Bellway P.l.c. · LSE:BWY

Bellway P.l.c — FY2018 Earnings Presentation

93 slides from Bellway P.l.c's earnings presentation, Oct 16, 2018

1. Slide 1: Results Presentation Year ended 31 July 2018

   Results Presentation Year ended 31 July 2018

2. Slide 2: Agenda

   Agenda 1. Highlights 2. Strategic update 3. Finance review 4. Operating review 5. Q&A 6. Appendices Results presentation Results presentation1616 October 2018 October 2018 - Page 2 -

3. Slide 3: Highlights

   Highlights John Watson Chairman Results presentation Results presentation1616 October 2018 October 2018 - Page 3 -

4. Slide 4: Highlights

   Highlights Financial highlights Volume RoCE EPS Dividend NAV 10,307 27.2% 423.4p 143.0p 2,079p +6.9% (40 bps) +14.2% +17.2% +16.5% Operational highlights Customer care Land buying Land bank Order book Growth Contracted to All land in place Strong order book New divisions 5* homebuilder acquire 12,96

5. Slide 5: Notes

   Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 5 -

6. Slide 6: Strategic update

   Strategic update Jason Honeyman Chief Executive Results presentation Results presentation1616 October 2018 October 2018 - Page 6 -

7. Slide 7: Notes

   Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 7 -

8. Slide 8: Strong customer demand

   Strong customer demand New build completions (England)  There is strong demand for affordably priced new homes in many parts of the country  Industry output in England is still below the government’s ambition of 300,000 homes p.a.  Cross-party support to increase the supply of new homes across al

9. Slide 9: Notes

   Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 9 -

10. Slide 10: Market fundamentally strong

    Market fundamentally strong Demand Mortgages Help to Buy Land Labour and materials  Access to low cost  Access to labour and mortgage finance is materials still a  Unemployment is at  Providing necessary  Land availability is good challenge a generational low boost for sector good  Responsible

11. Slide 11: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 11 -

12. Slide 12: Delivering long term value for shareholders

    Delivering long term value for shareholders Long term and sustainable approach Flexibility required in cyclical market Quality product Strong brand reputation Focus on customer service Financial outperformance over the longer Strong operational focus term Results presentation Results presentation161

13. Slide 13: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 13 -

14. Slide 14: Strategic priorities

    Strategic priorities Volume growth Focus on RoCE Value creation through capital and dividend growth Maintaining a Appointing the right Strengthening the Driving down costs flexible capital people brand structure Results presentation Results presentation1616 October 2018 October 2018 - Page 14 -

15. Slide 15: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 15 -

16. Slide 16: Finance review

    Finance review Keith Adey Finance Director Results presentation Results presentation1616 October 2018 October 2018 - Page 16 -

17. Slide 17: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 17 -

18. Slide 18: Strong earnings growth

    Strong earnings growth For the year ended 31 July 2018 2017 Change Homes sold 10,307 9,644 6.9% Units Average selling price £284,937 £260,354 9.4% Housing revenue £2,936.8m £2,510.9m 17.0% Revenue Other revenue £20.9m £47.7m (56.2%) Total revenue £2,957.7m £2,558.6m 15.6% Gross profit £753.4m 25.5%

19. Slide 19: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 19 -

20. Slide 20: Housing revenue

    Housing revenue For the year ended 31 July 2018 2017 ASP of Bellway completions Units ASP Units ASP Private 8,263 £323.4k 7,567 £296.0k Social 2,044 £129.3k 2,077 £130.4k < £200k £200k-£300k £300k-£400k £400k-£500k £500k-£600k > £600k Bellway 10,307 £284.9k 9,644 £260.4k completions  Rise in privat

21. Slide 21: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 21 -

22. Slide 22: Geographic analysis

    Geographic analysis For the year ended 31 July 2018 2017 London Units ASP Units ASP 2018 2017 North 5,061 £229.5k 4,655 £211.3k Units ASP Units ASP London 1,118 £414.9k 959 £371.8k South 5,246 £338.4k 4,989 £306.2k Total 10,307 £284.9k 9,644 £260.4k  London represented 11% of completions  6 most r

23. Slide 23: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 23 -

24. Slide 24: Operating performance

    Operating performance For the year ended 31 July Operating profit bridge 2018 2017 Change Gross profit £753.4m £661.6m £91.8m 25.5% 25.9% (40bps) Admin. expenses (£100.5m) (£90.0m) (£10.5m) (3.4%) (3.6%) 20bps Operating profit £652.9m £571.6m £81.3m 22.1% 22.3% (20bps) Ground rent disposal Overhead

25. Slide 25: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 25 -

26. Slide 26: Balance sheet

    Balance sheet As at 31 July 2018 2017 Change Assets Fixed assets £13.1m £11.3m £1.8m Investment in joint ventures £43.5m £34.3m £9.2m Inventory £3,271.6m £2,968.1m £303.5m Land £2,011.9m £1,838.2m £173.7m WIP £1,259.7m £1,129.9m £129.8m Debtors £116.0m £87.6m £28.4m Pension asset/(deficit) £1.3m (£4

27. Slide 27: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 27 -

28. Slide 28: Land bank

    Land bank ^ As at 31 July 2018 2017 Average Average Plots Cost Plots Cost plot cost plot cost Land with DPP Brought forward 1 August 25,655 £1,546.1m £60.3k 24,879 £1,373.1m £55.2k Net purchases 11,529 £738.4m £64.0k 10,420 £685.1m £65.7k Sold (10,307) (£605.5m) £58.7k (9,644) (£512.1m) £53.1k Carri

29. Slide 29: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 29 -

30. Slide 30: Work in progress

    Work in progress As at 31 July Site construction vs housing revenue 2018 2017 Change Site construction £1,115.1m £1,017.7m £97.4m Showhomes £97.4m £78.2m £19.2m Part exchange stock £47.2m £34.0m £13.2m Total WIP £1,259.7m £1,129.9m £129.8m WIP Housing revenue Proportion of unreserved Increase in par

31. Slide 31: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 31 -

32. Slide 32: Balanced and flexible capital structure

    Balanced and flexible capital structure For the year ended 31 July £648.1m generated before Cash generated from increasing investment in land operations after investing for Gearing only 10% inclusive of and site construction growth was 58% of operating land creditors of £365.4m profit Results presen

33. Slide 33: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 33 -

34. Slide 34: Dividend

    Dividend For the year ended 31 July Dividend per share (p) 2018 2017 Change Interim dividend 48.0p 37.5p 28.0% Proposed final dividend 95.0p 84.5p 12.4% Total dividend 143.0p 122.0p 17.2%  Compounding effect as a result of reinvesting earnings back in to the business Interim Final Expect to maintai

35. Slide 35: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 35 -

36. Slide 36: Delivering enhanced shareholder value

    Delivering enhanced shareholder value RoCE RoE NAV 23.3% p.a. return over 3 years 27.2% 22.1% 2,079p 2017: 27.6% 2017: 22.6% 2017: 1,785p (40 bps) (50 bps) +16.5%  Over the past three years:- – Revenue has increased by almost 68% Cumulative – Earnings have risen by 84% NAV at July 15 NAV growth div

37. Slide 37: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 37 -

38. Slide 38: Operating review

    Operating review Jason Honeyman Chief Executive Results presentation Results presentation1616 October 2018 October 2018 - Page 38 -

39. Slide 39: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 39 -

40. Slide 40: Delivering growth through divisional expansion (1)

    Delivering growth through divisional expansion (1)  7 new divisions opened since 2013  Volume increased by 82% in same period  Scotland East opened on 1 August 2018  Combined Scotland divisions have capacity to deliver over 1,200 homes within the next few years  Further expansion is planned wit

41. Slide 41: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 41 -

42. Slide 42: Delivering growth through divisional expansion (2)

    Delivering growth through divisional expansion (2) Eastern Counties London Partnerships Eastern Counties will focus on good value family housing in Focus on strong relationships with RSLs and local authorities and around Peterborough and Cambridge Will provide lower cost homes in London where the sh

43. Slide 43: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 43 -

44. Slide 44: Delivering growth through buying land

    Delivering growth through buying land Contracted sites and plots  Contracted to buy 100 sites at an average gross margin of around 24%  Outside of London, land buying has focused on affordably priced family homes Contracted sites  Focus on sites with the right product mix and in locations that at

45. Slide 45: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 45 -

46. Slide 46: Delivering growth through further investment in strategic land

    Delivering growth through further investment in strategic land Maidstone, Kent 2018 2017 Change Plots promoted from strategic 2,741 2,643 3.7% land New strategic 27 26 3.8% agreements Strategic plots with positive 8,500 6,900 23.2% planning status  Exercised option in Maidstone, Kent for 250 units

47. Slide 47: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 47 -

48. Slide 48: Driving down costs

    Driving down costs Some gaps still exist in Strong culture of cost Cost pressures still exist the supply chain but Overall costs have control for labour and materials easing in some parts of increased by around 3% the country Simple approach to cost reductions:- The Artisan collection New standard s

49. Slide 49: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 49 -

50. Slide 50: The Artisan Collection (1)

    The Artisan Collection (1)  24 newly designed houses ranging from 2 to 5 bedrooms, 80% of range is under 1,200 sq ft  Good value family homes  Already plotted on 44 developments comprising 6,000 plots  First planning permissions expected in November and occupations expected in summer 2019  Rang

51. Slide 51: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 51 -

52. Slide 52: The Artisan Collection (2)

    The Artisan Collection (2)  Internal layouts based upon customer feedback and include family zones, improved storage space and open plan areas  New standard specification includes hard wiring for broadband, USB points, LED down lighters and electric car charging points  New house types are easier

53. Slide 53: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 53 -

54. Slide 54: Appointing the right people

    Appointing the right people  We invest in people  Everyone is encouraged to develop and progress in their discipline  Operational strength has allowed us to grow volume and improve standards of quality and service  Member of The 5% Club  New Site Agent training scheme in place for summer 2019 R

55. Slide 55: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 55 -

56. Slide 56: Strengthening the brand

    Strengthening the brand 92.1% of customers 49 Awards New website would recommend Results presentation Results presentation1616 October 2018 October 2018 - Page 56 -

57. Slide 57: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 57 -

58. Slide 58: Trading review

    Trading review Weekly reservation rate 2018 2017 Change  House price gains are modest, c.1% to H1 178 166 7.2% 2% H2 222 209 6.2% Full year 200 187 7.0%  Price rises most pronounced on affordable sites in good residential locations Ave. active outlets Cancellation rate + 7.4% 11%  Scotland, East

59. Slide 59: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 59 -

60. Slide 60: Current trading and order book

    Current trading and order book Order book at 30 Sept 2018 (2017: 1 Oct) +6.9%  Reservations 2.9% up in first nine weeks to 176 Units +7.9%  Value of order book at 30 September up by 7.9% Value (£m)  68% of order book is contracted Private Social Results presentation Results presentation1616 Octob

61. Slide 61: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 61 -

62. Slide 62: Outlook

    Outlook  Scotland East opened on 1 August 2018  Two new divisions on stream from 1 February 2019  Brexit poses some uncertainty and could affect busy spring selling season  Standardisation will help mitigate margin pressure in the years ahead  New Partnerships division provides an exciting oppo

63. Slide 63: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 63 -

64. Slide 64: Q&A

    Q&A Artisan Street scene Results presentation Results presentation1616 October 2018 October 2018 - Page 64 -

65. Slide 65: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 65 -

66. Slide 66: Appendices

    Appendices 1. Income statement 2. Net finance expense 3. Geographic analysis 4. ASP per sq ft 5. Housing revenue 6. Product analysis 7. Completion analysis 8. Land supply 9. Strategic land 10. Land creditors 11. Land bank glossary 12. Order book at 31 July Results presentation Results presentation16

67. Slide 67: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 67 -

68. Slide 68: Appendix 1 - Income statement

    Appendix 1 - Income statement For the year ended 31 July 2018 2017 Change Homes sold 10,307 9,644 6.9% Average selling price £284,937 £260,354 9.4% Housing revenue £2,936.8m £2,510.9m 17.0% Other revenue £20.9m £47.7m (56.2%) Total revenue £2,957.7m £2,558.6m 15.6% Gross profit £753.4m 25.5% £661.6m

69. Slide 69: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 69 -

70. Slide 70: Appendix 2 – Net finance expense

    Appendix 2 – Net finance expense For the year ended 31 July 2018 2017 Change Net bank interest payable inc. fees £5.2m £4.5m 15.6% Non bank interest: £8.4m £6.7m 25.4% Made up of:- Land creditors / debtors – IAS 39 £8.3m £6.6m 25.8% Pension cost £0.1m £0.2m (50.0%) Other interest £-m (£0.1m) (100.0%

71. Slide 71: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 71 -

72. Slide 72: Appendix 3 – Geographic analysis

    Appendix 3 – Geographic analysis For the year ended 31 July Homes sold (No.) 2018 2017 Change Private Social Total Private Social Total Private Social Total North 4,171 890 5,061 3,897 758 4,655 7.0% 17.4% 8.7% South 4,092 1,154 5,246 3,670 1,319 4,989 11.5% (12.5%) 5.2% Group 8,263 2,044 10,307 7,5

73. Slide 73: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 73 -

74. Slide 74: Appendix 4 – ASP per sq ft

    Appendix 4 – ASP per sq ft For the year ended 31 July 2018 2017 Change Private Social Total Private Social Total Private Social Total North 226 126 213 211 119 199 7.1% 5.9% 7.0% South - made up of:- 373 196 342 348 189 314 7.2% 3.7% 8.9% London 605 241 533 533 268 471 13.5% (10.1%) 13.2% Non-London

75. Slide 75: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 75 -

76. Slide 76: Appendix 5 – Housing revenue

    Appendix 5 – Housing revenue For the year ended 31 July Completion analysis Average selling price (‘ASP’) 2018 2017 + 9.3% + 9.4% 51% 52% (0.8%) 2018 2017 2018 2017 2018 2017 Revenue analysis 2018 2017 Private Social Total Homes sold 2018 2017 61% 61% North South (excl. London) London boroughs Priva

77. Slide 77: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 77 -

78. Slide 78: Appendix 6 – Product analysis

    Appendix 6 – Product analysis For the year ended 31 July Product mix analysis Selling price analysis 2018 2017 2018 2017 London flats Townhouses 1 & 2 bed < £200,000 £200,000 - £300,000 £300,001 - £400,000 Non-London flats 3 bed 4+ bed £400,001 - £500,000 £500,001 - £600,000 > £600,000 Flats Houses

79. Slide 79: Notes

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80. Slide 80: Appendix 7 – Completion analysis

    Appendix 7 – Completion analysis For the year ended 31 July 2018 2017 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 – non-London Investor Help to Buy – London Results presenta

81. Slide 81: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 81 -

82. Slide 82: Appendix 8 – Land supply

    Appendix 8 – Land supply Owned and controlled land (plots) Land spend and contracted land (£m) Land with DPP Pipeline Cash land spend Contracted land North South Results presentation Results presentation1616 October 2018 October 2018 - Page 82 -

83. Slide 83: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 83 -

84. Slide 84: Appendix 9 – Strategic land

    Appendix 9 – Strategic land As at 31 July Strategic land by category 2018 2017  8,500 plots with a positive planning status  The Group has further long term land holdings which do not yet have a positive planning status Total 8,500 Total 6,900 Allocation only Application only Both allocation and a

85. Slide 85: Notes

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86. Slide 86: Appendix 10 – Land creditors

    Appendix 10 – Land creditors As at 31 July Land creditor payment profile  Often able to secure a discount on land deals in return for making up front payments  Seek to defer payments where it is cost effective to do so  £285m due for payment in £285m 2018/19 Results presentation Results presentat

87. Slide 87: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 87 -

88. Slide 88: Appendix 11 – Land bank glossary

    Appendix 11 – 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 develo

89. Slide 89: Notes

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90. Slide 90: Appendix 12 – Order book at 31 July

    Appendix 12 – Order book at 31 July As at 31 July 2018 2017 Change Private Social Total Private Social Total Private Social Total % % % At 1 August 3,126 1,623 4,749 2,995 1,649 4,644 4.4% (1.6%) 2.3% Reservations 7,904 2,495 10,399 7,698 2,051 9,749 2.7% 21.6% 6.7% Completions (8,263) (2,044) (10,3

91. Slide 91: Notes

    Notes Results presentation Results presentation1616 October 2018 October 2018 - Page 91 -

92. Slide 92: Disclaimer

    Disclaimer This presentation is not intended to, and does not constitute or form part of, any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities in Bellway p.l.c. or any other invitation or inducement to engag

93. Slide 93: Results presentation

    Results presentation Results presentation1616 October 2018 October 2018 - Page 93 -

Bellway p.l.c. — FY2018 Earnings Presentation on 6ix