Bellway P.l.c. · LSE:BWY
Bellway P.l.c — H1 2015 Earnings Presentation
94 slides from Bellway P.l.c's earnings presentation, Mar 25, 2015
Slide 1: Results Presentation Half year ended 31 January 2015
Results Presentation Half year ended 31 January 2015
Slide 2: Agenda
Agenda 1. Strategic update 2. Finance review 3. Operating review 4. Trading and outlook 5. Questions and answers 6. Appendices Results presentation 25 March 2015 - Page 2 -
Slide 3: Strategic update
Strategic update Ted Ayres Chief Executive Results presentation 25 March 2015 - Page 3 -
Slide 4: Clear strategy for growth
Clear strategy for growth Demand Supply Capacity Good quality land Customer demand is strong opportunities at attractive Ability to invest rates of return Gradually improving mortgage Positivity within the planning Existing structure of 15 availability at competitive environment divisions rates Posi
Slide 5: Notes
Notes Results presentation 25 March 2015 - Page 5 -
Slide 6: Delivering substantial value
Delivering substantial value A strong focus on Progressive dividend Growth in net asset Volume growth return on capital policy value + 15.7% + 580 bps + 56.3% + 5.6% No. of homes sold Return on capital Interim dividend Net asset value ** * 56.1% increase in earnings per share to 103.5p * Restated -
Slide 7: Notes
Notes Results presentation 25 March 2015 - Page 7 -
Slide 8: Finance review
Finance review Keith Adey Finance Director Results presentation 25 March 2015 - Page 8 -
Slide 9: Notes
Notes Results presentation 25 March 2015 - Page 9 -
Slide 10: Group results
Group results For the half year ended 31 January 2015 2014* Mvt Revenue £831.2m £700.4m 18.7% Gross profit £195.3m 23.5% £138.3m 19.7% 41.2% Administrative expenses (£29.6m) (3.6%) (£29.3m) (4.1%) 1.0% Operating profit £165.7m 19.9% £109.0m 15.6% 52.0% Share of result of JVs - £0.1m (100%) Net finan
Slide 11: Notes
Notes Results presentation 25 March 2015 - Page 11 -
Slide 12: Revenue
Revenue For the half year ended 31 January 2015 2014* Mvt Homes sold 3,754 3,245 15.7% Average selling price £219,343 £212,071 3.4% Housing revenue £823.4m £688.2m 19.6% Non housing revenue £7.8m £12.2m (36.1%) Total revenue £831.2m £700.4m 18.7% Results presentation 25 March 2015 - Page 12 -
Slide 13: Notes
Notes Results presentation 25 March 2015 - Page 13 -
Slide 14: Housing revenue: social mix
Housing revenue: social mix For the half year ended 31 January Homes sold Average selling price (‘ASP’) 2015 2014 + 6.9% + 10.4% Private Social 2015 2014 2015 2014 Private Social Social housing expected to be 15% to 20% Full year ASP expected to be between of full year completions. £220k to £225k de
Slide 15: Notes
Notes Results presentation 25 March 2015 - Page 15 -
Slide 16: Housing revenue: geographic mix
Housing revenue: geographic mix For the half year ended 31 January 2015 2014 Mvt Completion analysis 2015 2014 North 55% 52% Homes sold 1,822 1,474 23.6% Average selling price £187,777 £177,526 5.8% South (inc. London) Revenue analysis Homes sold 1,932 1,771 9.1% 2015 2014 59% 62% Average selling pr
Slide 17: Notes
Notes Results presentation 25 March 2015 - Page 17 -
Slide 18: Operating performance
Operating performance 2015 2014 2014 2014 Operating profit bridge H1 H1* H2* FY* Gross profit £195.3m £138.3m £177.3m £315.6m 23.5% 19.7% 22.6% 21.3% Administrative (£29.6m) (£29.3m) (£30.7m) (£60.0m) expenses (3.6%) (4.1%) (3.9%) (4.1%) * Operating £165.7m £109.0m £146.6m £255.6m profit 19.9% 15.6%
Slide 19: Notes
Notes Results presentation 25 March 2015 - Page 19 -
Slide 20: Net finance expense
Net finance expense For the half year ended 31 January 2015 2014* Mvt Net bank interest payable inc. fees £3.3m £1.4m 135.7% Non bank interest: £3.5m £3.9m (10.3%) Made up of:- Land creditors / debtors – IAS 39 £3.5m £2.9m 20.7% Preference dividend £-m £1.0m (100.0%) Pension cost £0.1m £0.2m (50.0%)
Slide 21: Notes
Notes Results presentation 25 March 2015 - Page 21 -
Slide 22: Earnings growth
Earnings growth For the half year ended 31 January Half year EPS growth 2015 2014* Mvt Profit before tax £158.9m £103.8m 53.1% Taxation (£32.5m) (£23.1m) 40.7% Effective tax rate 20.5% 22.3% Profit after tax £126.4m £80.7m 56.6% Annualised rate of growth in EPS has been 60% since January 2012 Earnin
Slide 23: Notes
Notes Results presentation 25 March 2015 - Page 23 -
Slide 24: Balance sheet
Balance sheet As at 31 January 31 July 2015 2014* Assets Fixed assets £17.3m £18.7m Inventory £1,948.0m £1,796.6m Shared equity £26.5m £32.2m Investment in joint ventures £26.1m £26.8m Net cash £-m £3.6m Debtors £62.0m £54.5m £2,079.9m £1,932.4m Liabilities Pension deficit (£12.1m) (£7.9m) Creditors
Slide 25: Notes
Notes Results presentation 25 March 2015 - Page 25 -
Slide 26: Inventory
Inventory As at 31 January 31 July Mvt 2015 2014* Owned and controlled land £1,225.1m £1,116.4m £108.7m Made up of:- DPP: land with detailed planning permission £949.1m £875.3m £73.8m Pipeline and strategic land £276.0m £241.1m £34.9m Work in progress £648.1m £615.8m £32.3m Showhomes £56.6m £52.9m £
Slide 27: Notes
Notes Results presentation 25 March 2015 - Page 27 -
Slide 28: 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 (3,754) (£176.0m) £46.9k Net purchases 4,357 £249.8m £57.3k Carried forward 31 January 2015 20,037 £949.1m £47.4k Results presentation 25 March 2015 - Page 28 -
Slide 29: Notes
Notes Results presentation 25 March 2015 - Page 29 -
Slide 30: Land creditors
Land creditors Land creditors are used where the cost of deferral is less than cost of bank finance. Land creditors are part of debt structure which is managed in the most cost effective manner. Due date Results presentation 25 March 2015 - Page 30 -
Slide 31: Notes
Notes Results presentation 25 March 2015 - Page 31 -
Slide 32: Cash flow
Cash flow For the half year ended 31 January £37.3m cash generated from operations Average net debt of £101m Peak net debt of £236m Results presentation 25 March 2015 - Page 32 -
Slide 33: Notes
Notes Results presentation 25 March 2015 - Page 33 -
Slide 34: Return on capital employed
Return on capital employed Key metric when assessing 31 January 31 January sites. 2015 2014 Capital turn 1.15 1.10 Avoid excessive capital in sites of several years duration. Limited exposure to 31 January 31 January underperforming assets e.g. 2015 2014* shared equity and impaired land. RoCE 22.8%
Slide 35: Notes
Notes Results presentation 25 March 2015 - Page 35 -
Slide 36: Dividend
Dividend Regular and progressive dividend policy. 31 January 31 January Mvt 2015 2014 Dividend paid throughout the Dividend 25.0p 16.0p 56.3% recession. Including interim dividend, payments will total £251m since Cumulative dividend (£m) recession. Expect full year cover of 3 times. Balanced approac
Slide 37: Notes
Notes Results presentation 25 March 2015 - Page 37 -
Slide 38: Value creation
Value creation As at Pre write Post write downs downs 31 January 31 July 2015 2014 NAV 1,181p 1,118p 31 January 31 January 2015 2014 RoE 18.0% 12.9% Sustainable and disciplined approach to growth Results presentation 25 March 2015 - Page 38 -
Slide 39: Notes
Notes Results presentation 25 March 2015 - Page 39 -
Slide 40: Operating review
Operating review Ted Ayres Chief Executive Results presentation 25 March 2015 - Page 40 -
Slide 41: Notes
Notes Results presentation 25 March 2015 - Page 41 -
Slide 42: Operational review
Operational review Foundation laid to grow the business. The Group is flexible to adapt to changes in a cyclical market. Margins have significantly improved by trading through low margin land and accelerating output on new land. Results presentation 25 March 2015 - Page 42 -
Slide 43: Notes
Notes Results presentation 25 March 2015 - Page 43 -
Slide 44: Product mix
Product mix Reduced exposure to apartments in northern cities. Increased expertise in high rise London apartments. 28% of output is apartments with over half of these constructed in London. Focus on traditional two storey Exposure to a variety of market housing outside London. segments allows a flex
Slide 45: Notes
Notes Results presentation 25 March 2015 - Page 45 -
Slide 46: Strong presence in London
Strong presence in London Demand remains robust. 27 active sites. 16 sites to be released for sale within the next 24 months. Prices now only slightly ahead of expectations on recent launches. Significant exposure in zone 2 and beyond. Results presentation 25 March 2015 - Page 46 -
Slide 47: Notes
Notes Results presentation 25 March 2015 - Page 47 -
Slide 48: Standard floor plans
Standard floor plans Ground floor Up to 50% of output could be delivered using standard floor plans. 35 new layouts to be rolled out from May 2015. Reduction in professional fees First floor could be £500 to £1,000 per unit. Strengthened negotiating position with suppliers. Helps maintain an efficie
Slide 49: Notes
Notes Results presentation 25 March 2015 - Page 49 -
Slide 50: Production
Production Construction of some major London schemes is outsourced – Helps achieve required rate of production. – Some certainty on build costs on complex developments. Strong relationships with subcontractors. Almost 2,200 people directly employed. 7,546 units under production of which 49% remain u
Slide 51: Notes
Notes Results presentation 25 March 2015 - Page 51 -
Slide 52: Build costs
Build costs Rationalised supply base over recent years. Mandatory Group deals for timber, bricks, blocks and kitchens – Rebates at record levels. Material cost pressures are low in context of overall build cost. Availability of specific sub-contract trades is a continued pressure but cost increases
Slide 53: Notes
Notes Results presentation 25 March 2015 - Page 53 -
Slide 54: Divisional growth and structure
Divisional growth and structure New division opened in Bristol in February. Anticipate opening another new division in 2015/16. Existing offices New office Capacity of around 9,000 homes in short to medium term. Continuing to assess possible further areas of expansion. Ability to grow beyond 9,000 h
Slide 55: Notes
Notes Results presentation 25 March 2015 - Page 55 -
Slide 56: Land acquisition
Land acquisition £355m spent on land and land creditors. Almost £2bn spent on land since downturn. Strengthened divisional land and planning teams. Favourable planning conditions. A focus on brownfield which represents 68% of Group’s legal completions. Head office land team reviews all land ensuring
Slide 57: Notes
Notes Results presentation 25 March 2015 - Page 57 -
Slide 58: Land bank
Land bank As at 31 January 31 July 2015 2014 Owned and controlled plots 35,837 35,434 Made up of:- DPP: plots with detailed planning permission 20,037 19,434 Pipeline: plots pending an implementable DPP 15,800 16,000 Strategic plots > 5,300 > 4,500 Strategic plots are only those long term plots whic
Slide 59: Notes
Notes Results presentation 25 March 2015 - Page 59 -
Slide 60: Land supply
Land supply As at Owned and controlled land (plots) Contracted to acquire 46 Land with DPP Pipeline sites in the period – 60% are in the south. Increased emphasis towards the south where returns are higher. Overall land bank split is right for the Group. North South Results presentation 25 March 201
Slide 61: Notes
Notes Results presentation 25 March 2015 - Page 61 -
Slide 62: Case study – Nine Elms
Case study – Nine Elms We will develop more complex schemes if contract terms are compelling. Upgraded to zone 1, new Northern line tube station and close to U.S. Embassy. Subject to planning contract for £44.4m with part deferred until December 2016. Planning obtained in October 2014 for 510 apartm
Slide 63: Notes
Notes Results presentation 25 March 2015 - Page 63 -
Slide 64: Sales outlets
Sales outlets As at Average active outlets 215 outlets at 1 August 2014. 220 outlets at 31 January 2015. 40 new outlets to open in H2. Could end year with 230 outlets. Different locations and product attract different sales rates. Outlet numbers should help to preserve weekly sales rate. Results pre
Slide 65: Notes
Notes Results presentation 25 March 2015 - Page 65 -
Slide 66: Trading and outlook
Trading and outlook Ted Ayres Chief Executive Results presentation 25 March 2015 - Page 66 -
Slide 67: Notes
Notes Results presentation 25 March 2015 - Page 67 -
Slide 68: Trading in period
Trading in period For the half year ended 31 January 2015 2014 Mvt Total reservations Return to normal North 1,610 1,544 4.3% seasonal trading pattern. South 1,994 2,012 (0.9%) Help to Buy used in 24% Total 3,604 3,556 1.3% of reservations. Incentives remain low. Sales rate (to 0 d.p.) North 62 60 4
Slide 69: Notes
Notes Results presentation 25 March 2015 - Page 69 -
Slide 70: Current trading and order book
Current trading and order book As at Current order book Value (£m) Reservations of 152 per week +35.2% from 1 February to 8 March – up 10%. Expect usual seasonal pattern Units of reservations. +21.6% Mindful of May general election. North South Results presentation 25 March 2015 - Page 70 -
Slide 71: Notes
Notes Results presentation 25 March 2015 - Page 71 -
Slide 72: Outlook
Outlook Strong forward sales position. Effective management of supply chain constraints. Expected volume growth in excess of 10% in current financial year. Sustainable and long term shareholder returns Results presentation 25 March 2015 - Page 72 -
Slide 73: Notes
Notes Results presentation 25 March 2015 - Page 73 -
Slide 74: Questions and answers
Questions and answers Hampton Grange, Bromley Results presentation 25 March 2015 - Page 74 -
Slide 75: Notes
Notes Results presentation 25 March 2015 - Page 75 -
Slide 76: Appendices
Appendices 1. Geographic analysis 2. Product analysis 3. Buyer analysis 4. ASP analysis 5. Order book at 31 January 6. Strategic land 7. Land bank glossary 8. Shared equity 9. Accounting standards Results presentation 25 March 2015 - Page 76 -
Slide 77: Notes
Notes Results presentation 25 March 2015 - Page 77 -
Slide 78: Appendix 1 – Geographic analysis
Appendix 1 – Geographic analysis Unit completions For the half year ended 31 January Private Social Total 2015 2014 2015 2014 2015 2014 No. No. No. No. No. No. North 1,569 1,379 253 95 1,822 1,474 South 1,534 1,512 398 259 1,932 1,771 Total 3,103 2,891 651 354 3,754 3,245 Average selling price Priva
Slide 79: Notes
Notes Results presentation 25 March 2015 - Page 79 -
Slide 80: Appendix 2 – Product analysis
Appendix 2 – Product analysis For the half year ended 31 January Selling price analysis 2015 2014 Over half of flats are in London. High average selling price for a Townhouses are only 4% of national housebuilder. output. Flexible land buying Results presentation 25 March 2015 - Page 80 -
Slide 81: Notes
Notes Results presentation 25 March 2015 - Page 81 -
Slide 82: Appendix 3 - Buyer analysis
Appendix 3 - Buyer analysis For the half year ended 31 January 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 25 March 2015 - Pag
Slide 83: Notes
Notes Results presentation 25 March 2015 - Page 83 -
Slide 84: Appendix 4 – ASP analysis
Appendix 4 – ASP analysis For the half year ended 31 January ASP / square foot (£) 2015 2014 Mvt Private Social Total Private Social Total Private Social Total North 184 110 176 171 115 168 7.6% (4.3%) 4.8% South - made up of:- 293 174 272 276 150 261 6.2% 16.0% 4.2% London 371 255 356 371 192 353 -
Slide 85: Notes
Notes Results presentation 25 March 2015 - Page 85 -
Slide 86: Appendix 5 – Order book at 31 January
Appendix 5 – Order book at 31 January As at 31 January 2015 31 January 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 2,948 656 3,604 3,338 218 3,556 (11.7%) 200.9% 1.3% Completions (3,
Slide 87: Notes
Notes Results presentation 25 March 2015 - Page 87 -
Slide 88: Appendix 6 - Strategic land
Appendix 6 - Strategic land As at Strategic land by category 5,300 plots in strategic land 31 January 2015 31 July 2014 bank with positive planning status. A further 40 sites are currently being progressed through the Allocation only Application only Both allocation and application planning system.
Slide 89: Notes
Notes Results presentation 25 March 2015 - Page 89 -
Slide 90: Appendix 7 – Land bank glossary
Appendix 7 – 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 91: Notes
Notes Results presentation 25 March 2015 - Page 91 -
Slide 92: Appendix 8 - Shared equity
Appendix 8 - Shared equity As at 31 January 31 July 2015 2014 Number of assets owned 2,451 2,682 Book value (BV) £26.5m £32.2m Original loan (OL) £60.1m £70.4m BV / OL 44% 46% Cumulative redemptions to date (units) 710 479 Book value / Net asset value 1.8% 2.4% Results presentation 25 March 2015 - P
Slide 93: Notes
Notes Results presentation 25 March 2015 - Page 93 -
Slide 94: 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