Bellway P.l.c. · LSE:BWY
Bellway P.l.c — FY2014 Earnings Presentation
88 slides from Bellway P.l.c's earnings presentation, Oct 14, 2014
Slide 1: Results Presentation Year ended 31 July 2014
Results Presentation Year ended 31 July 2014
Slide 2: Agenda
Agenda 1. Strategic update 2. Finance review 3. Operating review 4. Current trading and outlook 5. Questions and answers 6. Appendices Results presentation 14 October 2014 - Page 2 -
Slide 3: Strategic update
Strategic update Ted Ayres Chief Executive Results presentation 14 October 2014 - Page 3 -
Slide 4: Delivering strategy
Delivering strategy Volume growth due to operational and A strong focus on Progressive dividend Growth in net asset balance sheet return on capital policy value capacity + 21.2% + 730bps + 73.3% + 11.7% No. of homes sold Return on capital Total dividend Net asset value 2013 5,652 2013 12.3% 2013 30
Slide 5: Notes
Notes Results presentation 14 October 2014 - Page 5 -
Slide 6: Ongoing strategy for growth
Ongoing strategy for growth Demand Supply Capacity Good quality land Customer demand is strong opportunities at attractive Ability to invest rates of return Increased mortgage Positivity within the planning Capacity within existing availability environment structure of 15 divisions Ability to expand
Slide 7: Notes
Notes Results presentation 14 October 2014 - Page 7 -
Slide 8: Finance review
Finance review Keith Adey Finance Director Results presentation 14 October 2014 - Page 8 -
Slide 9: Notes
Notes Results presentation 14 October 2014 - Page 9 -
Slide 10: Group results
Group results For the year ended 31 July 2014 2013 Mvt Revenue £1,486.4m £1,110.7m 33.8% Gross profit £316.4m 21.3% £203.3m 18.3% 55.6% Administrative expenses (£60.3m) (4.1%) (£52.2m) (4.7%) 15.5% Operating profit £256.1m 17.2% £151.1m 13.6% 69.5% Net finance expense (£10.2m) (£10.2m) -% Profit bef
Slide 11: Notes
Notes Results presentation 14 October 2014 - Page 11 -
Slide 12: Revenue
Revenue For the year ended 31 July 2014 2013 Mvt Homes sold 6,851 5,652 21.2% Average selling price £213,182 £193,025 10.4% Housing revenue £1,460.5m £1,091.0m 33.9% Non housing revenue £25.9m £19.7m 31.5% Total revenue £1,486.4m £1,110.7m 33.8% Results presentation 14 October 2014 - Page 12 -
Slide 13: Notes
Notes Results presentation 14 October 2014 - Page 13 -
Slide 14: Housing revenue: social mix
Housing revenue: social mix For the year ended 31 July 2014 2013 Mvt Private housing Homes sold 5,809 4,694 23.8% Average selling price £231,480 £207,322 11.7% Social housing Homes sold 1,042 958 8.8% Average selling price £111,173 £122,971 (9.6%) Results presentation 14 October 2014 - Page 14 -
Slide 15: Notes
Notes Results presentation 14 October 2014 - Page 15 -
Slide 16: Housing revenue: geographic mix
Housing revenue: geographic mix For the year ended 31 July 2014 2013 Mvt Completion analysis 2014 2013 North 53% 53% 18% 15% Homes sold 3,223 2,652 21.5% 35% 38% Average selling price £183,047 £163,534 11.9% 47% 47% South (inc. London) Revenue analysis Homes sold 3,628 3,000 20.9% 2014 2013 Average
Slide 17: Notes
Notes Results presentation 14 October 2014 - Page 17 -
Slide 18: Operating performance
Operating performance For the year ended 31 July 2014 2014 2014 2013 FY H2 H1 FY Gross profit £316.4m £177.8m £138.6m £203.3m 21.3% 22.6% 19.8% 18.3% Administrative expenses (£60.3m) (£30.9m) (£29.4m) (£52.2m) (4.1%) (3.9%) (4.2%) (4.7%) Operating profit £256.1m £146.9m £109.2m £151.1m 17.2% 18.7% 1
Slide 19: Notes
Notes Results presentation 14 October 2014 - Page 19 -
Slide 20: Finance expense
Finance expense For the year ended 31 July 2014 2013 Mvt Net bank interest payable inc. fees £2.9m £3.7m (21.6%) Non bank interest: £7.3m £6.5m 12.3% Made up of:- Land creditors / debtors – IAS 39 £5.7m £4.7m 21.3% Preference dividend £1.3m £1.9m (31.6%) Pension cost £0.4m £0.3m 33.3% Other interest
Slide 21: Notes
Notes Results presentation 14 October 2014 - Page 21 -
Slide 22: Earnings
Earnings For the year ended 31 July 2014 2013 Mvt Profit before taxation £245.9m £140.9m 74.5% Taxation (£54.5m) (£32.3m) 68.7% Effective tax rate 22.2% 23.0% Profit after taxation £191.4m £108.6m 76.2% Earnings per share 157.0p 89.3p 75.8% Earnings per share is highest achieved in the Group’s histo
Slide 23: Notes
Notes Results presentation 14 October 2014 - Page 23 -
Slide 24: Balance sheet
Balance sheet As at 31 July 2014 2013 Assets Fixed assets £18.9m £19.0m Inventory £1,822.7m £1,513.5m Shared equity £32.2m £34.5m Net cash £5.1m - Debtors £75.6m £60.4m £1,954.5m £1,627.4m Liabilities Pension deficit (£7.9m) (£9.0m) Creditors (£332.5m) (£227.8m) Land creditors (£248.0m) (£146.0m) (£
Slide 25: Notes
Notes Results presentation 14 October 2014 - Page 25 -
Slide 26: Inventory
Inventory As at 31 July 2014 2013 Mvt Owned and controlled land £1,122.4m £907.3m £215.1m Made up of:- DPP: land with detailed planning permission £875.3m £782.5m £92.8m Pipeline and strategic land £247.1m £124.8m £122.3m Work in progress £635.9m £535.0m £100.9m Showhomes £52.9m £52.8m £0.1m Part ex
Slide 27: Notes
Notes Results presentation 14 October 2014 - Page 27 -
Slide 28: Land with detailed planning permission
Land with detailed planning permission Average Plots Cost plot cost Brought forward 1 August 2013 18,991 £782.5m £41.2k Sold (6,851) (£352.1m) £51.4k 12,140 £430.4m £35.5k Net purchases 7,294 £444.9m £61.0k Carried forward 31 July 2014 19,434 £875.3m £45.0k Results presentation 14 October 2014 - Pag
Slide 29: Notes
Notes Results presentation 14 October 2014 - Page 29 -
Slide 30: Cash flow
Cash flow For the year ended 31 July £124.9m cash generated from operations 380 Average cash of £12.2m 82.8 (100.9) 330 Peak net debt of £48.9m 280 256.1 (113.1) 230 £m 180 130 (48.1) 80 (20.8) (45.1) 30 5.1 (5.8) (20) Opening net Operating Working Increase in Increase in Interest and Investing & Di
Slide 31: Notes
Notes Results presentation 14 October 2014 - Page 31 -
Slide 32: Return on capital employed
Return on capital employed RoCE is a key land assessment metric 2014 2013 RoCE on fully traded sites, Capital turn 1.1 0.9 acquired since the downturn is 25% Shared equity is limited to 2.4% of net asset value – minimal 2014 2013 drag on balance sheet RoCE 19.6% 12.3% Help to Buy has accelerated tra
Slide 33: Notes
Notes Results presentation 14 October 2014 - Page 33 -
Slide 34: Dividend
Dividend 31 July 31 July Mvt 2014 2013 Aim to:- Earnings per share 157.0p 89.3p 75.8% - Re-invest sufficient Dividend 52.0p 30.0p 73.3% earnings to generate future, sustainable growth Dividend cover 3.0 3.0 - Provide certainty of returns to shareholders £220m dividend to shareholders Dividend since
Slide 35: Notes
Notes Results presentation 14 October 2014 - Page 35 -
Slide 36: Value creation
Value creation As at 31 July Pre write downs Post write downs 1,300 2014 2013 1,200 NAV 1,118p 1,001p 1,100 Pence 1,000 900 2014 2013 800 RoE 14.9% 9.3% 700 Jul 07 Jul 08 Jul 09 Jul 10 Jul 11 Jul 12 Jul 13 Jul 14 Net a s s et val ue per s ha re Cumul a ti ve di vi dend pa i d per s ha re £176.4m pai
Slide 37: Notes
Notes Results presentation 14 October 2014 - Page 37 -
Slide 38: Operating review
Operating review Ted Ayres Chief Executive Results presentation 14 October 2014 - Page 38 -
Slide 39: Notes
Notes Results presentation 14 October 2014 - Page 39 -
Slide 40: Trading
Trading Reservations per week 14 H1 H2 FY Year ended 31 July 2014 137 159 148 Year ended 31 July 2013 97 158 128 Increase 41.2% 0.6% 15.6% Surge in reservations following introduction of Help to Buy No material impact from MMR Cancellation rates have fallen from 13.8% to 10.9% Results presentation 1
Slide 41: Notes
Notes Results presentation 14 October 2014 - Page 41 -
Slide 42: Volume growth
Volume growth Volume 215 outlets at 31 July 2014 7,000 21.2% Trading through sites faster than 6,750 expected 6,500 6,250 Expect to open 80 outlets in current 6,000 year 8.2% 5,750 5,500 6,851 6.2% 5,250 Average active outlets 7.1% 5,000 4,750 5,652 July 13 218 4.9% 4,500 5,226 4,922 July 14 222 4,2
Slide 43: Notes
Notes Results presentation 14 October 2014 - Page 43 -
Slide 44: National coverage
National coverage Focus on investing in primary locations where there is significant urban population Existing offices All 15 divisions have reported New offices increases in both revenue and profit New divisions in Manchester and Thames Valley have completed 98 and 101 homes respectively We aim to
Slide 45: Notes
Notes Results presentation 14 October 2014 - Page 45 -
Slide 46: Strong presence in London
Strong presence in London 27 active sites in London Significant imbalance between supply and demand Net pricing gains up to 10% Focus on high rise, affordable apartments outside zone 1 23 sites will be released for sale in next 12 to 24 months Results presentation 14 October 2014 - Page 46 -
Slide 47: Notes
Notes Results presentation 14 October 2014 - Page 47 -
Slide 48: Completion analysis
Completion analysis For the year ended 31 July 2014 2013 216, 3% 332, 5% 915, 16% 958, 17% 1042, 15% 2129, 31% 205, 4% 814, 14% 426, 8% 551, 8% 147, 3% 606, 9% 155, 3% 0, 0% 4% 0% 38, 1% 8, 0% 1967, 29% 1994, 34% Second time buyers Other buyers Deposit assisted Other second time buyers Unassisted fi
Slide 49: Notes
Notes Results presentation 14 October 2014 - Page 49 -
Slide 50: Production
Production Investment in work in progress to achieve growth aspirations Stock of completed units has fallen to 204 Increased build rates have placed pressure on construction costs and the supply chain Reduced availability of bricks and blocks throughout the year Working closely with major brick and
Slide 51: Notes
Notes Results presentation 14 October 2014 - Page 51 -
Slide 52: Build costs
Build costs Cost of bricks and blocks up 10% to 20% Only £450 per typical house Some minor increases in chipboard and timber products Upward pressure on subcontract trades especially in the south east Results presentation 14 October 2014 - Page 52 -
Slide 53: Notes
Notes Results presentation 14 October 2014 - Page 53 -
Slide 54: Cost control
Cost control Strong relationships with subcontractors help contain increases Cost increases mitigated by: - Reduced site overheads due to faster sales rates - Increased trade rebates Overall costs are up 3% to 5% Results presentation 14 October 2014 - Page 54 -
Slide 55: Notes
Notes Results presentation 14 October 2014 - Page 55 -
Slide 56: Land bank
Land bank As at 31 July 2014 2013 Owned and controlled plots 35,434 32,991 Made up of:- DPP: plots with detailed planning permission 19,434 18,991 Pipeline: plots pending an implementable DPP 16,000 14,000 Strategic plots > 4,500 > 4,400 Strategic plots are only those long term plots which currently
Slide 57: Notes
Notes Results presentation 14 October 2014 - Page 57 -
Slide 58: Land acquisition
Land acquisition £460m spent on land and land creditors Attractive land opportunities meet or exceed minimum hurdle rates Competition mainly from other major housebuilders Some inflationary pressure in London and the south east We remain disciplined in our approach to land buying All land in place f
Slide 59: Notes
Notes Results presentation 14 October 2014 - Page 59 -
Slide 60: Land buying: planning environment
Land buying: planning environment As at 31 July 2014 2013 Brought forward at 1 August 18,991 17,636 Already controlled: DPP obtained in the period 4,340 4,252 Bought with benefit of DPP 2,954 2,755 Total additions 7,294 7,007 Sold (6,851) (5,652) Plots with implementable DPP 19,434 18,991 Previously
Slide 61: Notes
Notes Results presentation 14 October 2014 - Page 61 -
Slide 62: Attractive land opportunities
Attractive land opportunities Pavilions 6, Tottenham Hale Scalebor Grange, Burley in Wharfedale Plot cost £49k – 21% of ASP Plot cost £65k – 30% of ASP Strong relationship with vendor and local Contracted with low initial deposit of only authority £100k Forecast margin of 23% and RoCE of 26% Forecas
Slide 63: Notes
Notes Results presentation 14 October 2014 - Page 63 -
Slide 64: Current trading and outlook
Current trading and outlook Ted Ayres Chief Executive Results presentation 14 October 2014 - Page 64 -
Slide 65: Notes
Notes Results presentation 14 October 2014 - Page 65 -
Slide 66: Current trading and orderbook
Current trading and orderbook Average weekly sales rate of 128 since 1 August – up 5% Expect sales rate to be stable Orderbook at 28 September:- – 4,435 homes – £975.4m – Value up 51.4% compared to last year Results presentation 14 October 2014 - Page 66 -
Slide 67: Notes
Notes Results presentation 14 October 2014 - Page 67 -
Slide 68: Outlook
Outlook Effective management of supply chain constraints Volume growth of 10% in current financial year Strong market conditions Operating and balance sheet capacity for growth Focus on return on capital employed Progressive dividend policy Sustainable long term returns for shareholders Results pres
Slide 69: Notes
Notes Results presentation 14 October 2014 - Page 69 -
Slide 70: Questions and answers
Questions and answers Blue Coats, Sheffield Results presentation 14 October 2014 - Page 70 -
Slide 71: Notes
Notes Results presentation 14 October 2014 - Page 71 -
Slide 72: Appendices
Appendices 1. A wide product mix 2. Sales mix 3. Order book at 31 July 4. Shared equity 5. Land creditor payments 6. Land buying 7. Owned and controlled plots 8. Land bank glossary Results presentation 14 October 2014 - Page 72 -
Slide 73: Notes
Notes Results presentation 14 October 2014 - Page 73 -
Slide 74: Appendix 1 - A wide product mix
Appendix 1 - A wide product mix For the year ended 31 July 2014 2013 Apartments 2014 Size 30% Av. Sq. feet / home 989 988 ASP / square foot £216 £195 70% 2013 30% 30% of our output is apartments ASP per square foot continues to improve 70% Houses Apartments Results presentation 14 October 2014 - Pag
Slide 75: Notes
Notes Results presentation 14 October 2014 - Page 75 -
Slide 76: Appendix - Sales mix
Appendix 2 - Sales mix For the year ended 31 July Product mix analysis 2014 2013 15% 15% 13% 17% 8% London flats represent 15% of 9% completions Focus on traditional two storey family housing 62% 61% Non-London flats 3 + bed 1 & 2 bed London flats Selling price analysis 2014 2013 10% 12% Change in p
Slide 77: Notes
Notes Results presentation 14 October 2014 - Page 77 -
Slide 78: Appendix 3 – Order book
Appendix 3 – Order book As at 31 July 2014 2013 Movement Private Social Total Private Social Total Private Social Total % % % At 1 August 2,503 1,022 3,525 1,499 1,034 2,533 67.0% (1.2%) 39.2% Reservations 6,470 1,219 7,689 5,698 946 6,644 13.5% 28.9% 15.7% Completions (5,809) (1,042) (6,851) (4,694
Slide 79: Notes
Notes Results presentation 14 October 2014 - Page 79 -
Slide 80: Appendix 4 - Shared equity
Appendix 4 - Shared equity As at 31 July 2014 2013 Number of assets owned 2,682 2,843 Book value (BV) £32.2m £34.5m Original loan (OL) £70.4m £74.9m BV / OL 46% 46% Cumulative redemptions to date (units) 479 310 Cumulative redemption proceeds as % of OL 81% 76% Book value / Net asset value 2.4% 2.8%
Slide 81: Notes
Notes Results presentation 14 October 2014 - Page 81 -
Slide 82: Appendix 5 - Land creditor payments
Appendix 5 - Land creditor payments 248.0 166.5 250 200 150 Land creditors represent only 22% of land book value £m 100 20.0 61.5 £186.5m of committed land 50 expenditure within next twelve months - Balance at H1 H2 Thereafter 31 July 2014 2014/2015 2014/2015 Due date Results presentation 14 October
Slide 83: Notes
Notes Results presentation 14 October 2014 - Page 83 -
Slide 84: Appendix 6 – Land buying
Appendix 6 – Land buying Cumulative land expenditure since downturn (£m) 1,600 1,400 1,200 1,000 Over £1.6bn expended on 800 1,616 higher margin land since 600 1,156 downturn. 856 400 551 200 301 93 0 Jul-09 Jul-10 Jul-11 Jul-12 July 13 July 14 Results presentation 14 October 2014 - Page 84 -
Slide 85: Notes
Notes Results presentation 14 October 2014 - Page 85 -
Slide 86: Appendix 7 - Owned and controlled plots
Appendix 7 - Owned and controlled plots 35,434 32,991 31,136 100% 90% Help to Buy has assisted trading 80% 45% 42% 43% on impaired sites 70% Less than 4% of owned and 60% controlled land bank represents 50% plots impaired at July 2008 and January 2009 31% 40% 38% 44% 30% 20% 15% 13% Jul 14 Jul 13 Ju
Slide 87: Notes
Notes Results presentation 14 October 2014 - Page 87 -
Slide 88: Appendix 8 – Land bank glossary
Appendix 8 – Land bank glossary Owned and controlled plots DPP: Plots owned or unconditionally contracted by the Group where there is an implementable detailed planning permission. Pipeline: Plots owned or controlled by the Group pending an implementable detailed planning permission, with developmen