Bellway P.l.c. · LSE:BWY
Bellway P.l.c — H1 2017 Earnings Presentation
82 slides from Bellway P.l.c's earnings presentation, Mar 21, 2017
Slide 1: Results Presentation: Half year ended 31 January 2017
Results Presentation Half year ended 31 January 2017
Slide 2: Agenda
Agenda 1. Highlights 2. Finance review 3. Strategic update 4. Operating review 5. Current trading and outlook 6. Questions and answers 7. Appendices Results presentation 21 March 2017 - Page 2 -
Slide 3: Highlights
Highlights Ted Ayres Chief Executive Results presentation 21 March 2017 - Page 3 -
Slide 4: Further disciplined volume growth
Further disciplined volume growth Volume Operational highlights Return on capital + 6.5% (250 bps) Investment in WIP to facilitate further growth with 9,603 plots under production. EPS up 10.2% to 163.9p Contracted to acquire 6,287 plots in the period. Interim dividend Net asset value + 10.3% + 16.6
Slide 5: Notes
Notes Results presentation 21 March 2017 - Page 5 -
Slide 6: Finance review
Finance review Keith Adey Finance Director Results presentation 21 March 2017 - Page 6 -
Slide 7: Notes
Notes Results presentation 21 March 2017 - Page 7 -
Slide 8: Operating result
Operating result For the half year ended 31 January 2017 2016 Mvt Homes sold 4,462 4,188 6.5% Average selling price £256,140 £257,280 (0.4%) Housing revenue £1,142.9m £1,077.5m 6.1% Other revenue £5.6m £7.4m (24.3%) Total revenue £1,148.5m £1,084.9m 5.9% Gross profit £296.7m 25.8% £272.4m 25.1% 70bp
Slide 9: Notes
Notes Results presentation 21 March 2017 - Page 9 -
Slide 10: Further revenue growth
Further revenue growth For the half year ended 31 January Homes sold (No.) 2017 2016 Social housing represented 21% of Private Social Total Private Social Total completions. North 1,846 371 2,217 1,704 269 1,973 South 1,697 548 2,245 1,940 275 2,215 Private ASP rose by >4% due to Group 3,543 919 4,4
Slide 11: Notes
Notes Results presentation 21 March 2017 - Page 11 -
Slide 12: Operating performance
Operating performance 2017 2016 2016 2016 Operating profit bridge H1 H1 H2 FY Gross profit £296.7m £272.4m £302.4m £574.8m 25.8% 25.1% 26.2% 25.7% Administrative (£44.1m) (£39.9m) (£42.9m) (£82.8m) expenses (3.8%) (3.7%) (3.7%) (3.7%) Operating £252.6m £232.5m £259.5m £492.0m profit 22.0% 21.4% 22.5
Slide 13: Notes
Notes Results presentation 21 March 2017 - Page 13 -
Slide 14: Earnings growth
Earnings growth For the half year ended 31 January 2017 2016 Mvt Operating profit £252.6m £232.5m 8.6% Net finance expense (£5.0m) (£5.7m) (12.3%) Share of result of JVs - (£0.2m) - Profit before tax £247.6m £226.6m 9.3% Taxation (£46.9m) (£44.5m) 5.4% Effective tax rate 18.9% 19.6% (70 bps) Profit
Slide 15: Notes
Notes Results presentation 21 March 2017 - Page 15 -
Slide 16: Balance sheet
Balance sheet As at 31 January 2017 2016 Mvt Assets Fixed assets and investment in joint ventures £48.6m £19.1m £29.5m Inventory £2,796.7m £2,334.8m £461.9m Land £1,761.7m £1,464.7m £297.0m WIP £1,035.0m £870.1m £164.9m Debtors £113.7m £76.0m £37.7m Assets held for sale - £26.2m (£26.2m) £2,959.0m £
Slide 17: Notes
Notes Results presentation 21 March 2017 - Page 17 -
Slide 18: Land bank
^ Land bank As at 31 January 2017 2016 Average Average Plots Cost Plots Cost plot cost plot cost Land with DPP Brought forward 1 August 24,879 £1,373.1m £55.2k 21,411 £1,040.9m £48.6k Net purchases 5,914 £401.9m £68.0k 5,856 £353.8m £60.4k Sold (4,462) (£244.0m) (£54.7k) (4,188) (£229.2m) £54.7k Car
Slide 19: Notes
Notes Results presentation 21 March 2017 - Page 19 -
Slide 20: Work in progress
Work in progress As at 31 January 2017 2016 Mvt Site construction £941.0m £792.0m £149.0m Show homes £71.8m £61.2m £10.6m Part exchange stock £22.2m £16.9m £5.3m Total WIP £1,035.0m £870.1m £164.9m WIP includes investment of £80m at Nine Elms. Substantial WIP investment required to Units in producti
Slide 21: Notes
Notes Results presentation 21 March 2017 - Page 21 -
Slide 22: Capital employed
Capital employed As at 31 January 2017 2016 Land creditor payment profile NAV £1,977.3m £1,694.9m Net bank debt £175.1m £58.9m Capital employed £2,152.4m £1,753.8m Land creditors £301.7m £275.7m Pension deficit £8.8m £6.1m Joint venture finance - - Goodwill - - £206.9m Adjusted capital £2,462.9m £2,
Slide 23: Notes
Notes Results presentation 21 March 2017 - Page 23 -
Slide 24: A focus on return on capital employed
A focus on return on capital employed As at 31 January Focus on RoCE when assessing land and continually review the balance sheet to 2017 2016 ensure all assets are Capital turn 1.14 1.28 generating the best possible return. 2017 2016 Increased amount invested in RoCE 25.1% 27.6% land and WIP by £24
Slide 25: Notes
Notes Results presentation 21 March 2017 - Page 25 -
Slide 26: Strong cash generation
Strong cash generation For the half year ended 31 January £209.4m generated before increasing Gearing 24% investment in land and WIP Gearing low at inclusive of <9%. land creditors. Peak debt of Average debt £236m. of £106m. £31.6m cash consumed in operations Results presentation 21 March 2017 - Pag
Slide 27: Notes
Notes Results presentation 21 March 2017 - Page 27 -
Slide 28: Investing for growth
Investing for growth H1 Growth Since the pre-recession peak in January 2007:- – Revenue is 2 times higher – Profit after tax is 2.9 times higher. Reinvestment of profits is H1 investment in land and WIP (net of exceptionals) having a compounding Revenue as a percentage of January 2007 effect on earn
Slide 29: Notes
Notes Results presentation 21 March 2017 - Page 29 -
Slide 30: Dividend
Dividend For the half year ended 31 January Retain ability to be flexible and 2017 2016 Mvt respond to changes in market conditions. Interim dividend 37.5p 34.0p 10.3% Continue to see attractive growth opportunities and expect to grow the business whilst maintaining a full year dividend Dividend per
Slide 31: Notes
Notes Results presentation 21 March 2017 - Page 31 -
Slide 32: Value creation
Value creation As at 31 January 77% return over 3 years 2017 2016 Mvt NAV 1,612p 1,383p 16.6% 2017 2016 Mvt RoE 20.9% 22.3% (140 bps) NAV at July 14 NAV growth Cumulative dividend paid Strategy for growth and progressive dividend delivering substantial value. Results presentation 21 March 2017 - Pag
Slide 33: Notes
Notes Results presentation 21 March 2017 - Page 33 -
Slide 34: Strategic update
Strategic update Ted Ayres Chief Executive Results presentation 21 March 2017 - Page 34 -
Slide 35: Notes
Notes Results presentation 21 March 2017 - Page 35 -
Slide 36: Market backdrop supports growth
Market backdrop supports growth Supply and demand (Great Britain) Mortgage rates Planning environment is positive with the Government commitment to Help to Buy in Housing Bill and White Paper providing further England until 2021. support. Good mortgage availability at low interest rates Land market
Slide 37: Notes
Notes Results presentation 21 March 2017 - Page 37 -
Slide 38: Capacity for growth
Capacity for growth 19 divisions provide capacity of c.11,000 homes per annum. Strong balance sheet and Existing trading divisions operating capacity provides ability to progress further divisional expansion and volume growth. Diverse range of product allows divisions to bid on a wide range of sites
Slide 39: Notes
Notes Results presentation 21 March 2017 - Page 39 -
Slide 40: Operating review
Operating review Ted Ayres Chief Executive Results presentation 21 March 2017 - Page 40 -
Slide 41: Notes
Notes Results presentation 21 March 2017 - Page 41 -
Slide 42: Trading review
Trading review Weekly reservation rate 2017 2016 Mvt Reservations Cancellation rate North 78 75 4.0% + 6.4% <12% South 88 81 8.6% Previously 11% Total 166 156 6.4% Reservation rate strengthened in north by new divisional offices in Darlington and Site visitors Website visitors Coventry. + 17% Flat W
Slide 43: Notes
Notes Results presentation 21 March 2017 - Page 43 -
Slide 44: Sales outlets
Sales outlets Active outlet openings New outlets drive sales. New site launches often result in significant reservations before demand moderates. Expect to open 50 outlets in H2. Expect average outlets to approach 230 for full year. 31 July 2017 Results presentation 21 March 2017 - Page 44 -
Slide 45: Notes
Notes Results presentation 21 March 2017 - Page 45 -
Slide 46: London
London Location of sites Sites Zone 1 1 Zone 2 15 Zones 3 – 6 20 London land bank Plots Under £250 psf 234 Under £500 psf 925 Help to Buy is 32% of reservations in Capital. Under £800 psf 1,284 c.20% of the Group’s capital is in London. Under £1,000 psf 429 454 plots >£800 psf including 320 at Nine
Slide 47: Notes
Notes Results presentation 21 March 2017 - Page 47 -
Slide 48: Construction costs
Construction costs Materials Some cost increases due to industrywide shortages and exchange rate movements. Mitigated through central procurement team and growing buying power. Overall material cost increases expected to be around £410 on a typical Bellway home. Subcontract Continued lack of availab
Slide 49: Notes
Notes Results presentation 21 March 2017 - Page 49 -
Slide 50: Strong operational focus
Strong operational focus Focused on quality control to ensure completed product meets customer expectations. Review a number of measures to assess our performance. Expect to be a 5* builder in imminent HBF Awards – one of only two national housebuilders. 43 site managers received NHBC Quality Awards
Slide 51: Notes
Notes Results presentation 21 March 2017 - Page 51 -
Slide 52: Land procurement
Land procurement Cash land spend (£m) Contracted to acquire 6,287 plots. Identify good opportunities with average intake margins around 23% and RoCE in excess of 20%. Entered into 9 new option agreements in the period. Obtained planning permission on 2,085 plots previously included in Contracted plo
Slide 53: Notes
Notes Results presentation 21 March 2017 - Page 53 -
Slide 54: Current trading and outlook
Current trading and outlook Ted Ayres Chief Executive Results presentation 21 March 2017 - Page 54 -
Slide 55: Notes
Notes Results presentation 21 March 2017 - Page 55 -
Slide 56: Current trading and order book
Current trading and order book Current order book Units Sales up 18% to 246 per week +8.3% since 1 February. Includes 52 reservations at Nine Elms. Like for like reservations are more than 13% ahead. Value (£m) Article 50 may affect customer +17.8% confidence but early start to spring selling season
Slide 57: Notes
Notes Results presentation 21 March 2017 - Page 57 -
Slide 58: Outlook
Outlook Strong market conditions and sustained government support for housing supports growth. Volume growth of at least 5% in the current financial year. Strong operational focus. Long term returns for shareholders Results presentation 21 March 2017 - Page 58 -
Slide 59: Notes
Notes Results presentation 21 March 2017 - Page 59 -
Slide 60: Questions and answers
Questions and answers Highgate Court, London Results presentation 21 March 2017 - Page 60 -
Slide 61: Notes
Notes Results presentation 21 March 2017 - Page 61 -
Slide 62: Appendices
Appendices 1. Guidance 2. Housing revenue 3. ASP analysis 4. Product analysis 5. Completion analysis 6. Net finance expense 7. Land supply 8. Strategic land 9. Land bank glossary 10. Order book at 31 January Results presentation 21 March 2017 - Page 62 -
Slide 63: Notes
Notes Results presentation 21 March 2017 - Page 63 -
Slide 64: Appendix 1 – Guidance
Appendix 1 – Guidance 31 July 2017 ASP Around £260k Volume growth At least 5% Operating margin Around 22% Year end bank debt £50m to £100m Social completions >20% Dividend 3x cover Results presentation 21 March 2017 - Page 64 -
Slide 65: Notes
Notes Results presentation 21 March 2017 - Page 65 -
Slide 66: Appendix 2 - Housing revenue
Appendix 2 - Housing revenue For the half year ended 31 January Completion analysis Average selling price (‘ASP’) 2017 2016 53% + 4.4% 50% -0.5% + 7.6% 2017 2016 2017 2016 2017 2016 Revenue analysis 2017 2016 Private Social Total 60% 63% Homes sold 2017 2016 North South (excl. London boroughs Privat
Slide 67: Notes
Notes Results presentation 21 March 2017 - Page 67 -
Slide 68: Appendix 3 – ASP analysis
Appendix 3 – ASP analysis For the half year ended 31 January ASP / square foot (£) 2017 2016 Mvt Private Social Total Private Social Total Private Social Total North 203 122 193 197 115 188 3.0% 6.1% 2.7% South - made up of:- 340 171 308 349 158 328 (2.6%) 8.2% (6.1%) London 533 224 503 483 276 480
Slide 69: Notes
Notes Results presentation 21 March 2017 - Page 69 -
Slide 70: Appendix 4 – Product analysis
Appendix 4 – Product analysis For the half year ended 31 January Product mix analysis Selling price analysis 2017 2016 2017 2016 London flats Townhouses 1 & 2 bed Up to £100,000 £100,001 - £150,000 £150,001 - £200,000 Non-London flats 3 bed 4+ bed £200,001 - £250,000 £250,001 - £300,000 £300,001+ Fl
Slide 71: Notes
Notes Results presentation 21 March 2017 - Page 71 -
Slide 72: Appendix 5 – Completion analysis
Appendix 5 – Completion analysis For the half year ended 31 January 2017 2016 Second time buyers Deposit assisted and first time Other buyers buyers Other second time buyers Unassisted first time buyers Housing Association Part exchange Help to Buy Investor Results presentation 21 March 2017 - Page
Slide 73: Notes
Notes Results presentation 21 March 2017 - Page 73 -
Slide 74: Appendix 6 - Net finance expense
Appendix 6 - Net finance expense For the half year ended 31 January 2017 2016 Mvt Net bank interest payable inc. fees £2.0m £2.1m (4.8%) Non bank interest: £3.0m £3.6m (16.7%) Made up of:- Land creditors / debtors – IAS 39 £2.8m £3.7m (24.3%) Pension cost £0.1m £0.1m - Other interest £0.1m (£0.2m) (
Slide 75: Notes
Notes Results presentation 21 March 2017 - Page 75 -
Slide 76: Appendix 7 – Land supply
Appendix 7 – Land supply As at 31 January Owned and controlled land (plots) Land with DPP Pipeline Wide geographic presence enables Bellway to benefit from growth opportunities in north, south and London markets. Pipeline reduced by 2,100 plots due to disposal of Barking Riverside. Quality land bank
Slide 77: Notes
Notes Results presentation 21 March 2017 - Page 77 -
Slide 78: Appendix 8 – Strategic land
Appendix 8 – Strategic land As at 31 January Strategic land by category 2017 2016 5,650 plots with positive planning status. 9 options entered in to in period. Successfully obtained planning on Total 5,650 Total 6,600 2,085 plots in the period. Allocation only Application only Both allocation and ap
Slide 79: Notes
Notes Results presentation 21 March 2017 - Page 79 -
Slide 80: Appendix 9 – Land bank glossary
Appendix 9 – 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
Slide 81: Notes
Notes Results presentation 21 March 2017 - Page 81 -
Slide 82: Appendix 10 – Order book at 31 January
Appendix 10 – Order book at 31 January As at 31 January 2017 2016 Movement Private Social Total Private Social Total Private Social Total % % % At 1 August 2,995 1,649 4,644 3,305 1,263 4,568 (9.4%) 30.6% 1.7% Reservations 3,328 977 4,305 3,291 763 4,054 1.1% 28.0% 6.2% Completions (3,543) (919) (4,