Bellway P.l.c. · LSE:BWY
Bellway P.l.c — FY2015 Earnings Presentation
96 slides from Bellway P.l.c's earnings presentation, Oct 13, 2015
Slide 1: Results Presentation Year ended 31 July 2015
Results Presentation Year ended 31 July 2015
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 13 October 2015 - Page 2 -
Slide 3: Strategic update
Strategic update Ted Ayres Chief Executive Results presentation 13 October 2015 - Page 3 -
Slide 4: Clear strategy for growth
Clear strategy for growth Demand Supply Capacity Good quality land New 17th division opened in Customer demand is robust opportunities at attractive Kings Hill, Kent rates of return Help to Buy extended until Positive planning environment Four new divisions opened 2020 in England supported by produc
Slide 5: Notes
Notes Results presentation 13 October 2015 - Page 5 -
Slide 6: Operational highlights
Operational highlights New divisions Investing in land Accelerating Standard floor Ashberry Homes build plans £620m spent in c.8,000 plots in Available in all 17 divisions period construction housing divisions Second brand Facilitating further growth Results presentation 13 October 2015 - Page 6 -
Slide 7: Notes
Notes Results presentation 13 October 2015 - Page 7 -
Slide 8: Delivering substantial value
Delivering substantial value Reinvestment in the A strong focus on Progressive dividend Volume growth business is growing return on capital policy the net asset value + 13.2% + 430 bps + 48.1% + 15.0% No. of homes sold Return on capital Total dividend Net asset value * 47.5% increase in earnings per
Slide 9: Notes
Notes Results presentation 13 October 2015 - Page 9 -
Slide 10: Finance review
Finance review Keith Adey Finance Director Results presentation 13 October 2015 - Page 10 -
Slide 11: Notes
Notes Results presentation 13 October 2015 - Page 11 -
Slide 12: Group results
Group results For the year ended 31 July 2015 2014** Mvt Exceptional Pre-exceptional Total item Revenue £1,765.4m - £1,765.4m £1,484.8m 18.9% Gross profit £427.9m 24.2% £6.9m £434.8m £315.6m 21.3% 35.6%* Administrative expenses (£67.5m) (3.8%) - (£67.5m) (£60.0m) (4.1%) 12.5% Operating profit £360.4
Slide 13: Notes
Notes Results presentation 13 October 2015 - Page 13 -
Slide 14: Revenue
Revenue For the year ended 31 July 2015 2014** Mvt Homes sold 7,752 6,851 13.2% Average selling price £223,821 £213,182 5.0% Housing revenue £1,735.1m £1,460.5m 18.8% Non housing revenue £30.3m £24.3m 24.7% Total revenue £1,765.4m £1,484.8m 18.9% ** Restated – see appendix 9 Results presentation 13
Slide 15: Notes
Notes Results presentation 13 October 2015 - Page 15 -
Slide 16: Housing revenue: social mix
Housing revenue: social mix For the year ended 31 July Homes sold Average selling price (‘ASP’) 2015 2014 + 8.7% + 3.0% Private Social 2015 2014 2015 2014 Private Social Social housing expected to be 15% to 20% Overall ASP in 2015/16 expected to of completions in full year 2015/16 increase in excess
Slide 17: Notes
Notes Results presentation 13 October 2015 - Page 17 -
Slide 18: Housing revenue: geographic mix
Housing revenue: geographic mix For the year ended 31 July 2015 2014 Mvt Completion analysis 2015 2014 North 53% 52% Homes sold 3,696 3,223 14.7% Average selling price £190,871 £183,047 4.3% South (inc. London) Revenue analysis Homes sold 4,056 3,628 11.8% 2015 2014 59% 60% Average selling price £25
Slide 19: Notes
Notes Results presentation 13 October 2015 - Page 19 -
Slide 20: Operating performance
Operating performance 2015 2015 2015 2014 Operating profit bridge FY* H2* H1 FY** Gross profit £427.9m £232.6m £195.3m £315.6m 24.2% 24.9% 23.5% 21.3% Administrative expenses (£67.5m) (£37.9m) (£29.6m) (£60.0m) * (3.8%) (4.1%) (3.6%) (4.1%) ** Operating £360.4m £194.7m £165.7m £255.6m profit 20.4% 2
Slide 21: Notes
Notes Results presentation 13 October 2015 - Page 21 -
Slide 22: Shared equity disposal
Shared equity disposal For the year ended 31 July 2015 Loans sold 2,376 Cash consideration £32.5m Profit on disposal £6.9m Treated as an exceptional item Proceeds invested in attractive land opportunities that are forecast to generate high rates of return Results presentation 13 October 2015 - Page
Slide 23: Notes
Notes Results presentation 13 October 2015 - Page 23 -
Slide 24: Net finance expense
Net finance expense For the year ended 31 July 2015 2014** Mvt Net bank interest payable inc. fees £6.5m £2.9m 124.1% Non bank interest: £6.6m £7.0m (5.7%) Made up of:- Land creditors / debtors – IAS 39 £6.6m £5.7m 15.8% Preference dividend £-m £1.3m (100.0%) Pension cost £0.3m £0.4m (25.0%) Other i
Slide 25: Notes
Notes Results presentation 13 October 2015 - Page 25 -
Slide 26: Earnings growth
Earnings growth For the year ended 31 July EPS growth 2015 2014** Mvt Profit before tax £354.2m £246.0m 44.0% Taxation (£71.1m) (£54.6m) 30.2% Effective tax rate 20.1% 22.2% Profit after tax £283.1m £191.4m 47.9% Annualised rate of growth in EPS has been over 52% since July 2012 Earnings per share 2
Slide 27: Notes
Notes Results presentation 13 October 2015 - Page 27 -
Slide 28: Balance sheet
Balance sheet As at 31 July 2015 2014** Assets Fixed assets £16.4m £18.7m Inventory £2,135.3m £1,796.6m Shared equity £-m £32.2m Investment in joint ventures £29.0m £26.8m Net cash £-m £3.6m Debtors £67.2m £54.5m £2,247.9m £1,932.4m Liabilities Pension deficit (£7.5m) (£7.9m) Creditors (£433.4m) (£3
Slide 29: Notes
Notes Results presentation 13 October 2015 - Page 29 -
Slide 30: Inventory
Inventory As at 31 July 2015 2014** Mvt Total land £1,296.9m £1,116.4m £180.5m Made up of:- DPP: land with detailed planning permission £1,040.9m £875.3m £165.6m Pipeline and strategic land £256.0m £241.1m £14.9m Work in progress £763.7m £615.8m £147.9m Showhomes £57.5m £52.9m £4.6m Part exchange st
Slide 31: Notes
Notes Results presentation 13 October 2015 - Page 31 -
Slide 32: Land with detailed planning permission
Land with detailed planning permission Average Plots Cost plot cost Brought forward 1 August 2014 19,434 £875.3m £45.0k Sold (7,752) (£367.8m) £47.4k Net purchases 9,729 £533.4m £54.8k Carried forward 31 July 2015 21,411 £1,040.9m £48.6k Results presentation 13 October 2015 - Page 32 -
Slide 33: Notes
Notes Results presentation 13 October 2015 - Page 33 -
Slide 34: Land creditors
Land creditors 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 s £145m due for payment in 2015/16 Due date Results presentation 13 October 2015 - Page 34 -
Slide 35: Notes
Notes Results presentation 13 October 2015 - Page 35 -
Slide 36: Cash flow
Cash flow For the year ended 31 July £153.5m cash generated Gearing of 2.4% from operations Net debt and land creditors represent only 14.7% of NAV Average net debt of £140m Peak net debt of £241m ** Restated – see appendix 9 Results presentation 13 October 2015 - Page 36 -
Slide 37: Notes
Notes Results presentation 13 October 2015 - Page 37 -
Slide 38: Return on capital employed
Return on capital employed Important metric when 2015 2014 assessing sites Capital turn 1.2 1.1 Focus on sales rate 2015 2014 RoCE 23.9%* 19.6% No exposure to shared equity 2015 2014 RoCE (inc. Avoid too many long term land creditors) 21.0%* 17.0% land assets Strong RoCE whilst adopting strategy for
Slide 39: Notes
Notes Results presentation 13 October 2015 - Page 39 -
Slide 40: Dividend
Dividend 2015 2014 Mvt Compelling investment Interim dividend 25.0p 16.0p 56.3% opportunities should generate high rates of return Proposed final dividend 52.0p 36.0p 44.4% Total dividend 77.0p 52.0p 48.1% Plan to reinvest 2/3 earnings to facilitate future growth Cumulative dividend (£m) Including f
Slide 41: Notes
Notes Results presentation 13 October 2015 - Page 41 -
Slide 42: Value creation
Value creation As at 31 July 2015 2014 + 50.8% NAV 1,286p 1,118p 2015 2014 RoE 19.4% 14.9% NAV at July 12 NAV growth Cumulative dividend paid Further value creation for shareholders Results presentation 13 October 2015 - Page 42 -
Slide 43: Notes
Notes Results presentation 13 October 2015 - Page 43 -
Slide 44: Operating review
Operating review Ted Ayres Chief Executive Results presentation 13 October 2015 - Page 44 -
Slide 45: Notes
Notes Results presentation 13 October 2015 - Page 45 -
Slide 46: Trading review
Trading review 2015 2014 Mvt Weekly sales rate Availability of product was H1 139 137 1.3% limited in H1 H2 167 159 5.3% Concerns regarding general Full year 153 148 3.5% election were short lived Progressive increase in Weekly sales rate reservations throughout H2 North 75 66 13.9% Strong demand in
Slide 47: Notes
Notes Results presentation 13 October 2015 - Page 47 -
Slide 48: Sales outlets
Sales outlets Average active outlets 80 outlets opened in the year Average outlets similar to last year Expect to open 90 outlets and close 85 outlets in 2015/16 Outlets have varying sales rates depending on product and location Results presentation 13 October 2015 - Page 48 -
Slide 49: Notes
Notes Results presentation 13 October 2015 - Page 49 -
Slide 50: Divisional expansion
Divisional expansion New offices opened in Bristol during February 2015 and in Kings Hill, Kent on 1 August 2015 Existing offices New divisions will contribute legal New offices completions in current financial year Potential for further expansion in the Midlands and the north Capacity of 10,000 uni
Slide 51: Notes
Notes Results presentation 13 October 2015 - Page 51 -
Slide 52: London coverage
London coverage Strong presence in London operating from 29 outlets 20 new outlets due to commence in next 12-24 months Number Zone 1 2 Zone 2 17 Zones 3 – 6 30 Help to Buy used in less than 4% of London completions compared to 27% across the Group Revenues up to 5% higher than expectation on some L
Slide 53: Notes
Notes Results presentation 13 October 2015 - Page 53 -
Slide 54: Production
Production Production accelerated on all sites Around 8,000 homes under production Production at more advanced stages, however, there are a number of apartment schemes due for completion beyond this financial year Availability of consistent labour force is biggest challenge to sector Extending appre
Slide 55: Notes
Notes Results presentation 13 October 2015 - Page 55 -
Slide 56: Construction costs
Construction costs Materials Sub-contract Gradual easing in the Volatility of sub-contract availability of materials labour rates is beginning to abate Re-negotiation of national agreements has Build costs updated for resulted in some all current sites and relatively small cost future acquisitions i
Slide 57: Notes
Notes Results presentation 13 October 2015 - Page 57 -
Slide 58: Standard floor plans
Standard floor plans Now available to all housing only divisions Divisions will elevate to meet local planning and vernacular requirements Initial customer feedback is positive Further procurement benefits should result from standardisation Results presentation 13 October 2015 - Page 58 -
Slide 59: Notes
Notes Results presentation 13 October 2015 - Page 59 -
Slide 60: Ashberry Homes
Ashberry Homes New second brand to facilitate higher sales rate on larger sites Should improve RoCE Trialled at Ibstock and shared between East Midlands and West Midlands divisions Avoids customer and supplier confusion Not to be used to justify larger purchases Absorbed into existing divisional str
Slide 61: Notes
Notes Results presentation 13 October 2015 - Page 61 -
Slide 62: Case study – Ibstock
Case study – Ibstock Strategic greenfield site 5 year option agreement entered into in February 2012 at 87% of OMV Planning permission issued in August 2013 for 197 dwellings Site acquired in September 2014 for £4.3m Forecast gross margin of 25% and RoCE of 25% Dual branding could increase RoCE furt
Slide 63: Notes
Notes Results presentation 13 October 2015 - Page 63 -
Slide 64: Land procurement
Land procurement £620m spent on land and land creditors – up 35% Contracted to acquire 88 sites in the period Competition mainly from major housebuilders outside of London Housing Association and private equity funds are active in London Larger tranches of land more readily available – we remain dis
Slide 65: Notes
Notes Results presentation 13 October 2015 - Page 65 -
Slide 66: Land bank
Land bank As at 31 July 2015 2014 Owned and controlled plots 36,211 35,434 Made up of:- DPP: plots with detailed planning permission 21,411 19,434 Pipeline: plots pending an implementable DPP 14,800 16,000 Strategic plots > 6,000 > 4,500 Strategic plots are only those long term plots which currently
Slide 67: Notes
Notes Results presentation 13 October 2015 - Page 67 -
Slide 68: Planning environment
Planning environment As at 31 July 2015 Stability provided by election Brought forward at 1 August 19,434 and commitment to NPPF Already controlled: DPP obtained in the period 6,909 Productivity plan places Bought with benefit of DPP 2,820 greater emphasis on Total additions 9,729 brownfield sites S
Slide 69: Notes
Notes Results presentation 13 October 2015 - Page 69 -
Slide 70: Current trading and outlook
Current trading and outlook Ted Ayres Chief Executive Results presentation 13 October 2015 - Page 70 -
Slide 71: Notes
Notes Results presentation 13 October 2015 - Page 71 -
Slide 72: Current trading and order book
Current trading and order book Current order book 149 reservations per week in Value (£m) first 9 weeks – up 16% +5.9% Greater availability of product Expect sales to remain stable for remainder of H1 Units 1,212 plots relate to social (0.1%) housing – all contracted Visibility over social housing o
Slide 73: Notes
Notes Results presentation 13 October 2015 - Page 73 -
Slide 74: Outlook
Outlook Strong forward sales position Managing delays in supply and subcontract chain Volume growth up to 10% in 2015/16 Sustainable, long term returns for shareholders Results presentation 13 October 2015 - Page 74 -
Slide 75: Notes
Notes Results presentation 13 October 2015 - Page 75 -
Slide 76: Questions and answers
Questions and answers Orchid Meadow, Formby, Cheshire Results presentation 13 October 2015 - Page 76 -
Slide 77: Notes
Notes Results presentation 13 October 2015 - Page 77 -
Slide 78: Appendices
Appendices 1. Geographic analysis 2. Product analysis 3. Buyer analysis 4. ASP analysis 5. Order book 6. Land supply 7. Strategic land 8. Land bank glossary 9. Accounting standards Results presentation 13 October 2015 - Page 78 -
Slide 79: Notes
Notes Results presentation 13 October 2015 - Page 79 -
Slide 80: Appendix 1 – Geographic analysis
Appendix 1 – Geographic analysis Unit completions For the year ended 31 July Private Social Total 2015 2014 2015 2014 2015 2014 No. No. No. No. No. No. North 3,070 2,958 626 265 3,696 3,223 South 3,108 2,851 948 777 4,056 3,628 Total 6,178 5,809 1,574 1,042 7,752 6,851 Average selling price Private
Slide 81: Notes
Notes Results presentation 13 October 2015 - Page 81 -
Slide 82: Appendix 2 – Product analysis
Appendix 2 – Product analysis For the year ended 31 July Product mix analysis Selling price analysis 2015 2014 2015 2014 Flats Houses London flats Townhouses 1 & 2 bed Non-London flats 3+ bed Over half of flats are in London High average selling price for a national housebuilder Townhouses are only
Slide 83: Notes
Notes Results presentation 13 October 2015 - Page 83 -
Slide 84: Appendix 3 – Buyer analysis
Appendix 3 – Buyer analysis For the year ended 31 July 2015 2014 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 NewBuy Results presentation 13 October 2015 - Page 84 -
Slide 85: Notes
Notes Results presentation 13 October 2015 - Page 85 -
Slide 86: Appendix 4 – ASP analysis
Appendix 4 – ASP analysis For the year ended 31 July ASP / square foot (£) 2015 2014 Mvt Private Social Total Private Social Total Private Social Total North 188 115 179 180 107 176 4.4% 7.5% 1.7% South - made up of:- 305 163 276 276 155 255 10.5% 5.2% 8.2% London 392 218 366 368 177 321 6.5% 23.2%
Slide 87: Notes
Notes Results presentation 13 October 2015 - Page 87 -
Slide 88: Appendix 5 – Order book
Appendix 5 – Order book As at 31 July 2015 2014 Movement Private Social Total Private Social Total Private Social Total % % % At 1 August 3,164 1,199 4,363 2,503 1,022 3,525 26.4% 17.3% 23.8% Reservations 6,319 1,638 7,957 6,470 1,219 7,689 (2.3%) 34.4% 3.5% Completions (6,178) (1,574) (7,752) (5,80
Slide 89: Notes
Notes Results presentation 13 October 2015 - Page 89 -
Slide 90: Appendix 6 – Land supply
Appendix 6 – Land supply As at 31 July Owned and controlled land (plots) Land with DPP Pipeline Wide geographic presence 4.7 years land supply at current output Quality land bank North South Results presentation 13 October 2015 - Page 90 -
Slide 91: Notes
Notes Results presentation 13 October 2015 - Page 91 -
Slide 92: Appendix 7 – Strategic land
Appendix 7 – Strategic land As at 31 July Strategic land by category 2015 2014 6,000 plots in strategic land bank with positive planning status. Allocation only Application only Both allocation and application Results presentation 13 October 2015 - Page 92 -
Slide 93: Notes
Notes Results presentation 13 October 2015 - Page 93 -
Slide 94: 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
Slide 95: Notes
Notes Results presentation 13 October 2015 - Page 95 -
Slide 96: Appendix 9 – Accounting standards
Appendix 9 – Accounting standards In previous years IFRSs allowed jointly controlled entities (JCEs) to be consolidated using either the equity method or proportional consolidation. The Group’s accounting policy was to use proportional consolidation. On 1 August 2014 the Group adopted IFRS 10 ‘Conso