.

Profit from operations of £654.9m (2006: £637.3m) resulted inoperating margins of 21.7% for the year (2006: 20.3%).The 2007profits are stated after charging £2.4m of goodwill impairment andthe 2006 profits are stated after charging £15.4m of reorganisationcosts relating to the integration of the Westbury acquisition.The 2007goodwill impairment charge relates to the utilisation of land whichhad been acquired as strategic land with the Beazer and Westburyacquisitions. Stripping these charges out the ‘underlying’ 2007 operatingmargin of 21.8% compares with 20.8% for the prior year.

2007 was the first full year of operations benefiting from the synergiessecured on the integration of Westbury. Synergies totalling over £50mper annum benefited the enlarged Group during the year.As a resultoperating margin in the Persimmon business was 23.0% (2006: 21.9%)and in Charles Church 17.4% (2006: 17.0%).

These operating margins remain at industry high levels despite themore competitive trading conditions.We contained our selling costs to3.2% of sales (2006: 2.9%) but anticipate these costs will increasethrough 2008.The assistance offered by our part exchange facilitiescontinues to prove attractive for our customers.

Through tight cost control we have maintained our operationalefficiency with operating expenses at 3.9% of sales (2006: 3.7%) –stated before goodwill impairment charges for 2007 and reorganisationcosts for 2006. Other income includes profit on land sales of 1.0% ofGroup revenue (2006: 0.6%), freehold reversions and sundry rentalincome.

House sales by type (%)

Detached Semidetached

Townhouse

Apartment Bungalow

28

1714 15

32

20

25

46

1 2

Persimmon distribution NHBC distribution*

22 Persimmon Plc

Today

Livingstone Park, Epsom, Surrey

23 Persimmon Plc

Tomorrow Environmental issues are of increasingpriority.This is not only about creatingplaces where people want to live, butabout using new technologies to ensurea sustainable future.

Steel frame build, Living-i, Irlam, Manchester


Business Review:Financial Review continued

Interest cover (x)†

2003 2004 2005 2006 2007

16.6 16.3

9.2 9.1

13.1

† 2004-7 stated under IFRS. Comparative for 2003 prepared under frozen UK GAAP Before goodwill impairment/amortisation where applicable. 2006 stated before

reorganisation costs

Dividend per share (pence)*

2003 2004 2005 2006 2007

27.5031.00

46.5051.20

18.30

* 2007 figure includes final dividend proposed of 32.7p

Net finance cost of £72.2m includes £6.4m of imputed interest onthe deferral of our land payables (2006: £6.4m). Interest on all fundingis expensed as incurred and was covered 9.1 times by operating profit(before goodwill impairment charges) (2006: 9.2 times – beforereorganisation costs).The Group’s average debt level for 2007 wascirca. £990m (2006: £1,120m).

Profit before tax (before goodwill impairment charges) was £585.1mcompared with £582.1m for the prior year (before reorganisationcosts) which represents record profit levels for Persimmon.

The effective tax rate for 2007 was 29.0%, reflecting the resolution ofa number of historic issues.

Basic earnings per share of 137.5p is 3% higher than last year (2006:133.8p). However, underlying earnings per share of 138.3p (strippingout goodwill impairment charge of £2.4m) is 1% higher than 137.5plast year (before reorganisation costs of £15.4m).

The proposed final dividend of 32.7p (2006: 32.7p) results in a fullyear dividend of 51.2p per share, a 10.1% increase on last year and iscovered 2.7 times by earnings (2006: 2.9 times).This continues ourprogressive dividend policy record, dividends having increased for the11th successive year being at a compound rate of 17.7%.

Balance sheetDuring 2007 we continued to invest in land assets and work inprogress to support our sales activity and future growth of thebusiness. Net assets increased by £314m, with net assets per shareincreasing by 15% to 781.4p (2006: 680.2p).

Our landbank of plots owned and under control at 31 December 2007at 78,863 plots represented c.5 year’s supply. In addition we held afurther 11,124 plots proceeding to contract.This total landbank offers£17.3bn of development value at current period average selling prices.However, as we continue to experience planning delays our access toplots with implementable detailed planning consent continues to beconstrained at c. 2.5 years.

We have been increasingly selective with our land replacementthroughout 2007 preferring to concentrate upon securing planningconsents on our strategic land.We successfully pulled through 8,181plots from our strategic landbank during the year. Our total investmentin land held for future development at 31 December 2007 was£2,346m.The land which we own and control had an averageplot cost of 21.3% of current period average selling price (2006:21.2%).We continue to replace our land at levels of cost which willprovide support to the future profitability of the business. In addition,we have continued to enjoy deferred terms on a number of our landacquisitions, land creditors having remained at a similar level to lastyear at £320m.


Net assets per share (pence)†

2003 2004 2005 2006 2007

486.5

574.9

680.2

781.4

398.7

† 2004-7 stated under IFRS. Comparative for 2003 prepared under frozen UK GAAPComparative for 2003 restated for UITF 38 (Accounting for ESOP trusts)Δ

Δ Landbank (plots)

2003 2004 2005 2006 2007

59,947 63,336

80,085 78,863

57,222

The Group’s strategic land holdings at 31 December 2007 were21,425 acres (2006: 23,162 acres) with approximately one thirdbeing owned, and the remaining two thirds held under long termoptions.This strategic landbank offers significant exciting potentialfor the future.

Intangible assets of £468m represents the combination of goodwillvalue from the acquisitions of Westbury plc and Beazer Group plctogether with £60m Westbury Partnerships/Space4 brand value.The goodwill value is supported by the assessment of the strategicland assets acquired which are included in the strategic landbankhighlighted earlier.We believe these investments will help supportthe success of our business in the future.

We continue to be encouraged by the opportunities provided by ourWestbury Partnerships business and the Space4 offsite manufacturingfacility in support of our growth in the lower cost partnership housingmarket.The availability of this modern method of construction, with itsproven environmental performance credentials, continues to offer anattractive build solution to the market.

Brand values and goodwill value have been tested for impairment.£2.4m of goodwill impairment is assessed to have occurred and has beencharged to the income statement. Our approach adopted on impairmenttesting is fully explained in note 14 to the Financial Statements.

Work in progress of £815m supports our forward sales position of£603m at 31 December 2007 and also reflects our stronger sales outletposition compared with the prior year, outlets being c.7% up year onyear.The slower market of Autumn 2007 emphasised that ourcontinued tight controls over the management of our work in progressinvestment remain critically important in optimising returns.

Due to our increased investment in land and work in progress through2007 return on average capital employed (before goodwill impairmentcharges) reduced slightly to 21.7% (2006: 23.7% – stated beforereorganisation costs).

The Group continues to run three employee pension schemes.ThePersimmon Group Stakeholder Scheme is based upon definedcontributions, whilst the Prowting Pension Scheme and the Persimmonplc Pension and Life Assurance Scheme are defined benefit schemes.The past service funding deficit of £61m (2006: £104m) in respect ofthe defined benefit schemes is included in the balance sheet togetherwith the associated deferred tax asset of £17m (2006: £31m).Thereduction in the pension deficit as compared with last year of £43mprimarily reflects the reduction in the value of the pension liabilitiesdue to the increase in corporate bond yields in the period. Full detailsof the key assumptions used in assessing the Group’s pension liabilitiesare included in note 30 to the Financial Statements.

Shareholders’ funds increased by £314m in the year. Retained profitsof £414m were offset in part by net dividends approved and paid of£114m.The remaining increase was principally the combination ofthe reduction in net pension deficit offset by the share buyback.

26 Persimmon Plc

Plan

27 Persimmon Plc

Complete High levels of customer service remainessential. Contented customers and anexcellent track record ensure ourcontinued success.


Business Review:Financial Review continued

Borrowings, cashflow and treasuryGearing was 31% as at 31 December 2007 with borrowings of £721m(net of cash balances, excluding finance leases but including forwardcurrency swaps) (2006: £661m).These borrowings are stated after therepurchase of 2.44m shares into treasury for a cash consideration of£22.3m during the period. Our policy of opportunistic share buybackwill continue. However, share repurchases will be balanced alongsideensuring liquidity of the business is secure and the appropriate level ofreinvestment in the business is achieved for the future. Net cash flowfrom operations of £263m was delivered after further investment bothin land (£189m) and work in progress and part exchange stocks(£238m). Free cash inflow for the year before dividends and sharebuybacks was £67.0m.

We continue to finance our operations through a combination ofshareholders’ funds, bank loans, overdrafts, cash in hand and long termloans. Head office manages the drawn credit lines of each operatingbusiness within overall facility limits which may be subject to offsetarrangements. Borrowing facilities are allocated by head office acrossthe operating businesses on commercial terms. Head office arrangesall borrowing facilities and invests short term cash deposits atcompetitive rates when available.

The Board manages the strategy regarding liquidity, interest rate andforeign currency risks.We address liquidity risk by ensuring wemaintain secure, flexible facilities with an extended maturity profilefrom a variety of sources.We continually assess our longer termrequirements to ensure relevant facilities are arranged at the appropriatetime.The Group currently has secured total committed credit facilitieswith an average life of c.3.5 years at competitive rates of interest.

We monitor prevailing and forecast monetary conditions in assessingour approach to interest rate risk management.The Group uses interestrate swap instruments when appropriate as part of this approach.We donot set a pre-defined balance between fixed, and floating, interest ratedebt.The Group has not entered into any new swap arrangementsduring the period.

Debt may be raised from capital markets outside the UK.We eliminateall foreign currency risk on entering into such transactions by way offoreign currency swaps.

Details of the Group’s borrowings and financial instruments aredisclosed in note 19 and note 21 to the Financial Statements.

Mike Killoran Group Finance Director25 February 2008

Borrowings (excluding finance leases) (£m)†

2003 2004 2005 2006 2007

193.9

265.7

661.3

721.1

314.5

Gearing (%)†

2003 2004 2005 2006 2007

1416

3331

28

† 2004-7 stated under IFRS. Comparative for 2003 prepared under frozen UK GAAP


Montgomerie Pier,Ardrossan,West Scotland

30 Persimmon Plc

Traditional

31 Persimmon Plc

Modern In today’s discerning world, customersincreasingly demand involvement andchoice to help ensure the home theybuy meets their own particular tastes.


Business Review:Corporate Responsibility

Sustainability is a key issue forPersimmon. Our stakeholders expectus to behave in a responsible mannerand we have an obligation to demonstrateto them that we are living up to thisexpectation. In particular, local authoritiesand planners increasingly expect us toconsider sustainability when we plan ourdevelopments and build new homes.

This means taking into account thedirect impacts of our activities, and thefuture impact of our buildings duringtheir lifetime. Our risk management takesthese impacts into account in protectingand enhancing our reputation.

ApproachWe aim to be a responsible housebuilder and embed the conceptof sustainability into our core operations.We have identified six keyresponsibilities that define our approach to:

• Build sustainable homes.

• Operate efficiently to minimise our impact on the environment.

• Work with local communities.

• Promote skills within the house building industry.

• Ensure a healthy and safe working environment.

• Care for our customers.

Our Sustainability Policy is supported by a number of specific policiesfocusing on issues pertinent to our business, such as Climate Change.

ManagementResponsibility for sustainability rests with the Corporate Responsibility(CR) Committee.The Committee includes representatives from acrossthe business, including those with operational responsibility and functionalresponsibility. Divisional commercial directors coordinate activities acrossthe Group and implementation is the responsibility of each operatingbusiness.

Building sustainable homesThe homes we build will last for many years.The way they are designedand built has an impact on how people choose to live and consequentlytheir impact on the environment and society around them.

In 2007, just under 10% of the homes we built were assessed againstBuilding Research Establishment’s EcoHomes standard, with almost halfof these achieving either a ‘very good’ or ‘excellent’ rating.We welcomethe introduction of the Government’s Code for Sustainable Homes as anenhanced method for assessing sustainability.

We have maintained the standards of energy efficiency of the homes webuild compared to last year, measured against the Standard AssessmentProcedure (SAP) used for calculating energy efficiency for HomeInformation Packs.

We continue to promote innovation, particularly the use of modernmethods of construction techniques, such as our innovative Space4 systemand technology such as those trialled at our award winning Living-iproject to improve the sustainability of the homes we build.


The Eco-Home conceptBuilt with eco friendliness and sustainability in mind, the house makes extensive use of materials thatare recyclable, renewable, reusable and natural.To minimise energy demands, the Eco House uses amicro combined heat and power unit, photovoltaic roof tiles and has highly insulated walls and roof.Other features include rainwater recycling and A-rated appliances.

The Techno Home conceptConstructed largely off-site to minimise site waste, the house has lighting and heating which arecontrolled in an energy efficient manner through the intelligent smart home system, which can evenbe accessed via the internet or a mobile phone. Other features include waste water recycling andconservation, renewable energy using ground heat extraction and self cleaning glass.

The Living-i project


Business Review:Corporate Responsibility continued

% of customers that would recommend Persimmon to a friend

2005 2006 2007

86%86%86%

Brownfield land regeneration: Mitchell’s Brook, Cape Hill,West Midlands

Operating efficiently to minimise our impacton the environmentWe have a robust approach to environmental management to ensure thatour impacts are identified and well managed, particularly on our sites.Space4, our timber frame manufacturing business, is accredited toISO14001.

Our primary focus remains on waste management.We have for manyyears recycled demolition waste and spoil on our sites and in recent yearscollated and monitored the house building waste generated on our sites.During 2007, we generated 150,000 tonnes of waste (9.5 tonnes perhome built).This remains broadly consistent with last year. However,improvements in the way we handle waste on site means that theproportion recycled has increased to 68% (2006: 66%).

Understanding the risks and impacts of climate change is playing agrowing role in business. Greenhouse gas emissions are becoming moreand more regulated, analysed and priced. It is important that we stayabreast of these changes and their implications for us as one of the UK’sleading housebuilders.

In 2007 we developed our climate change position statement thatexplains the key risks and opportunities for our business from climatechange, what we believe our responsibilities to be and the actions weare taking to address these. Our statement is available on our website.

Working with local communitiesOur regional operating structure, with businesses located in thecommunities in which we build our homes, means we can be flexibleduring the planning and design process, engage with the local communityand build developments in which people want to live.

As one of the country’s largest housebuilders we have a role to play inhelping the Government to deliver on its promise to increase the numberof affordable homes.Westbury Partnerships enhances our capability in thisarea, together with Persimmon Partnerships in Scotland. In 2007, webuilt 1,962 partnership homes, representing 12% of our total completions,a 40% increase on the levels of 2006.

Promoting skills within the house buildingindustryPersimmon directly employed 5,501 people in 2007 of whom 31%are female. Our success relies on the skills and technical ability of ouremployees, and we invest in significant training and development.

Our Homing in on Opportunity education initiative continues to be atthe heart of our approach by encouraging young people to consider acareer in house building, giving apprentices the opportunity to gainrecognised qualifications and developing our managers of the future.

Waste generated per home built(tonnes)

2005 2006 2007

10.8

9.09.5


RIDDORS (per 1,000 employees)

2003 2004 2005 2006 2007

11.410.3

12.912.211.9

Ensuring a healthy and safe working environmentHealth and safety is an integral part of the way we work and it is factoredinto almost every decision that is taken within the business, particularlythose relating to site operations.

In 2007, we launched our Safe Teams Avoid Risk (STAR) campaignand our first internal health and safety magazine entitled ‘Safety Matters’.In addition, we delivered over 60% more health and safety training daysthis year.

The number of incidents reportable under the UK Reporting ofIncidents, Diseases and Dangerous Occurrence Regulations 1995(RIDDORs) has remained unchanged in 2007, despite the growth inthe number of our employees and subcontractors.

Caring for our customersWe continue to focus on our approach to customer care. We havemonitored our customer satisfaction and quality control for many years.Recently we have adapted our regular customer satisfaction surveys tothe emerging house building industry standard.These ask our customers aseries of questions, including whether they would recommend Persimmonto a friend. In 2007 86% of our customers responded saying they would,continuing the trend of the past two years.

AimsDuring 2007, we developed a new approach to sustainability. Our sixresponsibilities provide a set of guiding principles for the Group onwhich we can build and improve our performance.

Our primary objective during 2008 is to embed these responsibilitiesinto our business and its operational practices, ensuring that our employeesand those working with us understand how we aim to work and ourexpectations of them.

Our 2007 Sustainability Report and further information on our approachcan be found on our website at www.persimmonhomes.com

Neil DavidsonChairman Corporate Responsibility Committee25 February 2008

Brownfield land regeneration: Mitchell’s Brook, Cape Hill,West Midlands

36 Persimmon Plc

Board of Directors

From left: David Thompson, Mike Farley, John White, Mike Killoran,David Bryant, Neil Davidson, Hamish Leslie Melville and Nicholas Wrigley

Richard PennycookNon-Executive Director (age 44)

Richard Pennycook was appointed to the Board on 14 March 2008.A chartered accountant and graduate of Bristol University, he has since2005 been the Group Finance Director of Wm Morrison Supermarkets PLC.Previous roles include Group Finance Director of RAC plc, Finance Directorof J D Wetherspoon plc, CEO of Welcome Break Holdings PLC and Non-Executive Director of Richer Sounds plc.

37 Persimmon PlcBoard of Directors

John WhiteGroup Chairman (age 56)

John White was appointed Group Chairman in April 2006, previously havingbeen Group Chief Executive for 13 years since 1993. He has spent all hisworking life in the housing industry.After joining Persimmon in 1979 hewas responsible for establishing the Group’s operations in the Midlands,following which he was appointed Regional Chairman for the South.Mr White was appointed to the Board in 1986 and is Chairman of theNomination Committee and the Risk Committee.

Mike Farley BSC (HONS.) MCIOB

Group Chief Executive (age 54)

Mike Farley was appointed Group Chief Executive in April 2006 followinga very successful period as Chief Executive of the original South Division.He joined Persimmon in 1983 and was appointed to the Board in 1989.Mr Farley is a member of the Chartered Institute of Building and wasresponsible for establishing the Wessex operating business and for developingthe business in the Midlands. Mr Farley is a member of the Risk Committee.

Mike Killoran BA (HONS.) ACA

Group Finance Director (age 46)

Mike Killoran joined the Company in 1996 and was appointed to the Boardin January 1999.A chartered accountant by profession, Mr Killoran workedin manufacturing, distribution and retail sectors before joining the Group.He took over his present role in April 1999 and is a member of theRisk Committee.

David BryantGroup Development Director (age 55)

David Bryant joined the Company in 1985 and was appointed to the Boardin 1991.Appointed Group Development Director on 1 July 2005 he hasresponsibilities for a number of Group functions including Sales & Marketing,Media and PR, Health & Safety and Procurement. Mr Bryant is alsoChairman of the Group’s operating businesses in Anglia and Essex.

Hamish Leslie MelvilleNon-Executive Director (age 63)

Hamish Leslie Melville is a Managing Director and Chairman of the EuropeanInvestment Banking Committee of Credit Suisse Securities (Europe) Limited.Mr Leslie Melville was appointed to the Board in 1995. He is Chairman ofMithras Investment Trust and The J P Morgan Fleming Mercantile InvestmentTrust. He is a member of the Nomination Committee.

David ThompsonSenior Independent Director (age 53)

David Thompson is Chairman of Marston’s PLC. He is also a director ofCaledonia Investments Plc and The Tribal Group Plc.Appointed to the Boardin August 1999, he is the Senior Independent Director, Chairman of the AuditCommittee and a member of the Nomination and Remuneration Committees.

Neil Davidson CBE

Non-Executive Director (age 57)

Neil Davidson retired as Chief Executive of Arla Foods UK PLC in June 2005.He is Chairman of the Nickerson Rothwell Group, Chairman of LeicestershireCounty Cricket Club Limited and a director of Emerging Media. He isChairman of the Corporate Responsibility Committee and a member of theAudit and Remuneration Committees.

Nicholas WrigleyNon-Executive Director (age 52)

Nicholas Wrigley was appointed to the Board on 1 February 2006. Mr Wrigleyis Managing Director of Rothschild London and a member of its GlobalInvestment Banking Committee and Global Management Committee. He hasover 20 years’ mergers and acquisitions experience at Rothschild includingthree years in Australia. Before joining Rothschild he qualified as anaccountant. Mr Wrigley is Chairman of the Remuneration Committeeand a member of the Audit Committee.

38 Persimmon Plc

The Directors present their Annual Report and the Financial Statementsfor the year ended 31 December 2007.

Principal activitiesThe principal activity of the Group is house building, which is carriedout within England,Wales and Scotland and is unchanged from last year.The Group trades under the brand names of Persimmon Homes, CharlesChurch, City Developments,Westbury Partnerships and Space4.

Business reviewA review of the development and performance of the Group’s businessduring the year and the position at the end of the year may be foundin the Business Review on pages 8 to 35 and in the Key PerformanceIndicators shown on the inside front cover and pages 24, 25, 28 and 32to 35 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.

Results and dividend paymentThe Group’s revenue and profit before taxation were £3,014.9m and£582.7m respectively.An interim dividend of 18.5p per share was paid toshareholders on 19 October 2007 and it is proposed to pay a finaldividend of 32.7p per share on 25 April 2008 to shareholders on theregister at the close of business on 7 March 2008, making a total for theyear of 51.2p per share (2006: 46.5p).A dividend reinvestment plan, whichenables shareholders to invest their dividends in ordinary shares, is availablein respect of the final dividend and the final date for receipt of elections is4 April 2008. Further details are available from our Registrars, whosecontact details can be found on page 96.

Going concernAfter making due enquiries, the Directors have formed a judgement, atthe time of approving the Financial Statements, that there is a reasonableexpectation that the Group has adequate resources to continue inoperational existence for the foreseeable future. For this reason theDirectors continue to adopt the going concern basis in preparingthe Financial Statements.

Directors and Directors’ interestsThe Directors of the Company during the whole of 2007 wereMessrs White, Farley, Killoran, Bryant, Leslie Melville,Thompson,Davidson and Wrigley.Their biographical details are shown on page 37.Adam Applegarth was also a Director of the Company during 2007until he resigned on 29 October 2007. None of the Directors have anycontracts of significance with the Company.

The beneficial and non-beneficial interests of the Directors in the sharesof the Company at 31 December 2007 and as at the date of this reportare disclosed in the Remuneration Report on page 47. Details of theinterests of the Directors in share options and awards of shares can befound on pages 46 and 47 within the same Report.

Substantial shareholdingsThe Company has been notified, pursuant to Disclosure & TransparencyRule 5, of the following interests of 3% or more of the voting rights ofthe Company as at 25 February 2008:

Number of Nature ofordinary shares Percentage holding

Lloyds TSB Group Plc 27,331,571 9.11% IndirectAXA SA 16,397,639 5.46% Direct

& IndirectPrudential plc group of companies 15,423,763 5.14% DirectD H Davidson and family 14,577,539 4.86% DirectLegal & General Group Plc 12,544,056 4.18% DirectBarclays PLC 11,919,582 3.97% Indirect

Employee involvementThe importance of good relations and communications with employeesis fundamental to the continued success of our business. Each of theGroup’s 34 operating businesses maintains employee relations and consultsemployees as appropriate to its own particular needs. Internal Groupmagazines are published twice a year and distributed to all employees toensure that they are kept well informed of the performance of the Group.

The Company makes various benefit schemes available to employees,including a Save AsYou Earn Scheme.All permanent employees areencouraged to participate, subject to having six months’ service at thedate of invitation.

Directors’ Report

39 Persimmon PlcDirectors’ Report

Equal opportunitiesEqual opportunities for training, career development and promotion areavailable to all employees regardless of race, colour, nationality, ethnicorigin, religion, sex, gender, sexual orientation, marital status, age ordisability.Applications for employment by disabled persons are alwaysfully considered with appropriate regard to the aptitude and abilities of theperson concerned. In the event of an employee becoming disabled everyeffort is made to ensure that their employment with the Group continues,that appropriate training is arranged and/or any reasonable adjustments aremade to their working environment.

Creditor payment policyThe Group agrees payment with its trade creditors and other supplierson an individual contract basis at the time the goods and services areordered rather than following a standard code.The policy is to abideby the agreed terms once satisfied that the goods or services have beenprovided in accordance with the contract terms and conditions.TheCompany’s average creditor payment period at 31 December 2007was 51 days (2006: 50 days).

Charitable and political donationsThe Group as a whole has made donations of £210,000 to charitableorganisations during the year. Further details of the Company’scommunity involvement and charitable activities can be found in theSustainability Report on our website at www.persimmonhomes.com.No political donations were made during the year.

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

Acquisition of own sharesAt the Annual General Meeting held on 19 April 2007, shareholdersgranted the Company authority to purchase up to an aggregate of29,926,110 of its own shares. During the year ended 31 December 2007the Company purchased 2,444,118 ordinary shares under this authority,with a nominal value of £244,412 representing approximately 0.81%of the issued ordinary share capital (excluding treasury shares) as at25 February 2008, for a consideration (including expenses) of£22,308,471.The shares were purchased as part of the share buybackprogramme initiated on 22 October 2007 and are all held in treasury.The Directors implemented the share buyback programme because theyconsidered the weakness in share prices of companies within the housebuilding sector provided an attractive opportunity for the Company topurchase its own shares.At 31 December 2007, the Company hadauthority to purchase a further 27,481,992 of its own shares.Thisauthority expires on 24 April 2008 and a resolution to renew theauthority will be put to shareholders at the next Annual General Meeting.

Annual General MeetingThe Annual General Meeting will commence at 12 noon on Thursday24 April 2008 at theVoltigeur Suite,York Racecourse,The Knavesmire,York.The notice of the meeting and an explanation of the ordinary andspecial 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 Reportconfirm that, so far as they are each aware, there is no relevant auditinformation (as defined by section 234ZA(3) of the Companies Act 1985)of which the Company’s auditors are unaware and that each Director hastaken all the steps that he ought to have taken as a Director in order tomake himself aware of any relevant audit information and to establish thatthe Company’s auditors are aware of that information.


Articles of AssociationThe following description summarises certain provisions of the currentArticles of Association of the Company (last amended by specialresolution on 21 April 2005 (the ‘Articles’) and applicable English lawconcerning companies (the Companies Act 1985 and the Companies Act2006, together the ‘Companies Acts’)).This is a summary only and therelevant provisions of the Companies Acts and Articles should beconsulted if further information is required.

Share capitalStructure

The Company has one class of share, being ordinary shares with anominal value of 10p each.At 25 February 2008 the issued sharecapital of the Company was 302,591,431 (including shares held inTreasury) ordinary shares with a nominal value of £30,259,143.Further details are provided in note 23 to the Financial Statements.

Rights attached to shares

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

Unissued shares are under the control of the Directors who may allot,grant options over, or otherwise dispose of them to such persons(including the Directors themselves) at such times and on such termsas the Directors may think proper, subject to the Articles, the CompaniesActs and other shareholders’ rights.

Details of employee share schemes are set out in note 23 and note 30 tothe Financial Statements.The Trustee of the Persimmon Employee BenefitTrust may vote or abstain as it sees fit.

Votes of membersEvery member present in person (or being a corporation representedby a duly authorised representative (who is not otherwise a member)under section 375 Companies Act 1985), shall subject to any provisionscontained in the Articles have one vote on a show of hands. On a pollevery member who is present by person or, being a corporationrepresented as aforesaid or by proxy shall have one vote for every share

of which the member is the holder. In the case of joint holders of a sharethe vote of the senior who tenders a vote, whether in person or by proxy,shall be accepted to the exclusion of the votes of the other joint holdersand for this purpose seniority shall be determined by the order in whichthe names of the holders appear in the Register of Members in respect ofthe share.

Restrictions on voting

No member (whether in person or by proxy) shall, unless the Directorsotherwise determine, be entitled to vote or to exercise any other right ofmembership at any General Meeting in respect of any share held by themember unless all calls or other sums presently payable by the member inrespect of that share in the Company have been paid.

In addition, no member shall be entitled to vote until he has compliedwith a direction notice served on him after failure to provide informationconcerning interest in those shares required by the Company under therelevant provisions of the Companies Act 1985.

Deadlines for voting rights

Votes may be exercised in person, by proxy, or in relation to corporatemembers by a corporate representative.The deadline for deliveringeither written or electronic proxy forms is 48 hours before the time forholding the meeting.

Dividends and distributionsThe Company may by Ordinary Resolution declare dividends notexceeding the amount recommended by the Directors, subject to theprovisions of the Companies Acts.The Directors may pay interimdividends and any fixed rate dividend whenever the financial positionof the Company, in the opinion of the Directors, justifies its payment.

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

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

Directors’ Report continued


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 resolution or bythe Board of Directors.A Director appointed by the Board of Directorsholds office until the next following Annual General Meeting and is theneligible for election by the members.

Each Director shall retire from office at the first Annual General Meetingfollowing his appointment and shall be eligible for reappointment;thereafter each Director shall retire from office and shall be eligible forreappointment at the Annual General Meeting held in the third yearfollowing his last reappointment.

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

The office of Director shall be vacated if (a) he resigns by notice inwriting to the Company; (b) he offers in writing to resign and theDirectors resolve to accept such offer; (c) a bankruptcy order or aninterim order is made against him or he makes any arrangement orcomposition with his creditors generally; (d) he is, or may be, sufferingfrom mental disorder; (e) he is absent from meetings of the Directorsfor six successive months without the permission of the Directors;(f) he becomes prohibited by law from acting as a Director; or (g) he isremoved from office pursuant to the Articles.

Powers of the DirectorsThe business of the Company shall be managed by the Directors whomay exercise all the powers of the Company, subject to the Company’sMemorandum of Association and Articles, the Companies Acts and anydirections given by the Company in general meeting. In particular theDirectors may exercise all the powers of the Company to borrow money,issue shares, appoint and remove Directors and recommend and declaredividends.

Amendment of the Company’s Articlesof AssociationAny amendments to the Articles of the Company may be made inaccordance with the provisions of the Companies Acts by way of specialresolution.A resolution will be put to the Annual General Meeting tobe held on 24 April 2008 to adopt new Articles. Details of the specificchanges being proposed are set out in full in the explanatory notes to theseparate notice convening the Annual General Meeting.

Significant agreementsThe following significant agreements contain provisions entitling thecounterparties to exercise termination or other rights in the event of achange of control of the Company:-

• Under the £800m syndicated loan facility agreement dated24 November 2005, all amounts become due and payable underthe terms of the facility if any person or group of persons actingin concert gains control of the Company.

• Under the private placement of senior loan notes detailed in note 19 tothe Financial Statements (the ‘Loan Notes’), the holders of the LoanNotes have an option (upon being notified by the Company within5 business days of the change of control) to require the Company toprepay the Loan Notes held by each holder. If the holders exercise thisoption, the amount of prepayment is the principal amount of the LoanNote together with interest accrued thereon to the date of theprepayment.The date of prepayment must be within 65 days of thechange of control.

• Control has the same meaning as S416 Income and Corporation TaxesAct 1988 and acting in concert has the meaning given to it in the CityCode on Takeovers and Mergers.

• Change of control is deemed to occur if at any time any person, orgroup of persons acting in concert, acquires control of the Company.

By order of the Board

Neil Francis Group Company Secretary25 February 2008

42 Persimmon Plc

The Board of Directors presents its Remuneration report for the year ended 31 December 2007.A resolution to approve this report will be put to shareholders at theAnnual General Meeting on 24 April 2008.

Remuneration CommitteeThe Remuneration Committee (the ‘Committee’) is responsible for setting each executive Director’s remuneration.The Committee’s current terms of reference wereadopted on 25 February 2004 and are available on the Company’s website or from the Group Company Secretary.

The Committee is comprised of three non-executive Directors, Nicholas Wrigley (Chairman), David Thompson and Neil Davidson, all of whom the Board considersto be independent. Nicholas Wrigley was appointed to the Committee on 18 December 2007 following Adam Applegarth’s resignation from the Committee on29 October 2007.

Remuneration policyA complete review of the executive Directors’ remuneration was carried out at the end of 2006 and the current policy, which was effective from 1 January 2007, wasapproved by shareholders at the Annual General Meeting in April 2007.

In preparing the remuneration policy, the Committee sought independent advice from New Bridge Street Consultants LLP (‘NBSC’), who are leading advisors onexecutive remuneration. NBSC were appointed by the Committee and do not provide any other service to the Company. In addition, the Committee consulted with theGroup Chairman and the Group Chief Executive, although neither participated in any discussion relating to their own remuneration.

The objective of the policy is to have a remuneration package which will retain the talented executive team and be performance orientated.The executive Directors’remuneration policy has a higher than typical emphasis on variable pay, which has helped to motivate the Directors to drive the excellent performance of the Company inthe past.The Committee considers that the policy ensures that the executive Directors’ remuneration is in line with market standards and best practice, closely aligning theDirectors’ interests with those of shareholders in creating shareholder value.

The remuneration of the executive Directors consists of different elements of pay and benefits, which make up the whole remuneration package.The components includebasic salary, annual bonus, long term incentive awards and pensions. Basic salaries were set on 1 January 2007 at broadly market median level, by reference to otherFTSE 100 companies of a similar size.Annual bonus is performance related and the performance conditions are set on profit before tax and earnings per share targets.The targets are set to allow a potentially high proportion of performance related pay for exceptional performance.The Committee considers it is important that theexecutive Directors are appropriately rewarded for continuing to deliver exceptional value to shareholders and to retain their expertise. Each Directors annual bonus iscapped and if minimum targets are not reached, no annual bonus is payable.

Long Term Incentive Plan (LTIP) Awards are designed to align this longer term element of remuneration with the Company’s financial performance and with the interestsof shareholders.The performance conditions attached to the vesting of LTIP Awards are based on the Company’s Total Shareholder Return versus a comparator group ofthe constituents of the FTSE 100 and the Company’s Return on Capital Employed.

The Committee still considers that it is important to remunerate John White and Mike Farley at similar levels.Although Mike Farley has full CEO responsibility, theCommittee is satisfied that these two very highly rated executives should be paid at market competitive rates for a company chief executive. John White brings a wealth ofexperience of the sector and knowledge of the Company which the Board considers essential for the Company to retain.This approach is recognised as being transitional,until such time as John White begins to step back from full time executive duties, when his remuneration would reduce commensurately.

Full details of both the quantum of the individual components of the packages and the structure of annual bonus, long term incentive awards and pension provision,are summarised below.

Basic salaryExecutive Directors’ basic salaries for 2007 were set at a broadly market median level, by reference to other FTSE 100 companies of a similar size. Basic salaries willincrease by 3% in 2008 and are set out below:

2008 2007

John White £633,450 £615,000

Mike Farley £633,450 £615,000

Mike Killoran £412,000 £400,000

David Bryant £272,950 £265,000

Annual bonusAnnual bonuses are performance related and non-pensionable.There are two performance targets for annual bonuses, Group profit before tax (‘PBT’) and earningsper share (‘EPS’).The Committee considers that these targets will incentivise the Directors in line with the Company’s strategic aims set out on pages 8 and 9.

The Committee has determined an appropriate sliding scale around a target figure for both EPS and PBT. Recognising the uncertain outlook for performancein 2008, compared to 2007, the Committee has increased the degree of stretch in the sliding scale around budget, for both the EPS and PBT parts. In addition,the proportion of the maximum bonus payable at target performance has been reduced from two-thirds to 50% and the amount payable at threshold reduced from 25%to 20%.The maximum bonus limits remain unchanged.

Remuneration Report

43 Persimmon PlcRemuneration Report

The Committee has determined that the total level of potential annual bonus payable to the executive Directors will be capped at a predetermined figure expressedas a percentage of basic salary, which varies by Director as follows:

Maximum annual bonus potential for 2008 (as a percentage of salary) 2008 2007

John White 250% 250%

Mike Farley 250% 250%

Mike Killoran 250% 250%

David Bryant 175% 175%

The balance of any bonus earned in excess of 150% of basic salary is awarded in the Company’s shares (‘Bonus Shares’), which may vest in two equal tranches over a twoyear period.

Bonus Shares are awarded at the same time as the cash bonus, with the first tranche vesting after the announcement of the Group’s preliminary results in the following yearand the second tranche vesting after the announcement of the Group’s preliminary results the year after. Each Director has the option to elect that the shares vest in a sixmonth period from the date of the relevant announcement.Any unvested Bonus Shares would be forfeited on termination of employment if the executive Director resignsor is dismissed summarily.

The number of Bonus Shares awarded for 2007 is calculated by dividing the balance of any bonus earned in excess of 150% of basic salary by the average share pricein the period 1 January 2008 to 14 February 2008.

Long Term Incentive PlanThe executive Directors are granted awards under the Company’s LTIP, up to a maximum value of 250% of basic salary. During 2007 John White and Mike Farley receivedan award of 200% of basic salary and Mike Killoran and David Bryant received an award equivalent to 150% of basic salary. In 2008 the Committee will make the samelevel of awards to the executive Directors.

LTIP awards vest after a three year performance period.The performance conditions are based on Total Shareholder Return (TSR) and Return on Capital Employed(ROCE), with 50% of an award linked to TSR and 50% linked to ROCE.The Committee considers this provides a good blend between rewarding long term financialperformance and superior stock market performance.

The performance conditions for 2008 awards are unchanged from those that attached to the awards made in 2007.The award based on TSR performance will measurethe Company’s TSR against the constituents of the FTSE 100 Index (excluding Investment Trusts) as at the date of grant.The FTSE 100 is considered to be the mostappropriate benchmark against which to compare Persimmon’s TSR, as there are an insufficient number of large housebuilders to provide a robust comparator group andthe sector may consolidate further.The vesting schedule for TSR is 25% of this part of the award for median performance, with sliding scale increases until full vesting atthe upper quartile. In respect of the part of the award based on ROCE targets, 25% of the shares linked to this condition will vest if ROCE over the performance period is15%, with a sliding scale up to all of the shares if ROCE is 22% or above.This range, in the view of the Committee, currently reflects the outlook for the house buildingsector. For grants in future years, the Committee will review the ROCE range in the light of the outlook for the house building sector at that time.

PensionThe executive Directors are members of the Group’s defined benefit pension scheme.The normal retirement age for executive Directors is 60.The Committee has agreedthat an executive Director who elected to cease accruing further service in the Group’s defined benefit scheme from 6 April 2006 will instead receive a salary supplementof 30% of basic salary.The Committee considers that the salary supplement is cost neutral to the Company.

John White, 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 and they remain members of the scheme for life insurance purposes.

A salary cap for pension purposes was introduced last year to mitigate the impact of the executive Directors’ salary increases effective from 1 January 2007. John White,Mike Farley and David Bryant’s pensionable salary caps are £473,000, £420,000 and £258,500 respectively, well below their basic salaries.

Mike Killoran elected to continue service in the Scheme and accrues benefit at 1/45th of his basic salary for service after 6 April 2006. Mike Killoran’s service in theScheme prior to this date was subject to the HMRC Earnings Cap and his current Scheme cap for service up to 5 April 2006 is £116,160.

The pensionable salary caps for the executive Directors will increase annually in accordance with their increase in basic salary, up to a maximum of 5% p.a.


Benefits in kindEach of the executive Directors’ remuneration also includes fully financed cars or cash car allowance, membership of the Group private medical scheme and the Groupincome protection scheme, subscriptions and some telephone costs.These benefits are not pensionable.

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 more than six months’ service.

Service contractsAll executive Directors have service contracts and in line with the recommendations of the Combined Code on Corporate Governance, the notice period for eachexecutive Director does not exceed 12 months.The contracts expire on the Director’s 60th birthday. In circumstances following a change of control, or where dismissedin breach of contract, an executive Director is entitled to payments for termination of employment, but in no circumstances will such payments exceed 12 months’remuneration.The executive Directors’ contracts are all dated 24 April 2002 but are effective from 1 January 2002. None of the non-executive Directors has servicecontracts.

Mike Killoran and Hamish Leslie Melville will retire at the 2008 Annual General Meeting and are offering themselves for re-election.

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 to comply withbest practice, formal share ownership guidelines were established in 2002.As a result, the Committee now requires each executive Director to hold Persimmon shares.John White and Mike Farley have to hold a minimum value of shares equivalent to three times their basic salary and the other executive Directors are required to maintainshareholdings equivalent in value to two times their basic salary. In all cases the executive Directors’ shareholdings are significantly in excess of the shareholding guidelines.

The Committee recognises that executive Directors may be required to sell sufficient shares in the Company to satisfy any tax liability arising on the vesting of BonusShares 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 seek approval fromthe Group Chairman and/or the Group Chief Executive.

Performance graphShown below is the Company’s TSR performance against the FTSE 100 Index over the last five financial years.The Board has chosen this comparator as it is thebenchmark for measuring the stock market performance of large UK listed companies.

Non-executive DirectorsNon-executive Directors do not have service contracts and are paid a fee which is non-pensionable.They do not qualify for performance-related bonuses.The Boardas a whole determines the fees of the non-executive Directors.The fees for 2008 are £48,000 p.a., plus an additional fee of £8,500 p.a. for additional responsibilitiesin chairing a committee.

400

300

200

100

500

Source: DATASTREAM

Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07

Persimmon PlcFTSE 100 Index


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 2007Salary

Performance supplement Subtotal DeferredSalaries related cash in lieu of emoluments bonus shares 2007 2006and fees bonus� Benefits pension received earned� Total Total

£ £ £ £ £ £ £ £

Executive

J White 615,000 922,500 49,188 184,500 1,771,188 42,437 1,813,625 2,185,333

M P Farley 615,000 922,500 37,024 184,500 1,759,024 42,437 1,801,461 1,779,499

M H Killoran† 364,000 600,000 28,648 – 992,648 42,525 1,035,173 1,161,187

D G Bryant 265,000 320,113 34,536 79,500 699,149 – 699,149 754,843

Non-executive

I H Leslie Melville* 46,750 – – – 46,750 – 46,750 47,408

D G F Thompson 55,000 – – – 55,000 – 55,000 53,000

R C N Davidson 46,750 – – – 46,750 – 46,750 45,000

A J Applegarth� 45,833 – – – 45,833 – 45,833 50,333

N Wrigley* 46,750 – – – 46,750 – 46,750 41,251

Totals 2,100,083 2,765,113 149,396 448,500 5,463,092 127,399 5,590,491 6,117,854

† The Group’s defined benefit pension scheme became non contributory on 1 August 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 rate of contribution to the scheme. Salary related benefits remain based on hissalary published on page 42.

� The performance-related bonus for 2007 (cash and deferred shares) has been earned as a result of the performance by reference to Group PBT and EPS.Notwithstanding this excellent performance, maximum bonus levels have not been payable.As set out in the policy section, annual bonus earned for 2007 in excess of150% of basic salary is deferred in shares for up to two years.

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

� Adam Applegarth resigned as a Director on 29 October 2007.

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 2007 of £300,000 (2006: £375,982) and benefits of £14,294 (2006: £18,615) in hiscapacity 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 (2006:£5,000) and benefits of £36,422 (2006: £22,731) for the year to 31 December 2007. Mr G Grewer, who retired as a Director in December 2001 received £40,000 (2006:£48,000) for his role as Chairman of the Trustees of the Persimmon Plc Pension and Life Assurance Scheme.

Directors’ pension entitlementsTransfer value

of netof inflation

Total accrued Total accrued Increase in Transfer Transfer Increase in increase inpension at pension at Increase in accrued value at value at transfer value, accrued pension

31 December 31 December accrued pension (net 31 December 31 December less member less member2006 2007 pension of inflation) 2006 2007 contributions contributions£ pa £ pa £ pa £ pa £ £ £ £

J White 240,463 271,537 31,074 21,696 4,116,902 4,759,056 642,154 408,015

M P Farley* 165,000 198,444 33,444 27,009 2,651,852 3,243,707 591,855 474,016

M H Killoran 24,737 38,004 13,267 12,302 297,629 479,997 182,368 165,590

D G Bryant 109,252 121,333 12,081 7,821 1,814,805 2,065,189 250,384 142,490

* Mr Farley’s pension entitlements were incorrectly stated in 2006 as they were calculated on his previous year’s pensionable salary.


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

price/market gain onPerformance price Market exercise of

1 January Granted Exercised Lapsed 31 December Exercisable Expiry condition at date price at date option2007 in year in year in year 2007 from date end date of award of exercise £

J White 59,109(1) – 59,109 – – Mar 07 Sep 07 Dec 06 617.5p 1,232p 728,223

1,443(3) – 1,443 – – Dec 07 May 08 – 525.0p 788.5p 3,802

57,602(1) – – – 57,602 Mar 08 Sep 08 Dec 07 746.5p – –

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 – –

180(3) – – 180 – Dec 09 May 10 – 1,050.0p – –

– 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 – –

Total 525,640 92,723 60,552 180 557,631 732,025

M P Farley 43,724(1) – 43,724 – – Mar 07 Sep 07 Dec 06 617.5p 1,232p 538,678

42,866(1) – – – 42,866 Mar 08 Sep 08 Dec 07 746.5p – –

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 – –

Total 310,632 91,449 43,724 – 358,357 538,678

M H Killoran 43,724(1) – 43,724 – – Mar 07 Sep 07 Dec 06 617.5p 1,232p 538,678

1,804(3) – – – 1,804 Dec 07 May 08 – 525.0p – –

42,866(1) – – – 42,866 Mar 08 Sep 08 Dec 07 746.5p – –

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 – –

Total 274,936 45,883 43,724 – 277,095 538,678

D G Bryant 34,979(1) – 34,979 – – Mar 07 Sep 07 Dec 06 617.5p 1,232p 427,793

1,804(3) – 1,804 – – Dec 07 May 08 – 525.0p 788.5p 4,754

31,480(1) – – – 31,480 Mar 08 Sep 08 Dec 07 746.5p – –

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 – –

Total 123,418 30,827 36,783 – 117,462 432,547

(1)Persimmon Plc Long Term Incentive Plan 1998. (3)Persimmon Plc Save AsYou Earn Scheme.

(2)Persimmon Plc Long Term Incentive Plan 2007. (4)Persimmon Plc Synergy Incentive Plan (SIP).


All options and awards were granted for nil consideration. 2007 awards were made on 2 May 2007.The performance conditions for these awards are shown on page 43.

Vesting of awards under the LTIP 1998 are subject to the achievement of performance conditions based on TSR relative to other housebuilders (median to upper quartileTSR for between 40% to 100% of this part of the award to vest) and a range of ROCE targets (13% to 20% for between 50% and 100% of this part of the award to vest).

All SIP awards are subject to a performance condition and will vest in two tranches.The performance conditions for both tranches of the SIP award 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 ended 31 December 2007;both figures have been approved by the Audit and Remuneration Committees advised by external auditors.The awards will vest in February 2009 and February 2010.The Committee requires John White to retain the SIP shares for the duration of his term as Chairman, except for sales of shares to pay income tax and National Insurancedue on the exercise of the award.

Details of the market value of the Company’s shares during 2007 were: closing price at 31 December 2007: £8.00; lowest closing price in 2007: £7.491/2; highest closingprice in 2007: £15.43.

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

1 January Awarded Vested 31 December2007 during year during year 2007

J White 144,042 53,646 109,886 87,802

M P Farley 76,834 38,481 59,044 56,271

M H Killoran 36,418 12,586 30,219 18,785

D G Bryant 9,915 – 9,840 75

Total 267,209 104,713 208,989 162,933

The proposed Bonus Share awards in respect of the 2007 bonus for Messrs White, Farley, and Killoran are 5,673, 5,673, and 5,685 respectively.The Bonus Share awardsfor 2007 were calculated at an average share price in the designated period of £7.48 (2006: £14.37) and are due to be awarded in March 2008. Bonus Shares vest overa two year period.

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:

Share options/awardsBeneficial holdings (excluding bonus shares)

31 December 1 January 31 December 1 January2007 2007 2007 2007

J White 2,060,227 1,949,644 557,631 525,640

M P Farley 968,535 893,911 358,357 310,632

M H Killoran 489,177 434,454 277,095 274,936

D G Bryant 512,945 470,842 117,462 123,418

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

D G F Thompson 31,155 30,596 – –

R C N Davidson 38,350 38,350 – –

N H T Wrigley 4,000 4,000 – –

Total 4,254,389 3,971,797 1,310,545 1,234,626

The Directors’ beneficial holdings represent 1.4% of the Company’s issued share capital as at 25 February 2008 (excluding shares held in Treasury). D G F Thompson alsohas non-beneficial interests of 12,155 ordinary shares (2006: 11,876 ordinary shares). Otherwise all interests of the Directors are beneficial.There has been no change in theinterests set out above between 31 December 2007 and 25 February 2008.

Approved by the Board and signed on its behalf by

Nicholas Wrigley Chairman Remuneration Committee25 February 2008

48 Persimmon Plc

The Board acknowledges that by adopting and implementing the higheststandards of corporate governance, it sets the standard and values for the entireGroup.The Board seeks to comply with best practice in all areas of corporategovernance and sets out below how the principles of the Combined Code onCorporate Governance 2006 (the Code) have been adopted and implementedby the Company.

DirectorsThe Board consists of four executive Directors and four non-executive Directors.The executive Directors provide a direct line of control between the Company andits operating businesses.The non-executive Directors provide a balance to the Boardand bring a wide breadth of experience.The Board considers all non-executiveDirectors to be independent.The Senior Independent Director is David Thompson.

Hamish Leslie Melville has completed more than 12 years service as a non-executive Director. Despite this long service, the Board considers Hamish LeslieMelville to be independent.This is because his long standing appointment does notin any way affect his objectivity and his ability to advise and question the executiveDirectors, particularly in respect of strategy and the Company’s financial affairs.His long association with the Company has given him a sound and detailedknowledge of the Company’s business which has enabled him to consider andevaluate information and responses from the executive Directors quickly andconcisely. His wise counsel has contributed significantly to the Company’s success.

The Chairman has reviewed Hamish Leslie Melville’s performance and hebelieves that his performance continues to be very effective.The Board considers itimportant to continue to have access to the judgement of Hamish Leslie Melvillein managing the Company in the current challenging market conditions.Hamish Leslie Melville will retire and be available for re-election to the Boardon an annual basis.

The Board meets six times a year and has a formal schedule of matters reserved forits consideration and decision.This schedule includes the approval of financial andmarketing strategy, dividend policy, approval of annual and interim results, majorinvestments, review of performance, monitoring risk, ensuring adequate financialresources are available and reporting to shareholders.The schedule is reviewed onan annual basis.

There was full attendance by all Directors at Board and Committee meetings duringthe year except that Adam Applegarth was unable to attend two Board meetingsprior to his resignation.

The Board and the Audit Committee undertake a written self-evaluation of theirperformance.A verbal evaluation of the performance of the Remuneration andNomination Committees are undertaken by the Committees.The non-executiveDirectors undertake a verbal annual performance evaluation of the Chairman, takinginto account the views of the executive Directors.The Chairman undertakes averbal evaluation of the executive Directors’ performance.As a result of theevaluations, a number of procedural and other changes have been implementedduring 2007; for example the Division Chief Executives make annual presentationsto the Board on the strategic operations and targets for their Divisions.

All Directors have access to the advice and services of the Group CompanySecretary and may also seek independent professional advice and training, at theCompany’s expense, if so required to carry out their duties.All executive Directorshave 12 month rolling contracts.The non-executive Directors do not have servicecontracts.

Nomination CommitteeThe members of the Nomination Committee are John White (Chairman),Hamish Leslie Melville and David Thompson.Adam Applegarth resigned from theCommittee on 29 October 2007.

The Committee met twice during 2007, to review and consider the compositionof the Board and to review its terms of reference, the latter of whichremained unchanged.

Following Mr Applegarth’s resignation on 29 October 2007, the Board instructedthe Committee to make recommendations for a non-executive Director who wouldbring different skills and expertise to the Board.At the date of this report the Boardhad not made an appointment.

In addition the Committee is satisfied that appropriate succession planning forsenior management is in place as evidenced by internal promotions made during2007 to the Divisional Boards.

Remuneration CommitteeAdam Applegarth resigned as Chairman of the Remuneration Committee on29 October 2007 and his position was taken by Nicholas Wrigley.The other membersof the Committee during 2007 were David Thompson and Neil Davidson.

The Remuneration Committee is responsible for setting the remuneration of theChairman and the executive Directors.The Remuneration Committee met onceduring the year to consider and approve the bonus arrangements for executiveDirectors from 1 January 2007. Details of the remuneration package for eachDirector serving during 2007 are set out in the Remuneration Report onpages 42 to 47.

In accordance with the Directors’ Remuneration Report Regulations 2002 theRemuneration Report will be put to shareholders for their approval at the AnnualGeneral Meeting on 24 April 2008.

Accountability and AuditThe Company has an established Audit Committee to whom the external auditors,KPMG Audit plc report. During 2007 the Audit Committee was wholly comprisedof independent non-executive Directors.The members of the Committee areDavid Thompson (Chairman), Neil Davidson and Nicholas Wrigley.All membersof the Committee have recent relevant financial experience; please see the Directors’biographies on page 37.

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

The Committee’s Terms of Reference were adopted on 25 February 2004.During the year the Board reviewed the Committee’s Terms of Reference and noamendments were made.The terms of reference of the Group Risk managementfunction were recommended by the Audit Committee, approved by the Board andwere unchanged in 2007.

The Committee met on four occasions during the year.The Committee agreedthe nature and scope of the audit with the auditors and monitored the quarterlyfindings of the auditors and Group Risk.The Committee regularly meet theauditors without the presence of the Company’s management.

Corporate Governance Report

49 Persimmon PlcCorporate Governance Report

A formal evaluation of the auditors was undertaken by the Audit Committeein April 2007 which took into account the calibre of the audit firm, qualitycontrol processes, audit team members, the scope of the audit, audit fees, auditcommunications, audit governance and independence.The results of the evaluationwere positive and the Audit Committee concluded that the current auditor, KPMGAudit plc should continue to provide its services to the Company.

The Audit Committee formulates and oversees the Company policy on monitoringauditor objectivity and independence in relation to non-audit services.The policyis to ensure that the nature of non-audit services performed or the fee incomerelative to the audit fee does not compromise or is seen to compromise the auditor’sindependence, objectivity or integrity.The auditors are excluded from undertakinga range of work on behalf of the Company which includes appraisal or valuationservices, management functions and litigation support, legal accounting andremuneration services. From time to time non-audit services are put out to tenderto a number of accountants.

The Company has had a whistle blowing procedure in place for a number of yearswhich is publicised in the Staff Handbook.All employees may raise concerns aboutmalpractice or improper or potentially illegal behaviour in confidence withoutconcern of victimisation or disciplinary action.

Internal controlThe Company has complied with the Code provisions on internal control, havingcontinued to operate the procedures necessary to implement the guidance issued inthe Turnbull Committee Report (revised October 2005) throughout the year.

The Board has overall responsibility for the Company’s system of internal controland for the review of its effectiveness. It is the role of management to implementthe Board’s policies on risk and control through the design and operation ofappropriate internal control systems.All employees have some responsibility forinternal control as part of their accountability for achieving objectives.

The Risk Committee has the delegated task of overseeing the Board’sresponsibilities with respect to risk and internal control. Specifically this includesdetermining appropriate control procedures and the review of the effectivenessof internal control.The members of the Risk Committee during 2007 wereJohn White, Mike Farley, Mike Killoran and the Division Chief ExecutivesDavid Thornton, Jeff Fairburn and Nigel Greenaway.The Risk Committee reportsto the Audit Committee, which oversees the Risk Committee’s activities.

As part of its ongoing activities, the Group Risk Management function has updatedthe Group’s risk assessment during the year.The results of this process have beenreported to the Risk Committee and have been used to drive a risk focusedprogramme of work designed to improve business processes and increase internalcontrol effectiveness.The Group Risk Management function has maintained the riskintranet system resulting in an enhanced risk register being completed during theyear.The risk register has been approved by the Risk and Audit Committees.

The processes that the Risk Committee has applied in reviewing the effectivenessof the system of internal control include the following:

• Ensuring that there is a continuous detailed involvement in land acquisitionassessment and work in progress, together with regular site visits and discussionwith site based personnel by senior management;

• Review of representations on risk and control from all Managing Directors ofoperating businesses following individual reviews of internal control within theiroperating businesses;

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

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

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

• Involvement in individual operating businesses board discussions, specificallyoperational board meetings where all aspects of operational performanceare analysed;

• Reviewing reports from the Corporate Responsibility Committee with particularreference to the social, environmental, sustainability and reputational risks facingthe Group.

The Risk Committee met six times during the year ensuring that there has been anongoing process for the identification, evaluation and management of the significantrisks that are faced by the Company.

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

Combined CodeThe Board supports the high standards in corporate governance and continues toreview the Code as well as the Company’s procedures to maintain proper controland accountability.The Company complied with the Code throughout 2007.

Relations with shareholdersThe Board has always sought good relations with the Company’s shareholdersand believes it is important that shareholders receive timely information on theirCompany’s progress.As well as the announcement of interim and final results,the Company issues regular trading statements to the London Stock Exchange.

The Directors understand that it is important for both private and institutionalshareholders to have the opportunity to raise concerns or discuss matters with them.The Group Chairman John White and the Senior Independent Director DavidThompson maintain contact with major shareholders to understand their issues andconcerns and report relevant information to the Board. Mike Farley and MikeKilloran have responsibility for maintaining appropriate communications withinstitutional investors.All the Directors attend the Company’s Annual GeneralMeeting and are available to answer questions at the meeting or privately.

By order of the Board

Neil Francis Group Company Secretary25 February 2008

50 Persimmon Plc

The Directors are responsible for preparing the Annual Report and the Groupand Parent Company Financial Statements in accordance with applicable lawand regulations.

Company law requires the Directors to prepare Group and Parent CompanyFinancial Statements for each financial year. Under that law they are required toprepare the Group Financial Statements in accordance with IFRSs as adopted by theEU and applicable law and have elected to prepare the Parent Company financialstatements on the same basis.

The Group and Parent Company Financial Statements are required by law andIFRSs as adopted by the EU to present fairly the financial position of the Groupand the Parent Company and the performance for that period; the Companies Act1985 provides in relation to such Financial Statements that references in the relevantpart of that Act to financial statements giving a true and fair view are references totheir achieving a fair presentation.

In preparing each of the Group and Parent Company Financial Statements, theDirectors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and estimates that are reasonable and prudent;

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

• prepare the Financial Statements on the going concern basis unless it isinappropriate to presume that the Group and the Parent Company will continuein business.

The Directors are responsible for keeping proper accounting records that disclosewith reasonable accuracy at any time the financial position of the Parent Companyand enable them to ensure that its Financial Statements comply with the CompaniesAct 1985.They have general responsibility for taking such steps as are reasonablyopen to them to safeguard the assets of the Group and to prevent and detect fraudand other irregularities.

Under applicable law and regulations, the Directors are also responsible forpreparing a Directors’ Report, Directors’ Remuneration Report and CorporateGovernance statement that comply with that law and those regulations.

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

Statement of Directors’ Responsibilities

51 Persimmon Plc

We have audited the Group and Parent Company financial statements (the ‘financialstatements’) of Persimmon Plc for the year ended 31 December 2007 whichcomprise the Group Income Statement, the Group and Parent Company BalanceSheets, the Group and Parent Company Cash Flow Statements, the Group andParent Company Statements of Recognised Income and Expenses, and the relatednotes.These financial statements have been prepared under the accounting policiesset 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 withsection 235 of the Companies Act 1985. Our audit work has been undertaken sothat we might state to the Company’s members those matters we are required tostate to them in an auditor’s report and for no other purpose.To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company and the Company’s members as a body, for our audit work, for thisreport, or for the opinions we have formed.

Respective responsibilities of directors and auditorsThe Directors’ responsibilities for preparing the Annual Report, the Directors’Remuneration Report and the financial statements in accordance with applicablelaw and International Financial Reporting Standards (IFRSs) as adopted by the EUare set out in the Statement of Directors’ Responsibilities on page 50.

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 on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a trueand fair view and whether the financial statements and the part of the Directors’Remuneration Report to be audited have been properly prepared in accordancewith the Companies Act 1985 and, as regards the Group financial statements,Article 4 of the IAS Regulation.We also report to you whether in our opinionthe information given in the Directors’ Report is consistent with the financialstatements.The information given in the Directors’ Report includes that specificinformation 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 properaccounting records, if we have not received all the information and explanations werequire 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’scompliance with the nine provisions of the 2006 Combined Code specified for ourreview by the Listing Rules of the Financial Services Authority, and we report if itdoes not.We are not required to consider whether the Board’s statements oninternal control cover all risks and controls, or form an opinion on the effectivenessof the Group’s corporate governance procedures or its risk and control procedures.

We read the other information contained in the Annual Report and considerwhether it is consistent with the audited financial statements.We consider theimplications for our report if we become aware of any apparent misstatements ormaterial 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 on Auditing(UK and Ireland) issued by the Auditing Practices Board.An audit includesexamination, on a test basis, of evidence relevant to the amounts and disclosuresin the financial statements and the part of the Directors’ Remuneration Reportto be audited. It also includes an assessment of the significant estimates andjudgements made by the Directors in the preparation of the financial statements,and of whether the accounting policies are appropriate to the Group’s andCompany’s circumstances, consistently applied and adequately disclosed.

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

OpinionIn our opinion:

• the Group financial statements give a true and fair view, in accordance with IFRSsas adopted by the EU, of the state of the Group’s affairs as at 31 December 2007and of its profit for the year then ended;

• the Parent Company financial statements give a true and fair view, in accordancewith IFRSs as adopted by the EU as applied in accordance with the provisionsof the Companies Act 1985, of the state of the Parent Company’s affairs as at31 December 2007;

• the financial statements and the part of the Directors’ Remuneration Report to beaudited have been properly prepared in accordance with the Companies Act 1985and, as regards the Group financial statements,Article 4 of the IAS Regulation; and

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

KPMG Audit Plc 1 The EmbankmentChartered Accountants Neville StreetRegistered Auditor Leeds25 February 2008 LS1 4DW

Independent Auditors’ Report to the Shareholders of Persimmon Plc

52 Persimmon Plc

2007 2006£m £m

Note Restated

Revenue 3,014.9 3,141.9

Cost of sales (2,278.8) (2,404.2)

Gross profit 736.1 737.7

Other operating income 40.1 29.6

Operating expenses (122.3) (130.7)

Share of results of jointly controlled entities 1.0 0.7

Profit from operations 9 654.9 637.3

Finance income 8 1.9 0.5

Finance costs 8 (74.1) (71.1)

Profit before tax 582.7 566.7

Income tax expense 10 (169.2) (170.3)

Profit after tax (all attributable to equity holders of the parent) 413.5 396.4

Earnings per share

Basic 13 137.5p 133.8p

Diluted 13 136.8p 133.1p

Consolidated Income StatementFor the year ended 31 December 2007

53 Persimmon Plc

2007 2006£m £m

Note Restated

Assets

Non-current assets

Intangible assets 14 467.8 470.4

Property, plant and equipment 15 47.8 48.9

Investments 16 3.2 2.8

Other receivables 18 17.2 11.5

Deferred tax assets 22 51.4 62.8

587.4 596.4

Current assets

Inventories 17 3,386.6 2,959.9

Trade and other receivables 18 180.2 178.7

Cash and cash equivalents 2.1 18.9

3,568.9 3,157.5

Total assets 4,156.3 3,753.9

Liabilities

Non-current liabilities

Interest bearing loans and borrowings 19 (527.5) (511.0)

Forward currency swaps (58.0) (94.8)

Deferred tax liabilities 22 (32.0) (25.9)

Retirement benefit obligation 30 (60.7) (103.7)

Other liabilities 20 (92.4) (96.8)

(770.6) (832.2)

Current liabilities



Trade and other payables 20 (749.0) (706.4)

Current tax liabilities (150.4) (106.7)

(1,040.3) (890.4)

Total liabilities (1,810.9) (1,722.6)

Net assets 2,345.4 2,031.3

Shareholders’ equity

Ordinary share capital issued 23, 24 30.3 29.9

Share premium 24 233.6 233.4

Own shares 24 – (5.1)

Hedge reserve 24 0.7 (4.3)

Other non-distributable reserve 24 281.4 281.4

Retained earnings 24 1,799.4 1,496.0

Total shareholders’ equity 24 2,345.4 2,031.3

The financial statements on pages 52 to 90 were approved by the Board of Directors on 25 February 2008 and were signed on its behalf by:

J White M H KilloranDirector Director

Consolidated Balance SheetAt 31 December 2007

54 Persimmon Plc

2007 2006Note £m £m

Assets

Non-current assets

Intangible assets 14 4.0 4.2

Property, plant and equipment 15 3.5 3.7

Investments 16 3,741.8 3,266.8

Deferred tax assets 22 21.4 40.4

3,770.7 3,315.1

Current assets

Inventories 17 – 0.2

Trade and other receivables 18 259.6 576.2

Cash and cash equivalents – 0.5

259.6 576.9

Total assets 4,030.3 3,892.0

Liabilities




Deferred tax liabilities 22 (0.1) –

Retirement benefit obligation 30 (60.7) (103.7)

Other liabilities 20 (2.2) (3.0)

(423.0) (411.1)

Current liabilities



Trade and other payables 20 (2,787.4) (2,559.2)

Current tax liabilities (4.1) (9.8)

(2,880.7) (2,668.3)

Total liabilities (3,303.7) (3,079.4)

Net assets 726.6 812.6

Shareholders’ equity

Ordinary share capital issued 23, 24 30.3 29.9

Share premium 24 233.6 233.4

Own shares 24 – (5.1)

Hedge reserve 24 – (2.3)

Other non-distributable reserve 24 4.6 4.6

Retained earnings 24 458.1 552.1

Total shareholders’ equity 24 726.6 812.6

The financial statements on pages 52 to 90 were approved by the Board of Directors on 25 February 2008 and were signed on its behalf by:

J White M H KilloranDirector Director

Company Balance SheetAt 31 December 2007

55 Persimmon Plc

2007 2006£m £m

Note Restated

Cash flows from operating activities:

Profit for the year 413.5 396.4

Adjustments for:

Income tax expense 169.2 170.3

Finance income (1.9) (0.5)

Finance costs 74.1 71.1

Depreciation charge 9.8 9.6

Amortisation of intangible assets 0.2 0.3

Impairment of intangible assets 2.4 –

Share of results of jointly controlled entities (1.0) (0.7)

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

Share-based payment charge 6.0 5.3

Other non-cash items – (8.3)

Profit from operations before working capital movements 671.3 642.8

Movements in working capital:

(Increase)/decrease in inventories (426.7) 186.0

(Increase)/decrease in trade and other receivables (7.2) 32.0

Increase/(decrease) in trade and other payables 25.6 (67.8)

Net cash from operations 263.0 793.0

Interest paid (66.2) (57.6)

Interest received 1.9 0.5

Tax paid (126.3) (146.8)

Net cash from operating activities 72.4 589.1

Cash flows from investing activities:

Acquisition of subsidiary – (508.5)

Received from jointly controlled entities 0.6 1.0

Purchase of property, plant and equipment (10.6) (9.6)

Proceeds from sale of property, plant and equipment 4.6 2.6

Net cash used in investing activities (5.4) (514.5)

Cash flows from financing activities:

Repayment of borrowings (68.0) (265.8)

Drawdown of loan facilities 75.0 257.3

Finance lease principal payments (1.4) (1.5)

Own shares purchased (25.5) _

Exercise of share options 2.3 3.2

Dividends paid to Group shareholders (114.1) (59.6)

Net cash used in financing activities (131.7) (66.4)

(Decrease)/increase in net cash and cash equivalents 25 (64.7) 8.2

Net cash and cash equivalents at beginning of year 15.9 7.7

Net cash and cash equivalents at end of year 26 (48.8) 15.9

Consolidated Cash Flow StatementFor the year ended 31 December 2007

56 Persimmon Plc

2007 2006Note £m £m

Cash flows from operating activities:


Adjustments for:

Income tax expense 9.9 22.9

Finance income (1.8) (0.1)

Finance costs 40.4 39.0

Depreciation charge 0.8 0.7


Share-based payment charge 6.0 5.3

Other non-cash items (0.9) (3.3)

Profit from operations before working capital movements 72.3 104.4

Movements in working capital:

Decrease in inventories 0.2 0.1

Decrease in trade and other receivables 316.6 81.3

Increase in trade and other payables 220.9 936.1

Net cash from operations 610.0 1,121.9

Interest paid (39.1) (33.6)

Interest received 1.8 0.1

Tax paid (12.1) (21.6)

Net cash from operating activities 560.6 1,066.8

Cash flows from investing activities:

Acquisition of subsidiary – (490.8)

Additional investment in subsidiaries (475.0) (848.9)

Purchase of property, plant and equipment (0.4) (0.7)

Proceeds from sale of property, plant and equipment 0.2 0.2

Net cash used in investing activities (475.2) (1,340.2)

Cash flows from financing activities:

Repayment of borrowings (17.2) (26.7)

Drawdown of loan facilities 75.0 257.3

Finance lease principal payments (0.4) (0.3)

Own shares purchased (22.3) –

Exercise of share options 2.3 3.2

Dividends paid to Group shareholders (114.1) (59.6)

Net cash (used in)/from financing activities (76.7) 173.9

Increase/(decrease) in net cash and cash equivalents 25 8.7 (99.5)

Net cash and cash equivalents at beginning of year (76.1) 23.4

Net cash and cash equivalents at end of year 26 (67.4) (76.1)

Company Cash Flow StatementFor the year ended 31 December 2007

57 Persimmon Plc

2007 2006£m £m

Effective portion of changes in fair value of cash flow hedges 11.9 (7.0)

Net actuarial gains/(losses) on defined benefit pension schemes 36.1 (4.7)

Taxation on items taken directly to equity (15.6) 3.5

Net income/(expense) recognised directly in equity 32.4 (8.2)


Total recognised income for the year (all attributable to equity holders of the parent) 445.9 388.2

Company Statement of Recognised Income and ExpenseFor the year ended 31 December 2007

2007 2006£m £m

Effective portion of changes in fair value of cash flow hedges 3.3 (6.6)

Net actuarial gains/(losses) on defined benefit pension schemes 36.1 (4.7)

Taxation on items taken directly to equity (13.0) 3.4

Net income/(expense) recognised directly in equity 26.4 (7.9)


Total recognised income for the year (all attributable to equity holders) 44.1 31.7

Consolidated Statement of Recognised Income and ExpenseFor the year ended 31 December 2007

58 Persimmon Plc

1 Adoption of new and revised standardsIn the current year, the Group and Company have adopted IFRS 7 FinancialInstruments: Disclosures which is effective for annual reporting periods beginningon or after 1 January 2007, and the related amendment to IAS 1 Presentation ofFinancial Statements.The impact of the adoption of IFRS 7 and the changes toIAS 1 has been to expand the disclosures provided in these financial statementsregarding the Group’s and Company’s financial instruments and management ofcapital (see note 21).The adoption has had no impact on profit or net assets foreither the current or comparative period of the Group or the Company.

Three relevant interpretations issued by the International Financial ReportingInterpretations Committee are effective for the current period. IFRIC 8 Scopeof IFRS 2 – Share-Based Payment; IFRIC 9 Reassessment of embedded derivatives;IFRIC 10 Interim Financial Reporting and Impairment.The adoption of therelevant interpretations has not led to any changes in the Group’s or Company’saccounting policies.

At the date of authorisation of these financial statements, IFRS 8: OperatingSegments and IFRIC 11: IFRS 2 – Group and Treasury Share Transactions werein issue and endorsed but not yet effective.The Directors note that the impactof the adoption of the Standard and interpretation in future periods is stillunder consideration.

2 Principal accounting policiesBasis of accounting

Both the consolidated Group and Parent Company financial statements have beenprepared in accordance with International Financial Reporting Standards, adoptedby the European Union and effective at 31 December 2007 (IFRSs) and thereforethe financial statements comply with Article 4 of the EU IAS Regulation.

The financial statements have been prepared on the historical cost basis, exceptfor the revaluation of certain financial instruments.The principal accounting policiesare set out below.

Basis of consolidation

The consolidated financial statements include the financial statements of theCompany and its subsidiaries up to 31 December each year.The results ofsubsidiaries acquired or disposed of during the year, are included in the consolidatedfinancial statements from the effective date of acquisition or up to the effective dateof disposal, as appropriate.Where necessary, adjustments are made to the financialstatements of subsidiaries to bring the accounting policies used into line with thoseused by the Group. All intra-group transactions, balances, income and expenses areeliminated on consolidation.

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method.The subsidiary’s identifiable assets, liabilities and contingent liabilities arerecognised at their fair value at the acquisition date.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisitionover the Group’s interest in the fair value of the identifiable assets, liabilities andcontingent liabilities of the acquired entity at the date of the acquisition. Goodwillarising on acquisition of subsidiaries and businesses is capitalised as an asset.Goodwill allocated to the strategic land holdings is recognised as an asset, being theintrinsic value within these holdings in the acquired entities, which is realised uponsatisfactory planning permission being obtained and sale of the land. Goodwill issubsequently measured at cost less any accumulated impairment losses.

Goodwill is assessed for impairment at each reporting date by performing a value inuse calculation, using a discount factor based on the pre-tax rate implicit in currentmarket transactions of similar assets, covering the expected period of realisation andconsidering current market conditions. It is tested by reference to the proportionof legally completed plots in the period compared to the total plots which areexpected to receive satisfactory planning permission in the remaining acquiredstrategic land holdings, taking account of historic experience and market conditionsand comparing the carrying value of the assets with their recoverable amounts.Anyimpairment loss is recognised immediately in the income statement.

Goodwill arising on acquisitions before the date of transition to IFRSs has beenretained at the previous UK GAAP amounts subject to being tested for impairmentat that date.The allocation of this goodwill for impairment testing is disclosed innote 14. Goodwill written off to reserves under UK GAAP prior to 1998 has notbeen reinstated and is not included in determining any subsequent profit or losson disposal.

Brand intangibles

Internally generated brands are not held on the balance sheet.The Group carriesassets on the balance sheet only for brands that have been acquired.Acquired brandvalues are calculated based on discounted cash flows. No amortisation is charged onbrand intangibles, as the Group believes that the value of the brands is maintainedindefinitely.The factors that result in the durability of the brands capitalised is thatthere are no material legal, regulatory, contractual, competitive, economic or otherfactors that limit the useful life of these intangibles.The acquired brands are testedannually for impairment by performing a value in use calculation, using a discountfactor based on the Group’s pre-tax weighted average cost of capital.

Where a brand’s life is not deemed to be indefinite it is written off over its expecteduseful life on a straight-line basis.

Revenue recognition

Revenue represents the total sales value of legally completed properties, excludingpart exchange property resales and land sales (which are included within costof sales and other operating income respectively).

Other operating income

Other operating income comprises profits from the sale of land holdings, freeholdreversions, rent receivable, and other incidental sundry income.

Operating expenses

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

Borrowing costs

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

Dividends

Dividends are recorded in the Group’s financial statements in the period in whichthey are approved or paid.

Share-based payment

Charges for employee services received in exchange for share-based payment havebeen made for all options/awards granted after 7 November 2002 in accordancewith IFRS 2 (Share-based Payment), to spread the fair value of the grant overthe vesting period.

The fair value of such options has been calculated using the Binomial OptionPricing Model, based upon publicly available market data at the point of grant.

Share-based payments are charged wholly in the ultimate Parent Company,which makes internal management recharges to subsidiaries for these servicesas appropriate.

Notes to the Financial StatementsFor the year ended 31 December 2007

59 Persimmon PlcNotes to the financial statements

2 Principal accounting policies (continued)Retirement benefit costs

The Group operates two defined benefit pension schemes, which are closed to newmembers. It also has a defined contribution scheme for employees who are notmembers of a defined benefit scheme.The liability in respect of the defined benefitschemes is the present value of the defined benefit obligation at the balance sheetdate, less the fair value of the scheme assets, together with adjustments for actuarialgains and losses. Further details of the schemes and the valuation methods appliedmay be found in note 30.

Expected scheme gains and losses are recognised via operating expenses in theincome statement and actuarial gains and losses via the statement of recognisedincome and expense.

Subsidiary entities bear a charge for current employees based upon their currentpensionable salaries. Differences between this charge and the current service cost areborne by the ultimate Parent Company as the legal sponsor, as are all experiencegains and losses.

Payments to the defined contribution scheme are accounted for on an accruals basis.Once the payments have been made, the Group has no further payment obligations.

Taxation

Income tax on the profit for the year comprises current and deferred tax.Income tax is recognised in the income statement except to the extent thatit relates to items recognised directly in equity, in which case it is recognisedin equity.

Current tax is the expected tax payable on the taxable income for the year, usingenacted or substantially enacted tax rates, and adjusted for any tax payable in respectof previous years.

Deferred tax is provided using the balance sheet liability method, providing fortemporary differences between the carrying amounts of assets and liabilitiesfor financial reporting purposes and the amounts used for taxation purposes.The following temporary differences are not provided for: goodwill, the initialrecognition of assets or liabilities that affect neither accounting or taxable profit, anddifferences relating to investment in subsidiaries to the extent that they will probablynot reverse in the foreseeable future.The amount of deferred tax provided is basedon the carrying amount of assets and liabilities, using the prevailing tax rates.

Where the deferred tax asset recognised in respect of share-based payments wouldgive rise to a credit in excess of the related accounting charge at the prevailing taxrate the excess is recognised directly in equity.

A deferred tax asset is recognised only to the extent that it is probable that futuretaxable profits will be available against which the asset can be utilised. Deferred taxassets are reviewed at each balance sheet date and reduced to the extent that it is nolonger probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset when there is a legally enforceable rightto set off current tax assets against current tax liabilities when the Group intends tosettle its current tax assets and liabilities on a net basis.

Leases

Assets financed by means of a finance lease are treated as assets of the Group at theirfair value or, if lower, at the present value of the minimum lease payments, eachdetermined at the inception of the lease.The corresponding liability to the leasingcompany is included as an obligation under finance leases. Depreciation on suchassets is charged to the income statement, in accordance with the stated accountingpolicy, over the shorter of the lease term or the asset life.The finance element ofpayments to leasing companies are calculated so as to achieve a constant rate ofinterest on the remaining balance over the lease term, and charged to the incomestatement accordingly.

Amounts payable under operating leases are charged to work in progress oroperating expenses on a straight line accruals basis over the lease term.

Property, plant and equipment

Depreciation on property, plant and equipment is provided using the straight linemethod to write off the cost less any estimated residual value, over the estimateduseful 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

Interest in subsidiary undertakings is valued at cost less impairment. Otherinvestments are stated at fair value.

Inventories

Inventories are stated at the lower of cost and net realisable value. Land includesundeveloped land and land under development.Work in progress comprises directmaterials, labour costs, site overheads, associated professional charges and otherattributable overheads.

Jointly controlled entities

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

Trade and other receivables

Trade and other receivables are held at cost less any impairment in realisable value.

Expenditure relating to forward land, including options and fees, is held within tradeand other receivables until the option is exercised and the land acquired followingthe securing of planning permission at which time the amount is transferred toinventories. If the option expires or the Directors no longer consider it likely thatthe option will 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 manage financial risk.Interest charges are stated after taking account of these swaps. Certain financialliabilities are held in foreign currencies.These are translated at prevailingexchange rates.

The Group has also entered into cross currency hedges to mitigate exposure to bothforeign currency and interest rates on these loans. Cash flow hedging instrumentsare held at fair value in the balance sheet.The effective portion of gains and losseson these instruments are taken to the hedge reserve until realised. On realisation(settlement of interest) such gains and losses are recognised in the income statement.

Fair value hedging instruments are held at fair value in the balance sheet with gainsand losses recognised through the income statement.These are offset against gainsand losses on the hedged item insofar as the hedges are effective.

Where the Company enters into financial guarantee contracts to guarantee theindebtedness of other companies within the Group, the Company considers these tobe insurance arrangements, and accounts for them as such. In this respect, the Companytreats the guarantee contract as a contingent liability until such time as it becomesprobable that the Company will be required to make a payment under the guarantee.

Trade and other payables

Trade payables on normal terms are not interest bearing and are stated at theirnominal value.Trade payables on extended terms, particularly in respect of landpurchases, are recorded at their fair value.

Deposits

New property deposits and on account contract receipts are held within currenttrade and other payables until the legal completion of the related property orcancellation of the sale.


2 Principal accounting policies (continued)Cash and cash equivalents

Cash and cash equivalents are defined as cash balances in hand and in the bank(including short term cash deposits).The Group routinely utilises short term bankoverdraft facilities, which are repayable on demand, as an integral part of its cashmanagement policy.As such these are included as a component of net cash and cashequivalents within the cash flow statement. Offset arrangements across Groupbusinesses have been applied to arrive at the cash and overdraft figures.

Interest bearing borrowings

Interest bearing borrowings are carried at amortised cost unless hedged using fairvalue hedges.Those interest bearing borrowings hedged using fair value hedges arecarried at fair value determined with reference to discounted risk-adjusted expectedfuture cash flows and application of current foreign market exchange rates.

Dividends

Dividends receivable from subsidiaries are accounted for on a cash basis, onceapproved by the shareholders of the subsidiary companies.

Own shares held

The Group may acquire holdings in its own shares either directly or via employeebenefit trusts.The acquisition cost of such shares (including associated purchasecosts) is treated as a deduction from retained earnings. Such shares may be used insatisfaction of employee options or rights, in which case the cost of such shares isreversed from the profit reserves on a ‘first in first out’ basis.

3 Critical accounting judgements and key sources ofestimation uncertainty

In applying the Group’s accounting policies the Directors have made no individualjudgements that have a significant impact upon the financial statements, exceptingthose involving estimation, which are dealt with below

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

Goodwill

The impairment testing of goodwill is substantially dependent upon the ability ofthe Group to successfully progress its strategic land holdings.The assumptions onwhich this estimate is based may be undermined by any significant changes in thecurrent planning regime.

Brand intangibles

The intangible brand assets have been assessed against the discounted cash flowsarising.These are based upon estimated returns from the related businesses, whichmay be impacted by various factors, most notably Government social housing policy.

Work in progress

Valuations which include an estimation of costs to complete and remainingrevenues, are carried out at regular intervals throughout the year, during which sitedevelopment costs are allocated between units built in the current year and those tobe built in future years.These assessments include a degree of inherent uncertainty.

Pensions

The Directors have employed the services of a qualified, independent actuary inassessing pension liabilities. However, they recognise that final liabilities and assetreturns may differ from actuarial estimates and therefore the pension liability maydiffer from that included in the financial statements.

4 RestatementIn order to enhance clarity for the readers of these financial statements a numberof disclosure items have been restated, none of which have had an impact on grossprofit, profit from operations or net assets.These changes comprise:

• Other operating income is separately disclosed from operating expenses onthe face of the income statement. Other operating income for the year ended31 December 2007 is £40.1m (2006: £29.6m).

• Land option payments at 31 December 2007 of £77.5m (2006: £69.8m) areseparately disclosed in trade and other receivables.

• New property deposits and on account contract receipts previously classifiedas a reduction in inventories are now disclosed within current trade and otherpayables following the principles applicable to deferred income. Deposits receivedand on account contract receipts at 31 December 2007 amounted to £45.0m(2006: £49.1m).

• During the year certain hedging instruments previously designated cash flowhedges have been redesignated fair value hedges from their inception. Comparativebalances for the change in fair value of these hedges have not been restated as theamounts are not considered material and result from a review of hedgingarrangements in the current period.

• The own share reserve of £5.1m at 31 December 2006 has been reclassified as adeduction against retained earnings.

5 Principal activitiesThe Group has only one class of business which is house building and it isundertaken within England,Wales and Scotland.


6 Key management remunerationKey management personnel, as disclosed under IAS 24 (Related Party Disclosures), has been identified as the Board and other senior operational management.Detailed disclosures of individual remuneration, pension entitlements and share options, for those Directors who served during the year, are given in the RemunerationReport on pages 42 to 47. Summary key management remuneration is as follows:

2007 2006£m £m

Short-term employee benefits 6.9 6.5

Post-employment benefits 0.6 0.4

Other long-term benefits 0.3 1.7

Share-based payments 4.1 3.5

11.9 12.1

No termination benefits were paid to key management personnel.

7 EmployeesGroup

The average monthly number of persons (including executive Directors) employed by the Group during the year was 5,501 (2006: 5,349).

2007 2006£m £m

Staff costs (for the above persons)

Wages and salaries 170.3 161.9

Social security costs 17.2 16.3

Pensions charge 7.7 2.3


201.2 185.8

The 2006 pensions charge includes a non-recurring credit of £5.5m in relation to the impact of introducing an allowance for cash commutation of pensions which hasreduced the past service liabilities of the Persimmon Plc Pension and Life Assurance Scheme (note 30).

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

Company

The average monthly number of persons (including executive Directors) employed by the Company during the year was 223 (2006: 200).

2007 2006£m £m

Staff costs (for the above persons)

Wages and salaries 18.5 16.6

Social security costs 2.4 2.2

Pensions credit (0.8) (3.3)


26.1 20.8


8 Net finance costs2006

2007 £m£m restated

Recognised in income statement

Other interest receivable 1.9 0.5

Finance income 1.9 0.5

Interest expense on financial liabilities 63.2 59.6

Imputed interest on deferred land payables 6.4 6.4

Change in the fair value of cash flow hedges transferred from equity 2.4 4.7

Interest expense on financial liabilities 72.0 70.7

Other interest expense 2.1 0.4

Finance cost 74.1 71.1

Net finance cost 72.2 70.6

Recognised in equity

Change in the fair value of cash flow hedges transferred to income statement (2.4) (4.7)

Effective changes in fair value of cash flow hedges 3.9 (2.3)

Redesignation of cash flow hedges as fair value hedges 10.4 –

11.9 (7.0)

All amounts recognised in equity have been taken to the hedge reserve (note 24).

On 1 January 2007 those hedging instruments which hedged forecast overseas fixed interest and loan principal transactions to floating rate sterling transactions wereredesignated from cash flow hedges to fair value hedges.The cumulative movement in the fair value of these cash flow hedges up to the date of redesignation was £10.4m.During the year £13.2m of gains on financial instruments held at fair value were recognised. £13.2m of losses on fair value hedges were also recognised.These gains/losseswere not related to credit risk assessments.

There was no hedging ineffectiveness in the period.

9 Profit from operations2007 2006£m £m

Profit from operations is stated after charging/(crediting):

Staff costs (note 7) 201.2 185.8

Reorganisation costs – 15.4

Profit on sale of land holdings (31.0) (19.6)

Rent receivable (1.6) (2.6)

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

Depreciation:

– owned assets 8.8 8.6

– assets held under finance leases 1.0 1.0


Impairment of intangible assets 2.4 –

Operating lease charges 11.7 12.7

The value of inventories expensed in 2007 and included in the cost of sales was £2,163.6m (2006: £2,280.9m).


9 Profit from operations (continued)

Amounts receivable by auditors and their associates in respect of:

2007 2006£’000 £’000

Audit of financial statements pursuant to legislation 240 219

Tax services 293 189

Corporate finance services – 391

Other services 23 24

556 823

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

Fees to major firms of accountants other than KPMG Audit Plc and its affiliated entities for non-audit services amounted to £84,834 (2006: £50,600).

10 Income tax expense2007 2006£m £m

Current tax expense:

UK corporation tax 181.5 174.9

Adjustments in respect of prior years (11.0) (7.5)

170.5 167.4

Deferred tax expense (note 22):

Origination and reversal of temporary differences (1.8) 3.2

Adjustments in respect of prior years 0.5 (0.3)

(1.3) 2.9

Total income tax expense in income statement 169.2 170.3

Reconciliation of effective tax rate

2007 2007 2006 2006% £m % £m

Profit before tax 582.7 566.7

Tax calculated at UK corporation tax rate 30.0 174.8 30.0 170.0

Accounting base cost not deductible for tax purposes 0.2 1.3 0.6 3.4

Goodwill impairment 0.1 0.7 – –

Expenditure not allowable for tax purposes 0.5 2.9 0.8 4.7

Adjustments in respect of prior years (1.8) (10.5) (1.4) (7.8)

Effective tax rate and tax expense for the year 29.0 169.2 30.0 170.3

Factors affecting future tax charge

The UK corporation tax rate changes to 28% from April 2008.The change has had no material effect on the tax charge for the year.A charge of £1.4m has been taken toreserves during the period in respect of this change in rates.


10 Income tax expense (continued)

Deferred tax recognised directly in equity

2007 2006£m £m

Relating to equity-settled transactions 3.2 (0.4)

Relating to actuarial gains/(losses) on pension schemes 12.0 (1.4)

Relating to hedged senior loan notes 3.6 (2.1)

18.8 (3.9)

11 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 financial statements.The Parent Company’s profit for the financial year was £17.7m (2006: £39.6m).

12 Dividends2007 2006£m £m

Amounts recognised as distributions to equity holders in the period:

2006 final dividend paid of 32.7p (2005: 19.0p) 97.7 55.9

2007 interim dividend paid of 18.5p (2006: 13.8p) 55.9 40.8

153.6 96.7

2007 final dividend proposed of 32.7p per share (2006: 32.7p) 98.1 97.7

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 24 April 2008 and therefore, in accordance with IAS 10, has not beenincluded as a liability in these financial statements.

Under the scrip dividend scheme, £39.5m of the 2006 final dividend (2005 final: £15.8m) and £nil of the 2007 interim dividend (2006 interim: £21.3m) were settled byway of shares.These amounts have been credited to retained earnings (note 24).The scrip dividend scheme ceased after payment of the 2006 final dividend and has beenreplaced by a Dividend Reinvestment Plan (DRIP).

13 Earnings per shareBasic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during theyear, excluding those: held in the Employee Share Ownership Trust, the Employee Benefit Trust (see note 30), 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 potentially dilutive ordinary shares from thestart of the accounting period.The Company has only one category of potentially dilutive ordinary shares: those share options and awards granted to directors andemployees where the exercise price is less than the average market price of the Company’s ordinary shares during the year. Diluted earnings per share is calculated bydividing earnings by the diluted weighted average number of shares.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

Weighted Weightedaverage average

number of number ofEarnings ordinary Earnings ordinary

2007 shares 2006 shares£m 2007 £m 2006

For basic earnings per share 413.5 300,673,519 396.4 296,155,856

Options and awards – 1,539,446 – 1,762,783

For diluted earnings per share 413.5 302,212,965 396.4 297,918,639


14 Intangible assetsGoodwill Brand Know how Total

Group £m £m £m £m

Cost

At 1 January 2006 182.0 – – 182.0

On acquisition of subsidiary 226.8 60.0 1.9 288.7

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

Accumulated impairment losses/amortisation

At 1 January 2006 – – – –

Impairment losses for the year – – – –

Amortisation charge for the year – – 0.3 0.3

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 31 December 2007 2.4 – 0.5 2.9

Carrying amount

At 31 December 2007 406.4 60.0 1.4 467.8

At 31 December 2006 408.8 60.0 1.6 470.4

Goodwill brought forward of £182.0m arose on acquisitions before the date of transition to IFRSs and is retained at the previous UK GAAP amounts, subject to beingtested for impairment at that date. £50m of this amount (2006: £50m) represents the brand value of Charles Church, acquired with 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 is allocated to acquired strategicland 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 calculations are those regarding discountand 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 for four years to form the basis of theGroup’s five year business plan.The growth rates therein vary between nil and 2%.After this period, the growth rates applied to the cash flow forecasts are no more than2% and do not exceed the long term average growth rates for the industry. Management used pre-tax discount factors between 7.5% and 9.5% over the forecast period.

The goodwill allocated to acquired strategic land holdings is further tested by reference to the proportion of legally completed plots in the period compared to the totalplots which are expected to receive satisfactory planning permission in the remaining strategic land holdings, taking account of historic experience and market conditions.The effect of testing goodwill for impairment in the manner set out is that the goodwill will be completely impaired once the final plot, that management expects toreceive a satisfactory planning permission, is sold.

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

TrademarksCompany £m

Cost

At 1 January 2006, 1 January 2007 and 31 December 2007 5.0

Amortisation

At 1 January 2006 0.5

Charge for the year 0.3

At 1 January 2007 0.8

Charge for the year 0.2

At 31 December 2007 1.0

Carrying amount




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


Cost

At 1 January 2006 18.8 30.9 9.6 59.3

Additions 3.2 7.3 1.0 11.5

On acquisition of subsidiary 5.7 10.2 0.5 16.4

Disposals (0.9) (4.6) (0.2) (5.7)

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 31 December 2007 25.5 49.6 11.7 86.8

Accumulated depreciation

At 1 January 2006 0.7 19.3 6.8 26.8

Charge for the year 0.5 7.4 1.7 9.6

Disposals (0.1) (3.6) (0.1) (3.8)

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 31 December 2007 1.1 28.3 9.6 39.0

Carrying amount

At 31 December 2007 24.4 21.3 2.1 47.8

At 31 December 2006 25.7 20.7 2.5 48.9

Assets held under finance lease:

Carrying amount at 31 December 2007 – 3.2 – 3.2



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

Company £m £m £m £m

Cost

At 1 January 2006 1.9 0.9 3.2 6.0

Additions 0.3 1.0 0.2 1.5

Disposals – (0.6) – (0.6)

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 31 December 2007 2.2 1.4 3.7 7.3

Accumulated depreciation

At 1 January 2006 0.3 0.4 2.2 2.9

Charge for the year – 0.2 0.5 0.7

Disposals – (0.4) – (0.4)

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 31 December 2007 0.3 0.4 3.1 3.8

Carrying amount

At 31 December 2007 1.9 1.0 0.6 3.5

At 31 December 2006 1.9 1.1 0.7 3.7

Assets held under finance lease:




16 InvestmentsInvestments

in jointlycontrolled

Investments entities TotalGroup £m £m £m

Cost

At 1 January 2006 169.1 – 169.1

On acquisition of subsidiary (169.1) 3.1 (166.0)

Share of results of jointly controlled entities – 0.7 0.7

Funding loans repaid to Group – (1.0) (1.0)

At 31 December 2006 – 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

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:

2007 2006£m £m

Non-current assets 0.5 0.5

Current assets 5.1 4.8

Current liabilities (2.4) (2.5)

Net assets of jointly controlled entities 3.2 2.8

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

2007 2006£m £m

Income 5.1 6.2

Expenses (4.0) (5.1)

1.1 1.1

Tax (0.1) (0.4)

Share of results of jointly controlled entities 1.0 0.7


16 Investments (continued)Interest insubsidiary

Investments undertakings TotalCompany £m £m £m

Cost

At 1 January 2006 169.1 1,758.0 1,927.1

On acquisition of subsidiary (169.1) 659.9 490.8

Addition to investments in existing subsidiaries – 848.9 848.9

At 31 December 2006 – 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

Details of Group undertakings are set out in note 31.

17 InventoriesGroup Group Company Company

2007 2006 2007 2006£m £m £m £m

Restated

Land 2,346.1 2,157.5 – –

Work in progress 814.8 651.8 – 0.2

Part exchange properties 146.9 68.0 – –

Showhouses 78.8 82.6 – –

3,386.6 2,959.9 – 0.2

18 Trade and other receivablesGroup Group Company Company

2007 2006 2007 2006£m £m £m £m

Restated

Non-current receivables

Other receivables 17.2 11.5 – –

Current receivables

Trade receivables 63.7 58.2 – –

Land options 77.5 69.8 – –

Other receivables 14.4 25.5 2.9 14.4

Amounts owed by Group undertakings – – 244.0 548.2

Other prepayments and accrued income 24.6 25.2 12.7 13.6

180.2 178.7 259.6 576.2


19 BorrowingsGroup Group Company Company

2007 2006 2007 2006£m £m £m £m

Non-current borrowings

US, UK and EU senior loan notes 450.7 509.1 268.5 272.1

Syndicated loan 75.0 – 75.0 –

Finance lease obligations 1.8 1.9 0.6 0.7

527.5 511.0 344.1 272.8

Current borrowings

Bank overdrafts (note 26) 50.9 3.0 67.4 76.6

US and UK senior loan notes 73.3 48.8 13.4 13.1

Other loan notes 5.3 17.8 5.3 6.6

Finance lease obligations 1.4 1.0 0.4 0.3

130.9 70.6 86.5 96.6

Detailed disclosure of the Group’s usage of financial instruments is included in note 21.

Excepting finance leases all borrowings are unsecured.The carrying value of borrowings equates to the face value of borrowings with the exception of finance leases.The repayment terms of borrowings are as follows:

Nominal Year of 2007 2006Currency interest rate maturity £m £m

Bank overdrafts GBP Base +1% 2008 50.9 3.0

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

UK senior loan notes GBP 5.09%-7.58% 2008-2021 77.6 103.8

US senior loan notes USD 5.10%-8.28% 2008-2016 442.7 450.7

EU senior loan notes EUR 3.77% 2011 3.7 3.4

Other loan notes GBP LIBOR – 0.5% 2011 5.3 17.8

Finance lease obligations GBP 7.00%-9.00% 2008-2011 3.5 3.2

Face value of borrowings 658.7 581.9

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

Carrying value of borrowings 658.4 581.6

Hedges have been taken out against all foreign currency denominated borrowings to hedge all principal payments to Sterling and to hedge foreign currency forwardinterest payments into Sterling payments at either fixed rates or rates linked to UK LIBOR.These hedges therefore form both a hedge of foreign exchange rate andinterest rate risk.Additional data on the maturity of financial liabilities and effective interest rates after consideration of these hedges is found in note 21.

Finance lease obligations – total minimum lease payments:

Group Group Company Company2007 2006 2007 2006£m £m £m £m

Within one year 1.5 1.1 0.5 0.4

In the second to fifth years inclusive 2.0 2.1 0.6 0.7

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

Present value of finance lease obligations 3.2 2.9 1.0 1.0

There are no finance lease obligations in excess of five years (2006: none).


20 Other liabilitiesGroup Group Company Company

2007 2006 2007 2006£m £m £m £m


Land payables 89.5 93.0 – –

Other payables 2.9 3.8 2.2 3.0

92.4 96.8 2.2 3.0

Group Group Company Company2007 2006 2007 2006£m £m £m £m

Restated

Current liabilities

Trade payables 306.2 263.1 2.2 1.9

Land payables 230.0 226.8 – –

Amounts owed to Group undertakings – – 2,757.4 2,528.2

Social security and other taxes 7.6 7.7 2.1 1.9

Deposits and on account contract receipts 45.0 49.1 – –

Other payables 35.6 40.5 9.5 10.2

Accrued expenses 124.6 119.2 16.2 17.0

749.0 706.4 2,787.4 2,559.2

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

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

– Market risk

– Liquidity risk

– Credit risk

This note presents basic information regarding the Group’s exposure to these risks and the Group’s objectives, strategy and processes for measuring and managingexposure to these. 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 which has the delegated taskof overseeing the Board’s responsibility with respect to risk and internal control.The Risk Committee reports to the Audit 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 annual assessment of the risks facedby the Group.This assessment is used to drive a risk focused programme of work aimed to improve business processes and increase internal control effectiveness.

Further discussion of the role of the Risk Committee and Group Risk function may be found within the Corporate Governance report on page 49.

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 its financial instruments. It alsoincorporates the effect of the overall UK housing market on the Group.The Group’s objective in market risk management is to minimize its exposures to fluctuationswithin 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 suchtransactions only as part of periodic wider refinancing undertakings to take advantage of the mature private placement markets in other countries (notably the USA) andonly with the approval of the Board of Directors.The Group applies hedge accounting to these arrangements in order to minimise profit and loss volatility.


21 Financial risk management (continued)Currency risk

The Group’s currency risk principally resides in senior loan notes issued in US Dollars and Euros to institutional investors.The Group has entered into hedge arrangementsfor all such loan notes swapping them into Sterling on issue.These hedges match the contractual maturity of all principal payments and also match foreign currencycontractual interest payment maturities, swapping these to either fixed Sterling payments (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 floating rate Sterling denominated loan.

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

The Group has no other significant currency exposures.

The following exchange rates applied during the year:

2007 2006

Average Year end Average Year endrate spot rate rate spot rate

US Dollar 2.002 2.004 1.840 1.959

Euro 1.462 1.362 1.467 1.484

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

2007 2006

USD Euro USD Euro$m bm $m am

Investments – 3.7 – 2.2

Senior loan notes (838.4) (5.0) (882.6) (5.0)

Forward exchange contracts 838.4 5.0 882.6 5.0

Net exposure – 3.7 – 2.2

Sensitivity analysis

The hedging arrangements in place over borrowings are such that the Group’s profit will be unaffected by any reasonably expected variation in exchange rate atthe reporting date (2006: nil).

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 no formal target for a ratio offixed:floating funding.The responsibility for setting the level of fixed rate debt lies with the Board of Directors and is continually reviewed in the light of economic dataprovided 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 as part of the hedgingarrangements put in place for foreign currency denominated senior loan notes detailed under currency risk above.

A number of derivative instruments were acquired with Westbury Plc in 2006.These instruments were not designated as hedges.All such instruments were cancelled in2006.The interest expense associated with these instruments is nil (2006: £0.2m).

It is generally accepted that UK house prices are influenced by the prevailing interest rate, insofar as this in turn dictates the availability and cost of borrowings for housepurchasers.The economic link between these two factors cannot be absolutely determined nor reliably modelled however, and therefore this has been excluded from thissensitivity analysis.

Sensitivity analysis

The Group’s hedging arrangements are such that the Group’s profit would be unaffected by any reasonably expected variation of the interest rate at the balance sheetdate (2006: nil).


21 Financial risk management (continued)Market risk

The Group is fundamentally affected by the level of UK house prices.These in turn are affected by factors such as employment levels, interest rates, supply of land withplanning and consumer confidence.

Whilst it is not possible for the Group to mitigate such risks on a national macroeconomic basis the Group does continually monitor its geographical spread within theUK, seeking to balance its investment in areas offering the best immediate returns with a long term spread of its operations throughout the UK to minimise the effect oflocal microeconomic fluctuations.

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’s strategy to managing liquidityrisk is to ensure that the Group has sufficient liquid funds to meet all its potential liabilities as they fall due, including anticipated shareholder distributions.

This is true not only of normal market conditions but also of negative projections against expected outcomes, so as to avoid any risk of incurring contractual penalties ordamaging the Group’s reputation, which would in turn reduce the Group’s ability to borrow at optimal rates.

The nature of the land market in which the Group operates is such that it may, from time to time, require short notice access to significant funds to enable it to takeadvantage of large scale purchasing opportunities as and when they arise. For this purpose the Group generally maintains significant available credit lines.

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 guaranteesrelate are recognised and accounted for in accordance with our standard accounting policies.

Liquidity forecasts are produced on a daily basis, to ensure that utilisation of current facilities is optimised; a monthly basis, to ensure that covenant compliance targets andmedium-term liquidity is maintained; and a long-term projection basis, for the purpose of identifying long 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 funding against the potentially higher ratesof return offered by debt financing in order to set an efficient but stable balance appropriate to the size of the Group.

The Group operates short-term uncommitted overdraft facilities of over £160m to meet day-to-day liquidity requirements.These facilities are cancellable on request fromthe 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 sixleading 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 facilities at the reporting dateamount to £725.0m (2006: £800.0m).

These facilities are considered adequate to meet all the Group’s cash flow requirements for the foreseeable future, excepting the potential impact of extreme circumstancesthat may not be reasonably anticipated (terrorism, natural disasters etc.)


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

2007Carrying 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 50.9 50.9 50.9 – – –

Syndicated loan 75.0 88.3 4.7 4.7 78.9 –

UK senior loan notes 77.6 115.2 25.6 4.2 12.3 73.1

US senior loan notes 442.7 509.3 76.8 103.9 162.4 166.2

EU senior loan notes 3.7 4.1 0.1 0.1 3.9 –

Other loan notes 5.3 5.5 5.5 – – –

Finance lease obligations 3.2 3.5 1.5 1.4 0.6 –

Forward currency swaps 68.0 134.8 21.5 22.8 53.3 37.2

Interest bearing financial liabilities 726.4 911.6 186.6 137.1 311.4 276.5

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


Group £m £m £m £m £m £m

Bank overdrafts 3.0 3.0 3.0 – – –




Other loan notes 17.8 18.2 18.2 – – –




Trade and other payables 426.6 426.6 422.8 2.0 1.5 0.3

Land payables 319.8 323.3 228.3 75.0 20.0 –

Financial liabilities 1,429.5 1,624.7 768.8 200.1 365.3 290.5


21 Financial risk management (continued)


Company £m £m £m £m £m £m

Bank overdrafts 67.4 67.4 67.4 – – –

Syndicated loan 75.0 88.3 4.7 4.7 78.9 –








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


Company £m £m £m £m £m £m

Bank overdrafts 76.6 76.6 76.6 – – –








Trade and other payables 2,560.3 2,560.3 2,557.3 1.9 1.1 –

Financial liabilities 2,964.0 3,071.3 2,673.3 36.4 184.2 177.4

Credit risk

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

In certain specific circumstances the Group has entered into shared equity arrangements with individuals or investors (not applicable to the Company). In such cases thelong-term debt is secured upon the property concerned (the Group does not recognise collateral rights as a separate asset, nor does it have rights to trade such collateral).


21 Financial risk management (continued)The maximum total credit risk is as follows:

2007 2006Group £m £m

Loans and receivables 95.3 95.2

Cash and cash equivalents 2.1 18.9

97.4 114.1

Company

Loans and receivables (including intercompany balances) 246.9 562.6

Cash and cash equivalents – 0.5

246.9 563.1

The maximum credit exposure of the Group to overseas parties is £0.5m (2006: £0.9m) (Company nil (2006: nil)).The Group’s credit risk is widely distributed.The maximum credit risk should any single party fail to perform is £4.6m (2006: £4.6m) (Company £114.7m (2006: £310.9m) being a subsidiary debtor).This Groupdebtor is secured upon property.The Directors consider these financial assets to be of high quality and the credit risk is assessed as low.

Fair value

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

2007 2006

Fair Carrying Fair Carryingvalue value value value


Trade and other receivables 95.3 95.3 95.2 95.2

Cash and cash equivalents 2.1 2.1 18.9 18.9

Bank overdrafts (50.9) (50.9) (3.0) (3.0)

Syndicated loan (75.0) (75.0) – –

UK senior loan notes (81.3) (77.6) (107.8) (103.8)

US senior loan notes (450.9) (442.7) (466.9) (450.7)

EU senior loan notes (3.7) (3.7) (3.4) (3.4)

Other loan notes (5.3) (5.3) (17.8) (17.8)

Finance lease obligations (3.2) (3.2) (2.9) (2.9)

Trade and other payables (469.3) (469.3) (426.6) (426.6)

Land payables (319.5) (319.5) (319.8) (319.8)

Forward currency swaps (68.0) (68.0) (101.5) (101.5)

(1,429.7) (1,417.8) (1,335.6) (1,315.4)

Unrecognised loss 11.9 20.2


21 Financial risk management (continued)2007 2006

Fair Carrying Fair Carryingvalue value value value


Trade and other receivables 246.9 246.9 562.6 562.6

Cash and cash equivalents – – 0.5 0.5

Bank overdrafts (67.4) (67.4) (76.6) (76.6)

Syndicated loan (75.0) (75.0) – –

UK senior loan notes (57.7) (54.6) (58.4) (55.8)

US senior loan notes (223.6) (223.6) (236.0) (226.0)

EU senior loan notes (3.7) (3.7) (3.4) (3.4)

Other loan notes (5.3) (5.3) (6.6) (6.6)

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

Trade and other payables (2,787.5) (2,787.5) (2,560.3) (2,560.3)

Forward currency swaps (18.6) (18.6) (34.3) (34.3)

(2,992.9) (2,989.8) (2,413.5) (2,400.9)

Unrecognised loss 3.1 12.6

Income and expense in relation to financial instruments is disclosed in note 8.

Financial assets and liabilities by category:

Group Company

2007 2006 2007 2006£m £m £m £m

Loans and receivables 95.3 95.2 246.9 562.6

Cash and cash equivalents 2.1 18.9 – 0.5

Financial liabilities at fair value (741.9) (424.7) (245.9) (37.7)

Financial liabilities at amortised cost (773.3) (1,004.8) (2,990.8) (2,926.3)

(1,417.8) (1,315.4) (2,989.8) (2,400.9)

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

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 effectively swap fixed US Dollar/Eurointerest payments for floating Sterling payments linked to UK LIBOR.They also provide a forward swap for all capital repayments.Thus these instruments effectively hedgeforeign exchange risk.

Other US senior loan notes are hedged via cash flow hedges.These hedge instruments effectively swap fixed US Dollar/Euro interest payments for fixed Sterling payments.They also provide a forward swap for all capital repayments.Thus these instruments effectively hedge 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 Company

2007 2006 2007 2006£m £m £m £m

Less than 1 year 8.1 6.7 – 2.7

1-2 years 1.0 9.9 – 2.8

2-5 years 17.4 48.4 – 17.9

Over 5 years – 36.5 – 10.9

Carrying value 26.5 101.5 – 34.3

There was no hedge ineffectiveness during the period.


22 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 2006 1.4 22.1 4.7 2.2 (0.3) (5.1) 25.0

Credit/(charge) to income 0.1 (3.9) 1.0 0.5 (0.9) 0.3 (2.9)

Credit to equity – 1.4 0.4 – 2.1 – 3.9

On acquisition of subsidiary – 11.5 – – 2.3 (5.5) 8.3

Other adjustments – – – – – 2.6 2.6

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 31 December 2007 1.3 17.0 2.5 2.7 (0.4) (3.7) 19.4

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

2007 2006£m £m

Deferred tax assets 51.4 62.8

Deferred tax liabilities (32.0) (25.9)

19.4 36.9

The following are the deferred tax assets and liabilities recognised by the Company and the movements thereon during the current and prior year:

Accelerated Retirement Othertax benefit Share-based temporary

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

At 1 January 2006 0.1 22.1 4.7 (1.0) 1.9 27.8

Credit/(charge) to income 0.1 (2.0) 1.0 – 0.1 (0.8)

Credit to equity – 1.4 0.4 2.0 – 3.8

Merger of Persimmon and Westbury pension schemes – 9.6 – – – 9.6

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 31 December 2007 (0.1) 17.0 2.5 – 1.9 21.3

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

2007 2006£m £m

Deferred tax assets 21.4 40.4

Deferred tax liabilities (0.1) –

21.3 40.4


23 Share capital2007 2006£m £m

Authorised

365,000,000 (2006: 365,000,000) ordinary shares of 10p each 36.5 36.5

Allotted, called up and fully paid

302,591,431 (2006: 299,236,297) ordinary shares of 10p each 30.3 29.9

The Company has one class of ordinary shares which carry no right to fixed income.All issued shares are fully paid.

The movements on share capital can be summarised as follows:

Issued shares

At 31 December 2006 299,236,297

Issued in lieu of dividends 2,838,562

Allotted in respect of the exercise of share options* 516,572

At 31 December 2007 302,591,431

* Total exercise cost £3.0m.

The Company has established an Employee Benefit Trust (EBT) to hold shares for participants of the Company’s various share schemes.The Trustee is Persimmon (ShareScheme Trustees) Limited, a subsidiary company. During 2007, the Trustee made market purchases of 250,000 shares at an average price of £12.73 and transferred 624,845shares to employees.At 31 December 2007 the trust held 224,611 shares on which dividends have been waived.The market value of these shares at 31 December 2007was £1.8m.

During the year the Company made direct market purchases of its own shares.The Company has bought 2,444,118 shares at an average price of £9.07 which it holds intreasury. Including associated purchase costs the total cost of the shares bought was £22,308,471. Dividends on these shares will be waived.At 31 December 2007 theCompany held 2,444,118 shares with a market value of £19.6m.


24 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 2006 29.5 229.2 (4.1) 0.6 281.4 1,155.4 1,692.0

Exercise of share options/share awards 0.1 4.5 (1.0) – – (1.4) 2.2

Scrip dividends 0.3 (0.3) – – – 37.1 37.1

Share option charge and taxation thereon – – – – – 8.5 8.5

Valuation of currency swaps and taxation thereon – – – (4.9) – – (4.9)

Movement in pension deficit and taxation thereon – – – – – (3.3) (3.3)

Dividends approved and paid – – – – – (96.7) (96.7)

Retained profits for the year – – – – – 396.4 396.4

Balance at 31 December 2006 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)


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

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


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


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

†Other reserve movement comprises the transfer of £3.3m from the hedge reserve to retained earnings in respect of hedges inherited on the acquisition of Westbury 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 arose prior to transition to IFRSs.


24 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 2006 29.5 229.2 (4.1) 2.3 4.6 568.3 829.8

Exercise of share options/share awards 0.1 4.5 (1.0) – – (1.4) 2.2

Scrip dividends 0.3 (0.3) – – – 37.1 37.1


Valuation of currency swaps and taxation thereon – – – (4.6) – – (4.6)

Movement in pension deficit and taxation thereon – – – – – (3.3) (3.3)



Balance at 31 December 2006 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

Own shares purchased – – – – – (22.3) (22.3)


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

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


Other reserve movementΔ – – – – – (2.7) (2.7)


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

Own shares

Own shares purchased are reconciled as follows:

Group Company£m £m

Balance at 31 December 2006 5.1 5.1

Acquired in the period 25.5 22.3

Disposed of on exercise/vesting to employees (6.6) (5.1)

Balance at 31 December 2007 24.0 22.3

*Includes £33.9m of non-distributable items (2006: £60.0m).ºThe other non-distributable reserve arose prior to transition to IFRSs.ΔOther reserve movement represents £2.7m in respect of losses on options exercised and satisfied from own shares held.


25 Reconciliation of net cash flow to net debt2007 2006

Group £m £m

(Decrease)/increase in net cash and cash equivalents (64.7) 8.2

(Increase)/decrease in debt and finance lease obligations (5.6) 10.0

(Increase)/decrease in net debt from cash flows (70.3) 18.2

Net debt acquired – (394.9)

New finance lease obligations (1.7) (1.9)

Non-cash movements 11.9 (17.4)

Increase in net debt (60.1) (396.0)

Net debt at 1 January (664.2) (268.2)

Net debt at 31 December (724.3) (664.2)

2007 2006Company £m £m

Increase/(decrease) in net cash and cash equivalents 8.7 (99.5)

Increase in debt and finance lease obligations (57.4) (230.3)

Increase in net debt from cash flows (48.7) (329.8)

New finance lease obligations (0.4) (0.8)

Non-cash movements 3.1 (6.4)

Increase in net debt (46.0) (337.0)

Net debt at 1 January (403.2) (66.2)

Net debt at 31 December (449.2) (403.2)

26 Analysis of net debtOther

non-cash2007 Cash flow movements 2006


Cash and cash equivalents 2.1 (16.8) – 18.9

Bank overdrafts (note 19) (50.9) (47.9) – (3.0)

Net cash and cash equivalents (48.8) (64.7) – 15.9

Bank loans (75.0) (75.0) – –

US and UK senior loan notes due within one year (73.3) 55.5 (80.0) (48.8)

US, UK and EU senior loan notes due after more than one year (450.7) – 58.4 (509.1)

Other loan notes due within one year (5.3) 12.5 – (17.8)

Forward currency swaps (68.0) – 33.5 (101.5)

Finance lease obligations (3.2) 1.4 (1.7) (2.9)

Net debt at 31 December (724.3) (70.3) 10.2 (664.2)


26 Analysis of net debt (continued)Other

non-cash2007 Cash flow movements 2006


Cash and cash equivalents – (0.5) – 0.5

Bank overdrafts (note 19) (67.4) 9.2 – (76.6)

Net cash and cash equivalents (67.4) 8.7 – (76.1)

Bank loans (75.0) (75.0) – –

US and UK senior loan notes due within one year (13.4) 15.9 (16.2) (13.1)

US, UK and EU senior loan notes due after more than one year (268.5) – 3.6 (272.1)

Other loan notes due within one year (5.3) 1.3 – (6.6)

Forward currency swaps (18.6) – 15.7 (34.3)

Finance lease obligations (1.0) 0.4 (0.4) (1.0)

Net debt at 31 December (449.2) (48.7) 2.7 (403.2)

Net debt is defined as cash and cash equivalents, bank overdrafts, finance lease obligations, interest bearing borrowings and related swap instruments.

27 Capital commitmentsAt 31 December 2007 there were contracted capital commitments to purchase property, plant and equipment amounting to £1.3m (2006: £0.2m) in the Groupand contracted capital commitments in the Company of £0.1m (2006: £0.1m).

28 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 bondsand guarantees amount to£375m (2006: £332m), that the possibility of cash outflow is considered minimal and no provision is required.

The Company has entered into guarantees of certain financial liabilities of related undertakings as detailed in note 32.


29 Operating leasesAt 31 December total outstanding commitments for future minimum lease payments under non-cancellable operating leases were as follows:

2007 2006Group £m £m

Expiring within one year 0.8 0.9

Expiring in the second to fifth years inclusive 10.2 7.5

Expiring after five years 21.0 26.6

32.0 35.0

Company

Expiring within one year 0.1 0.1

Expiring in the second to fifth years inclusive 0.3 0.4

Expiring after five years – –

0.4 0.5

The Group receives sundry rental income under short term leases arising from its long term land holdings.There are no minimum lease receipts as no lease is held undera non cancellable agreement.

Operating lease payments represent rentals payable by the Group for certain of its office properties and motor vehicles. Motor vehicles have an average term of 1.6 yearsto expiry. Property leases have an average term of 10.9 years to expiry.

30 Employee benefitsRetirement benefit obligation

At 31 December 2007 the Group operated three employee pension schemes, a stakeholder scheme and two defined benefit schemes.Actuarial gains and losses arerecognised in full through the statement of recognised income and expense in accordance with IAS 19 (Revised).All pension scheme costs that are recognised in theincome statement are reported as operating expenses. Expected costs in relation to current employees are charged to the relevant operating business.All other pensionscheme 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 matches employees’ own contributions totheir individual Stakeholder plans, up to 9% of basic salary depending on the length of service. Group contributions to this scheme of £1.3m (2006: £0.9m) are expensedthrough 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 new members on 30 September 2001.The assets of the Persimmon Scheme are held separately from those of the Group.An actuarial valuation of the Persimmon Scheme was carried out as at 1 January 2005by a professionally qualified actuary and adopted the projected unit method. Under the projected unit method the current service cost, as a percentage of PersimmonScheme members’ pensionable pay, will increase as the active members approach retirement. Standard 1992 mortality tables were used as a basis to calculate the futureliability.An actuarial valuation of the Persimmon Scheme as at 1 January 2008 is currently being calculated.


30 Employee benefits (continued)Prowting Scheme

On acquisition of Westbury plc the Group assumed control of the Prowting Pension Scheme (the ‘Prowting Scheme’).

The Prowting Scheme continues to operate separately. It was closed to new members prior to the acquisition.The assets of the Prowting Scheme are held separately fromthose of the Group.The most recent completed actuarial valuation of the Prowting Scheme was carried out as at 31 March 2006 by a professionally qualified actuary andadopted the projected unit method. Under the projected unit method the current service cost, as a percentage of Prowting Scheme members’ pensionable pay, will increaseas the active members approach retirement. Standard 1992 mortality tables, appropriately adjusted and applying a medium cohort effect, have been used as a basis tocalculate 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 calculated based on the followingfinancial assumptions (figures presented are an aggregation of both defined benefit schemes):

2007 2006% pa % pa

Discount rate 5.80 5.10

General pay increases 3.90 3.90

Inflation assumption 3.10 2.90

Pension increases – Limited Price Indexation 3.10 2.90

Expected return on Scheme assets:

Equities 8.5 8.5

Bonds 5.3 4.8

Property 7.5 7.5

Cash 5.5 5.2

Rate of return on assets have been determined following consideration of the likely return on such assets based on current prevailing returns, adjusted in consideration oflong-term historic performance where appropriate.

The major categories of scheme assets as a percentage of the total fair value of scheme assets are as follows:

2007 2006% %

Equities 64 71

Bonds 26 26

Property 2 2

Cash 8 1


30 Employee benefits (continued)

The amounts recognised in income are as follows:

2007 2006£m £m

Current service cost 6.7 7.1

Curtailment credit – (1.2)

Past service credit – (5.5)

Interest cost 18.3 16.4

Expected return on scheme assets (18.6) (15.5)

Total (included in staff costs) 6.4 1.3

Net actuarial (gain)/loss (36.1) 4.7

Total (gain)/loss recognised in the Statement of Recognised Income and Expense in the period (36.1) 4.7

Total defined benefit scheme (gain)/loss recognised in the period (29.7) 6.0

The 2006 pension charge includes a non-recurring credit of £5.5m in relation to the impact of introducing an allowance for cash commutation of pension which hasreduced the past service liabilities of the Persimmon plc Pension and Life Assurance Scheme.

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 gain recognised in the Statement of Recognised Income and Expense since the adoption of IAS 19 (Revised) is £12.7m (2006: £23.4m loss).

2007 2006£m £m

Expected return on scheme assets 18.6 15.5

Actuarial loss on scheme assets (1.2) (0.8)

Actual return on scheme assets 17.4 14.7

The amounts included in the balance sheet arising from the Group’s obligation in respect of its defined benefit schemes is as follows:

2007 2006£m £m

Present value of funded obligations 340.0 360.8

Fair value of scheme assets (279.3) (257.1)

Deficit in the scheme and net liability in the balance sheet 60.7 103.7

A deferred tax asset totalling £17.0m (2006: £31.1m) has been recognised on the balance sheet in relation to the net pension obligation.

Movements in the liability recognised on the balance sheet were as follows:

2007 2006£m £m

At 1 January 103.7 73.5

Acquired deficit – 38.4

Total (gain)/loss recognised in the period (29.7) 6.0

Company contributions paid in the period (13.3) (14.2)

At 31 December 60.7 103.7


30 Employee benefits (continued)

Changes in the present value of the defined benefit obligation were as follows:

2007 2006£m £m

At 1 January 360.8 238.1

Obligation assumed on acquisition – 109.7

Current service cost 6.7 7.1

Interest cost 18.3 16.4

Actuarial losses on liabilities (37.3) 3.9

Past service credit – (5.5)

Gain on curtailment – (1.2)

Contributions by members – 0.4

Benefits paid (8.5) (8.1)

At 31 December 340.0 360.8

Changes in the fair value of scheme assets were as follows:

2007 2006£m £m

At 1 January 257.1 164.6

Assets assumed on acquisition – 71.3

Expected return 18.6 15.5

Actuarial losses on assets (1.2) (0.8)

Contributions 13.3 14.6

Benefits paid (8.5) (8.1)

At 31 December 279.3 257.1

A three year history of experience adjustments is as follows:

2007 2006 2005£m £m £m

Present value of defined benefit obligation (340.0) (360.8) (238.1)

Fair value of scheme assets 279.3 257.1 164.6

Deficit in the scheme (60.7) (103.7) (73.5)

Experience adjustments on scheme liabilities – 0.8 2.4

Percentage of scheme liabilities – 0.2% 1.0%

Experience adjustments on scheme assets (1.2) (0.8) 18.1

Percentage of scheme assets 0.4% 0.3% 11.0%

The expected employer contributions to the defined benefit schemes during 2008 is £13.3m.

Post retirement life expectancy assumptions for retirement aged staff are as follows:

2007 2006Years Years

Male current pensioner 21.5 20.9

Female current pensioner 23.8 23.7

Male future pensioner 22.2 21.6

Female future pensioner 24.4 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 manyyears and it has been impractical to separately identify such assets and liabilities subsequent to the transition to IFRS.


30 Employee benefits (continued)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 accordance with IFRS 2, only costsrelating 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 the date of grant.

Options have been issued to senior management (including the executive Directors) under the Group’s various executive share option schemes, which includes twolong term incentive plans (LTIP).Vesting of options granted under the LTIP is dependent on the Group’s return on capital employed and its total shareholder return versusa comparator group of house building companies (for options granted before 2007) and versus a comparator group of the constituents of the FTSE 100 at date of grant(for options granted in 2007). 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:

2007 2006Save As You Earn Scheme Save AsYou Earn Scheme

Weighted WeightedNumber of average Number of average

shares under exercise shares under exerciseGroup and Company option price (p) option price (p)

Outstanding at the beginning of the year 1,369,381 725.4 1,471,511 543.3

Granted during the year 738,068 753.0 421,609 1,050.0

Forfeited during the year (212,508) (711.5) (141,624) (587.8)

Exercised during the year (416,647) (505.7) (382,115) (433.4)

Outstanding at the end of the year 1,478,294 803.1 1,369,381 725.4

Exercisable at the end of the year 51,431 525.0 25,732 436.0

2007 2006Executive Share Schemes Executive Share Schemes

Weighted WeightedNumber of average Number of average

shares under exercise shares under exerciseGroup and Company option price (p) option price (p)

Outstanding at the beginning of the year 308,399 362.3 634,511 348.8

Granted during the year – – 65,173 915.7

Forfeited during the year (7,639) (986.6) – –

Exercised during the year (51,006) (483.1) (391,285) (400.6)

Outstanding at the end of the year 249,754 368.6 308,399 362.3

Exercisable at the end of the year 248,282 364.9 289,797 365.3


30 Employee benefits (continued)2007 2006

Long Term Incentive Plans Long Term Incentive Plans

Number of Number ofGroup and Company shares under option shares under option

Outstanding at the beginning of the year 1,066,050 1,289,227

Granted during the year 448,597 330,916

Forfeited during the year (63,744) (39,689)

Exercised during the year (413,671) (514,404)

Outstanding at the end of the year 1,037,232 1,066,050

Exercisable at the end of the year 2,750 27,500

2007 2006Synergy Incentive Plan Synergy Incentive Plan

Number of Number ofGroup and Company shares under option shares under option

Outstanding at the beginning of the year 775,000 –

Granted during the year – 775,000

Outstanding at the end of the year 775,000 775,000

Exercisable at the end of the year – –

The weighted average share price at the date of exercise for share options exercised during the period was 1,075.1p.The options outstanding at 31 December 2007 had arange of exercise prices from zero to 1,331.0p and a weighted average remaining contractual life of 2.2 years.

The inputs into the binomial option-pricing model for options that were granted in the year were as follows:

LTIPSAYE May2007 2007

Grant date 12 October 2007 2 May 2007

Risk free interest rate 5.21% 5.56%

Exercise price 753.0p nil

Share price at dateof grant 976.0p 1,345.0p

Expected dividend yield 5.00% 4.00%

Expected life 3 years 3 years

Date of vesting 1 December 2010 2 May 2010

Expected volatility 30% 28%

Fair value of option 279.0p 1,195.0p

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 2007, the Group and Company recognised total expenses of £6.0m (2006: £5.3m) in relation to equity-settled share-based payment transactions in the incomestatement.These option charges have been credited against the retained earnings reserve.All share-based payments are expensed by the Company.The Company makesmanagement charges to its subsidiaries which include the cost of providing this benefit to their employees.


31 Details of Group undertakingsThe Directors set out below information relating to the major subsidiary undertakings of Persimmon Plc at 31 December 2007.All of these companies are registeredin England. 100% of voting rights are held by companies within the Group.A full list of subsidiary undertakings and jointly controlled entities will be annexed to theCompany’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.

32 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 thetransactions with key management personnel is provided in note 6. Detailed disclosure of the individual remuneration of Board members is included in the RemunerationReport on pages 42 to 47.There is no difference between transactions with key management personnel of the Company and the Group.

There have been no other transactions between key management personnel and the Company.

The Company has entered into transactions with its subsidiary undertakings in respect of the following: internal funding loans and provision of Group services (includingSenior Management, IT, accounting, marketing, purchasing and conveyancing services). Recharges are made to subsidiary undertakings for Group loans, based on fundingprovided, at an interest rate linked to the prevailing base rate. No recharges are made in respect of balances due to or from otherwise dormant subsidiaries. Recharges aremade for Group services based on utilisation of those services.

During the year these recharges amounted to:

2007 2006£m £m

Interest charges on intra-group funding 78.0 102.5

Group services recharges 27.0 36.7

105.0 139.2

In addition to these services the Company acts as a buying agent for certain Group purchases, such as insurance.These are recharged at cost based on utilisation by thesubsidiary undertaking.

The amount outstanding from subsidiary undertakings to the Company at 31 December 2007 totalled £244.0m (2006: £548.2m).Amounts owed to subsidiaryundertakings by the Company at 31 December 2007 totalled £2,757.4m (2006: £2,528.2m).

The Company provides the Group’s defined benefit pension scheme. Expected service costs are charged to the operating businesses at cost.There is no contractualarrangement or stated policy relating to the net defined benefit cost. Experience and actuarial gains and losses are recognised in the Company.

Certain subsidiary undertakings have entered into guarantees of external bank loans and overdrafts of the Company.The total value of such borrowings at31 December 2007 was £424.3m (2006: £285.2m).The Company has entered into guarantees over bank loans and borrowings of the subsidiary undertakings.The total value of such borrowings at 31 December 2007 was £293.0m (2006: £276.9m).

The Company has suffered no expense in respect of bad or doubtful debts of subsidiary undertakings in the year (2006: £nil).

91 Persimmon Plc

Jeff FairburnDivision Chief Executive

Keith SaundersYorkshireRegional Chairman

John CassieScotlandRegional Chairman

David JenkinsonNorth EastRegional Chairman

Corinne GillAssociate Director –Group Finance

Directory – North DivisionNorth Division Board

Persimmon HomesYorkshirePersimmon HouseFulfordYorkYO19 4FETelephone (01904) 642199Fax (01904) 656142Managing Director:Andrew Bowes

Persimmon Homes WestYorkshire3 Hepton CourtYork RoadLeeds LS9 6PWTelephone (0113) 2409726Fax (0113) 2408967Managing Director:Wayne Gradwell

Persimmon Homes SouthYorkshirePersimmon HouseDoncaster RoadKirk SandallDoncaster DN3 1QPTelephone (01302) 883141Fax (01302) 885600Managing Director: Neil Follows

Persimmon Homes North EastPersimmon HouseClasper WaySwalwellNewcastle upon TyneNE16 3BETelephone (0191) 4990011Fax (0191) 4991211Deputy Managing Director: Gerry Choat

Persimmon Homes TeessidePersimmon HouseHilton RoadAycliffe Industrial EstateNewton AycliffeCounty Durham DL5 6ENTelephone (01325) 328380Fax (01325) 328390Managing Director: Neil Foster

Persimmon Homes West ScotlandPersimmon House77 Bothwell RoadHamilton ML3 0DWTelephone (01698) 457117Fax (01698) 427122Managing Director: Douglas Law

Persimmon Partnerships ScotlandPersimmon House77 Bothwell RoadHamilton ML3 0DWTelephone (01698) 424507Fax (01698) 476488Regional Director: George Gibney

Persimmon Homes East ScotlandUnit 1Wester Inch Business ParkOld Well CourtBathgate EH48 2TQTelephone (01506) 638300Fax (01506) 638301Regional Director: Ewan Mackay

Charles Church North EastCharles Church HouseBowburn North Industrial EstateDurham RoadBowburnCounty Durham DH6 5PFTelephone (0191) 3774000Fax (0191) 3774001Managing Director: John Holder

Charles ChurchYorkshire3 Hepton CourtYork RoadLeeds LS9 6PWTelephone (0113) 2409726Fax (0113) 2408967Managing Director:Wayne Gradwell

Charles Church ScotlandUnit 2Wester Inch Business ParkOld Well CourtBathgate EH48 2TQTelephone (01506) 637650Fax (01506) 637652Managing Director: Jim Kirkpatrick

92 Persimmon PlcDirectory

David ThorntonDivision Chief Executive

David BroadbentNorth WestRegional Chairman

Richard WrightShiresRegional Chairman

David BryantGroup DevelopmentDirector and EasternRegional Chairman

Judith PotterDivision Finance Director

Directory – Central DivisionCentral Division Board

Persimmon Homes North WestPersimmon HouseStonecross ParkYew Tree WayGolborneWarringtonCheshire WA3 3JDTelephone (01942) 277277Fax (01942) 276490Managing Director:Alan Cadman

Persimmon Homes LancashirePersimmon HouseLancaster Business ParkCaton RoadLancaster LA1 3RQTelephone (01524) 542000Fax (01524) 542001Managing Director: Mark Cook

Persimmon Homes North MidlandsPersimmon HouseMeridian EastMeridian Business ParkLeicester LE19 1WZTelephone (0116) 2815600Fax (0116) 2815601Managing Director: Paul Hurst

Persimmon Homes West MidlandsVenture CourtBroadlandsWolverhamptonWest Midlands WV10 6TBTelephone (01902) 787989Fax (01902) 624333Managing Director: Dominic Harman

Persimmon Homes South MidlandsPersimmon HouseBirmingham RoadStudleyWarwickshire B80 7BGTelephone (01527) 851200Fax (01527) 851222Managing Director: Chris Walker

Persimmon Homes Midlands3 Waterside WayBedford RoadNorthampton NN4 7XDTelephone (01604) 884600Fax (01604) 884601Managing Director: Susan Blackman

Persimmon Homes East MidlandsPersimmon House19 Commerce RoadPeterborough Business ParkLynch WoodPeterborough PE2 6LRTelephone (01733) 397200Fax (01733) 397255Managing Director:Adrian Evans

Persimmon Homes ThamesValleyPersimmon HouseVanwall Business ParkMaidenheadBerkshire SL6 4UBTelephone (01628) 502800Fax (01628) 502801Managing Director:Andrew Hammond

Persimmon Homes Essex10 Collingwood RoadWithamEssex CM8 2EATelephone (01376) 518811Fax (01376) 521145Managing Director: Ian Jeffrey

Persimmon Homes AngliaPersimmon HouseColville Road WorksOulton BroadLowestoft NR33 9QSTelephone (01502) 516784Fax (01502) 561656Managing Director:Alan Hadman

Charles Church North LondonTarget House257-263 High StreetLondon ColneySt AlbansHertfordshire AL2 1HATelephone (01727) 828800Fax (01727) 828851Managing Director: John Mann

Charles Church South MidlandsCharles Church HouseJephson CourtTancred CloseLeamington Spa CV31 3RZTelephone (01926) 310000Fax (01926) 310001Deputy Managing Director: Steve Roberts

Charles Church North WestCharles Church House56-62 Middlewich RoadSandbachCheshire CW11 1HUTelephone (01270) 750085Fax (01270) 750391Managing Director: Glenn Rowson

93 Persimmon PlcDirectory

Persimmon Homes South EastPersimmon HouseBrooklands Business ParkWeybridgeSurrey KT13 OYPTelephone (01932) 350555Fax (01932) 350022Managing Director: Edward Owens

Persimmon Homes South CoastPersimmon House100 Wickham RoadFarehamHampshire PO16 7HTTelephone (01329) 514300Fax (01329) 514333Managing Director:Andrew Golawski

Persimmon Homes WessexCedar HouseRiverside BusinessVillageSwindon RoadMalmesburyWiltshire SN16 9RSTelephone (01666) 824721Fax (01666) 826152Managing Director: Steve Roche

Persimmon Homes SevernValleyGlanville HouseChurch StreetBridgwaterSomerset TA6 5ATTelephone (01278) 727170Fax (01278) 727197Managing Director: Carl Haley

Persimmon Homes WalesPersimmon HouseLlantrisant Business ParkLlantrisantMid Glamorgan CF72 8YPTelephone (01443) 223653Fax (01443) 237328Managing Director: Steve Williams

Persimmon Homes South WestMallard RoadSowton Trading EstateExeterDevon EX2 7LDTelephone (01392) 252541Fax (01392) 430195Managing Director: Simon Perks

Elvetham Heath DevelopmentsCommunity CentreThe KeyElvetham HeathFleetHampshire GU51 1HATelephone (01252) 619810Fax (01252) 619811Managing Director: Nick Scregg

Charles Church SouthernCharles Church HouseKnoll RoadCamberleySurrey GU15 3TQTelephone (01276) 808080Fax (01276) 808081Managing Director:Terry Massingham

Charles Church WesternChurchward HouseChurchward RoadYateBristol BS37 5NNTelephone (01454) 333800Fax (01454) 327123Director in Charge: Martin Ward

Charles Church Special ProjectsCharles Church HouseKnoll RoadCamberleySurrey GU15 3TQTelephone (01276) 808080Fax (01276) 808081Chairman: Brian Thomson

Charles Church Wales34-37 Lambourne CrescentCardiff Business ParkLlanishenCardiff CF14 5GGTelephone (02920) 768400Fax (02920) 761044Managing Director:Andrew Crompton

Westbury PartnershipsCentral HouseSabre CloseQuedgeleyGloucester GL2 4NZTelephone (01452) 783000Fax (01452) 783091Managing Director: Mark PlattsDirector Westbury P’ships:Ashley Lane

Space4 LtdTameside DriveCastle BromwichBirminghamB35 7AGTelephone: 0121 748 8383Fax: 0121 776 7369Managing Director: Patrick Dormon

Directory – South DivisionSouth Division Board

Nigel GreenawayDivision Chief Executive

Darren JonesSouthern Regional Chairman

Adrian MorganWestern Regional Chairman

Dewi GriffithsDivision Finance Director

94 Persimmon Plc

2007 2006 2005 2004 2003IFRS IFRS IFRS IFRS UK GAAP

Restated*

Unit sales 15,905 16,701 12,636 12,360 12,163

Revenue £3,014.9m £3,141.9m £2,285.7m £2,131.3m £1,883.0m

Average selling price £189,558 £188,129 £180,892 £172,431 £154,810

Profit from operations† £657.3m £637.3m £527.8m £498.0m £381.7m

Profit before tax† £585.1m £566.7m £495.4m £468.0m £352.5m

Basic earnings per share† 138.3p 133.8p 118.4p 113.5p 86.8p

Diluted earnings per share† 137.6p 133.1p 118.0p 112.8p 86.0p

Dividend per share 51.20p 46.50p 31.00p 27.50p 18.30p

Net assets per share 781.4p 680.2p 574.9p 486.5p 398.7p

Total shareholders’ equity £2,345.4m £2,031.3m £1,692.0m £1,405.6m £1,126.3m

Return on capital employed† 21.7% 23.1% 28.8% 30.6% 25.5%

*Comparatives for 2003 restated for impact of UITF 38 (Accounting for ESOP trusts).†2006 figures stated after reorganisation costs, all figures shown before goodwill amortisation/impairment where applicable.

The amounts disclosed for 2003 are stated under frozen UK GAAP because it is not practicable to restate amounts for periods prior to the date of transition to IFRSs.

FiveYear Record

Financial Calendar

Shares ex dividend 5 March 2008

Record date for Final dividend entitlement 7 March 2008

Interim Management Statement 24 April 2008

Final dividend payment date 25 April 2008

Trading update 8 July 2008

Announcement of Interim Results 21 August 2008

Shares ex dividend 3 September 2008

Record date for Interim dividend entitlement 5 September 2008

Interim dividend payment date 17 October 2008

Interim Management Statement 18 November 2008

95 Persimmon Plc

Number ofSize of shareholding shareholders %

1 – 5,000 11,629 90.85

5,001 – 50,000 716 5.59

50,001 – 250,000 267 2.09

250,001 and over 188 1.47

Total 12,800 100.00

Share price – year ended 31 December 2007

Price at 31 December 2007 £8.00

Lowest for year £7.491/2

Highest for year £15.43

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 2007

96 Persimmon Plc

John White Group ChairmanMike Farley Group Chief ExecutiveMike Killoran Group Finance DirectorDavid Bryant Group Development Director

Hamish Leslie Melville Non-Executive DirectorDavid Thompson Senior Independent DirectorNeil Davidson Non-Executive DirectorNicholas Wrigley Non-Executive DirectorRichard Pennycook Non-Executive Director

Directors

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 PLCNational Australia Bank LtdHBOS plcHSBC plc

Financial advisors/stockbrokersCitigroup Global Markets LimitedMerrill Lynch International

SolicitorsMayer Brown International LLP

RegistrarsComputershare Investor Services PLCPO Box 82The PavilionsBridgwater RoadBristolBS99 7NHTelephone (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 current share price.

Recruitment

Information on the careers and positions available within the Persimmon Group.

Corporate Responsibility

This section includes the Sustainability Report, our report on corporateresponsibility and the sustainability of our new homes.

Dividend Reinvestment Plan (DRIP)A Dividend Reinvestment Plan is available to shareholders.The DRIP allowsshareholders to increase their shareholding in an easy and convenient way and isadministered by Computershare Investor Services Plc.

Details of how to register for the DRIP can be obtained from Computershare.

Information on the Internet: www.persimmonhomes.com

Designed and produced by RadleyYeldar (London)

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

Where the heart isAnnual Report December 2007Where the heart isAnnual Report December 2007

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