Barratt Redrow Plc · LSE:BTRW

Barratt Redrow — Barratt Developments — H1 2012/13 Earnings Presentation

60 slides from Barratt Redrow's earnings presentation, Feb 27, 2013

  1. Slide 1: Results presentation Half year ended 31 December 2012

    Half Year 2012/13 1 Results presentation Half year ended 31 December 2012 27 February 2013

  2. Slide 2: Bob Lawson, Chairman

    Half Year 2012/13 2 Bob Lawson St Andrews, Bromley-by-Bow, London, E3 Chairman

  3. Slide 3: David Thomas, Group Finance Director

    Half Year 2012/13 3 David Thomas Group Finance Director Ladykirk Place, Monkton, Ayrshire

  4. Slide 4: Key highlights – continued progress

    Half Year 2012/13 4 Key highlights – continued progress Operating margin(1) Pre-tax profits £m(2) Private ASP £k 205 9% 60 8% 195 40 7% 20 46.1 6% 185 5% 21.6 0 4% (4.6) 175 3% -20 199.9 201.9 2% 6.4% 8.5% (48.5) 165 173.2 191.9 5.0% 2.4% -40 1% 155 0% -60 H1 09/10 H1 10/11 H1 11/12 H1 12/13 H1 09/1

  5. Slide 5: Summary revenue drivers

    Half Year 2012/13 5 Summary revenue drivers Change H1 12/13 v H1 H1 12/13 H1 11/12 FY 11/12 11/12 Completions Private 4,241 4,028 9,832 5.3% Affordable 844 1,089 2,805 (22.5%) Total 5,085 5,117 12,637 (0.6%) % Affordable 17% 21% 22% (4%) JV(1) 109 81 220 34.6% ASP (£’000) Private 201.9 199.9 201.8 1

  6. Slide 6: Profit & loss

    Half Year 2012/13 6 Profit & loss Change H1 12/13 v H1 £m (unless otherwise stated) H1 12/13 H1 11/12 FY 11/12 11/12 Revenue 951.1 952.8 2,323.4 (0.2%) Gross profit 111.2 99.2 296.2 12.1% Gross margin 11.7% 10.4% 12.7% 1.3% Administrative expenses (40.6) (40.5) (122.2) 0.2% Other income 10.2 2.4 17.

  7. Slide 7: Completions by land type

    Half Year 2012/13 7 Completions by land type 100% 27% 35% 80% 40% 45% % of total completions (3) 60% 44% 38% 35% 40% 33% 20% 29% 25% 27% 22% 0% H1 11/12 H2 11/12 FY 11/12 H1 12/13 (1) (1) (2) Impaired old Non impaired - old New (1) Old land owned prior to re-entry into land market in mid 2009 (2) In

  8. Slide 8: Joint ventures - London

    Half Year 2012/13 8 Joint ventures - London Private : Profit Affordable share (%) JV partner GDV Total units Private ASP (%) Altitude, Aldgate 50 : 50 L&Q £110m 235 £558k 73 : 27 Queensland 50 : 50 L&Q £137m 375 £353k 100 : 00 Terrace, Islington Fulham Riverside, 50 : 50 L&Q £427m 462 £1,030k 85 : 1

  9. Slide 9: London joint venture delivery profile

    Half Year 2012/13 9 London joint venture delivery profile J J J J F MA Mu J A S N D J F M A M u J A S N D J F M A M u J A S N a e a p a n ul u e O o e a e a p a n ul u e O o e a e a p a n ul u e O o Landbank n b r r y e y g p ct v c n b r r y e y g p ct v c n b r r y e y g p ct v Dec private units(1

  10. Slide 10: Cash flow

    Half Year 2012/13 10 Cash flow £m (unless otherwise stated) H1 12/13 H1 11/12 FY11/12 Profit from operations (after exceptionals) 80.8 61.1 191.1 Decrease in net land (pre land acquisitions and disposals) 227.0 211.6 505.9 Increase in WIP (128.5) (95.8) (35.9) Decrease in part exchange and other inv

  11. Slide 11: Cash flow (continued)

    Half Year 2012/13 11 Cash flow (continued) £m (unless otherwise stated) H1 12/13 H1 11/12 FY 11/12 Cashflow from operations (pre land acquisitions & disposals) 82.6 70.5 572.4 Land spend (231.3) (260.6) (397.4) Land sales 28.3 3.2 39.0 Investments in joint ventures and associates (22.3) (8.5) (7.9)

  12. Slide 12: Balance sheet - assets

    Half Year 2012/13 12 Balance sheet - assets £m (unless otherwise stated) 31 Dec 2012 30 June 2012 31 Dec 2011 Goodwill and intangibles 892.2 892.2 892.2 Deferred tax assets 108.8 118.6 144.8 Equity share (non-current available for sale assets) 193.9 189.2 177.5 Investment in joint ventures and assoc

  13. Slide 13: Landbank – increasing % of high margin land

    Half Year 2012/13 13 Landbank – increasing % of high margin land 100% 80% 41% 45% 53% 57% 64% 60% 40% 39% 38% 33% 31% 26% 20% 20% 17% 14% 12% 10% 0% 31-Dec-10 30-Jun-11 31-Dec-11 30-Jun-12 31-Dec-12 Impaired old(1) Non impaired old (1) New-owned and conditional(2) (1) Old land owned prior to re-entr

  14. Slide 14: Equity share

    Half Year 2012/13 14 Equity share £m (unless otherwise stated) 31 Dec 2012 30 June 2012 31 Dec 2011 Opening balance 189.2 169.4 169.4 Net additions(1) 8.5 24.5 11.0 Redemptions (3.8) (4.7) (2.9) Closing balance 193.9 189.2 177.5 Of which: - Government schemes 64.3 52.5 41.7 - Barratt schemes 129.6 1

  15. Slide 15: Balance sheet – liabilities

    Half Year 2012/13 15 Balance sheet – liabilities £m (unless otherwise stated) 31 Dec 2012 30 June 2012 31 Dec 2011 Net debt (331.7) (167.7) (542.2) Trade payables (259.3) (291.4) (255.2) Other payables(1) (306.5) (343.8) (331.0) Pension obligations (19.9) (21.4) (35.1) Net swaps (51.3) (49.2) (48.6)

  16. Slide 16: Net interest charge analysis

    Half Year 2012/13 16 Net interest charge analysis £m (unless otherwise stated) H1 12/13 H1 11/12 FY 11/12 Cash interest Interest on term debt and overdrafts 6.1 8.9 18.1 Interest on private placement notes 11.3 11.4 22.6 Non-utilisation fees on RCF’s 3.0 4.7 8.4 Swap interest 4.5 4.6 8.7 Other inter

  17. Slide 17: Financing arrangements

    Half Year 2012/13 17 Financing arrangements Loan Facility Amount Maturity Interest basis Average rate(1) RCF facilities(2)(3) £690m May 2015 LIBOR +2.25% 7.2% Interest rate swaps(4) £192m 5.9% Private Placement notes(3)(5) Apr 2013(6) Fixed rates - Aug 07 / Apr 08 Issue £163m 11.4% – Apr 2020 depend

  18. Slide 18: Guidance

    Half Year 2012/13 18 Guidance • 51% of H2 12/13 completions expected from higher margin land • FY13 administration cost c. £110m • FY13 net interest charge c. £72m • FY13 cash land spend c. £700m • Net debt as at 30 June 2013 c. £160m • Land creditors remain at similar proportion of landbank

  19. Slide 19: Steven Boyes, Group Chief Operating Officer

    Half Year 2012/13 19 Great Western Park, Didcot, Oxfordshire Insert image Steven Boyes Group Chief Operating Officer

  20. Slide 20: Strong H1 performance

    Half Year 2012/13 20 Strong H1 performance • Strong H1 performance • All regions making progress towards objectives • New sites delivering target returns • Strong momentum in the land market • Firm focus on operational efficiency and cost control

  21. Slide 21: Improving trends across the regions

    Half Year 2012/13 21 Improving trends across the regions Total H1 11/12 H1 12/13 % Chg Private units owned 4,028 4,241 +5.3% Private ASP owned (£k) 199.9 201.9 +1.0% Private units JV 50 54 +8.0% Private ASP JV (£k) 263.3 282.0 +7.1% Northern H1 11/12 H1 12/13 % Chg East H1 11/12 H1 12/13 % Chg Priva

  22. Slide 22: Regional private sales rates

    Half Year 2012/13 22 Regional private sales rates Total H1 11/12 H1 12/13 0.48 0.49 +2.1% Northern East H1 11/12 H1 12/13 change H1 11/12 H1 12/13 change 0.44 0.40 -9.1% 0.45 0.47 +4.4% Southern Central H1 11/12 H1 12/13 change H1 11/12 H1 12/13 change 0.63 0.69 +9.5% 0.41 0.42 +2.4% West London H1

  23. Slide 23: Gradually increasing site numbers

    Half Year 2012/13 23 Gradually increasing site numbers 400 400 391 7 381 6 383 380 375 5 4 2 360 352 2 393 340 385 377 378 373 350 320 300 H1 10/11 H2 10/11 H1 11/12 H2 11/12 H1 12/13 H2 12/13 to date (1) (1) Active sites JV active sites (1) Average active sites in the period

  24. Slide 24: Completions by type

    Half Year 2012/13 24 Completions by type (1) 100% 21% 17% 80% 19% 17% 60% 5% 19% 17% 40% 7% 9% 20% 36% 33% 0% H1 11/12 H1 12/13 (2) Other private Investor Shared equity NewBuy Part exchange Affordable (1) Completions excluding joint ventures (2) Affordable completions comprise Section 106 obligation

  25. Slide 25: Completions by product mix

    Half Year 2012/13 25 Completions by product mix (1) 100% 9% 6% 4% 4% 80% 25% 29% 21% 25% 60% 30% 32% 40% 14% 13% 20% 22% 20% 0% H1 11/12 H1 12/13 Flats (non-London) 1 & 2 Bed 3 Bed 4 Bed 5 & 6 Bed Flats (London) (1) Completions excluding joint ventures

  26. Slide 26: Strong momentum in the land market

    Half Year 2012/13 26 Strong momentum in the land market 500 Land approvals (£m) 453 400 400 300 318 277 200 213 178 100 136 37 0 H2 08/09 H1 09/10 H2 09/10 H1 10/11 H2 10/11 H1 11/12 H2 11/12 H1 12/13

  27. Slide 27: Excellent opportunities - London

    Half Year 2012/13 27 Excellent opportunities - London Fulham Riverside, Fulham Wharf, SW6 Cannon Wharf, Surrey Quays, SE8 Division West London Division East London GDV £427m GDV £221m Total units 462 Total units 679 Private ASP £1,030k Private ASP £355k Land source Sainsbury’s Land source Private Fl

  28. Slide 28: Excellent opportunities - Southern

    Half Year 2012/13 28 Excellent opportunities - Southern Cane Hill, Coulsdon, Surrey Gumley Road, Grays, Essex Division Southern Counties Division Eastern Counties GDV £236m GDV £24m Total units 650 Total units 134 Private ASP £443k Private ASP £209k Land source Greater London Authority Land source P

  29. Slide 29: Excellent opportunities - West

    Half Year 2012/13 29 Excellent opportunities - West Cathedral Walk, Wells, Somerset Pen Y Garn Heights, Pontypool, Gwent Division Bristol Division South Wales GDV £15m GDV £20m Total units 87 Total units 124 Private ASP £203k Private ASP £203k Land source Administrators Land source Local Authority H

  30. Slide 30: Excellent opportunities - East

    Half Year 2012/13 30 Excellent opportunities - East Saltergate, Chesterfield, Derbyshire Radstone Fields, Brackley, Northamptonshire Division North Midlands Division Northampton & South Midlands GDV £13m GDV £106m Total units 68 Total units 463 Private ASP £185k Private ASP £259k Land source Private

  31. Slide 31: Excellent opportunities - Central

    Half Year 2012/13 31 Excellent opportunities - Central Longford Park, Banbury, Oxfordshire Tettenhall, Woodthorne, West Midlands Division West Midlands Division Mercia GDV £76m GDV £29m Total units 356 Total units 58 Private ASP £237k Private ASP £490k Land source Private Land source Private Large b

  32. Slide 32: Excellent opportunities - Northern

    Half Year 2012/13 32 Excellent opportunities - Northern Fairmilehead, Edinburgh Centurion Fields, Adel, West Yorkshire Division East Scotland Division Yorkshire West GDV £44m GDV £20m Total units 144 Total units 45 Private ASP £358k Private ASP £475k Land source Scottish Water Land source Strategic

  33. Slide 33: National with a balanced land portfolio

    Half Year 2012/13 33 (1) National with a balanced land portfolio Owned & conditionally Years supply(2) JV plots(3) Approved plots(4) contracted plots Northern 11,093 4.8 2,329 Central 11,020 5.1 539 East 9,319 4.0 1,849 West 10,878 4.4 782 Southern 8,797 4.2 692 1,122 London 4,955 4.0 1,156 169 Tota

  34. Slide 34: Focus on operating efficiency

    Half Year 2012/13 34 Focus on operating efficiency • Continue to drive standardisation and best practice across the Group • c. 85% of materials, including sub contractor materials, procured centrally • Fixed supply arrangements provide visibility and certainty • For FY13, do not expect any significa

  35. Slide 35: Mark Clare, Group Chief Executive

    Half Year 2012/13 35 St Oswald’s Court, Malpas, Cheshire Mark Clare Group Chief Executive

  36. Slide 36: Market update

    Half Year 2012/13 36 Market update • Good momentum into December • Strong start to 2013 • Government’s FLS is driving improvements – increase in mortgage availability – reduction in interest rates • Planning process improvements • New sites driving strong levels of customer interest

  37. Slide 37: Improved mortgage lending for new build

    Half Year 2012/13 37 Improved mortgage lending for new build SECONDHAND NEW BUILD Lender Max LTV(1) Rate Rate Max LTV Rate Rate Sept 12 Feb 13 Sept 12 Feb 13 (NewBuy) (NewBuy) 90% 6.29% 4.99% 95% 5.89% 5.19% 90% 5.69% 4.24% 95% 5.49% 4.44% 90% 5.99% 4.49% 95% 4.99% 4.69% 90% 5.99% 6.19% 95% 5.49% 4.

  38. Slide 38: House prices & mortgage approvals

    Half Year 2012/13 38 House prices & mortgage approvals 140 110 120 Mortgage approvals (000s) 100 House price index (1) 100 80 90 60 40 80 20 0 70 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 (1) Mortgage approvals (LHS) Halifax HPI data (RHS)(1) Nationwi

  39. Slide 39: The Group's key objectives

    Half Year 2012/13 39 The Group’s key objectives Rebuilding profitability Zero net debt by June 2015 Drive ROCE Maximise Total Shareholder Return

  40. Slide 40: Rebuilding profitability

    Half Year 2012/13 40 Rebuilding profitability (1) 100% 6% 22% Total Average ASP(2) gross 80% Land type £K margin(2) 49% Impaired old(3) 171 0% % of total completions 61% Non impaired 179 c. 9% 60% old(3) New owned, 216 c. 20% 62% conditional & 40% approved(4) 33% Strategic, terms n/a c. 20% agreed &

  41. Slide 41: Zero net debt target whilst investing in land

    Half Year 2012/13 41 Zero net debt target whilst investing in land (1) Net debt (£m) 1,800 Cumulative land spend (£m) 400 367 1,611 1,600 350 323 1,400 300 1,200 250 1,000 911 200 168 160 800 150 600 514 100 Zero net 400 253 debt 50 200 0 0 FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY11 FY12 FY13 F'cst F'c

  42. Slide 42: Driving return on capital

    Half Year 2012/13 42 Driving return on capital 30% 29% 29% 25% 25% 22% 22% 20% 16% 15% 15% 11% 10% 9% 8% 6% 6% 5% 4% 1% 2% 0% FY06 FY07 FY08 FY09 FY10 FY11 FY12 Minimum hurdle on(3) ROCE(1) Adj ROCE(2) new land (1) ROCE is calculated as earnings before interest, tax and operating exceptional items d

  43. Slide 43: Driving return on capital

    Half Year 2012/13 43 Driving return on capital • Increase profits – 20% gross margin on new land • Deliver operational model – Fast asset turn – Reducing investment by a third • Realising low return assets – Older land – Commercial assets – Equity share

  44. Slide 44: Optimised operational model

    Half Year 2012/13 44 Optimised operational model Land acquisition Construction Sales & marketing • Right sites & • Minimise ‘paid for’ • Affordable housing product infrastructure delivery • Smaller average • Standardised • Dual branded sites site size product • Best in class sales • 4.5 year landban

  45. Slide 45: Dividend policy

    Half Year 2012/13 45 Dividend policy • Board recognises importance of both capital growth and dividend • Expect to propose a conservatively set final dividend for June 2013 • Phased reduction moving to 3 x cover by June 2016 • Combined with strong earnings momentum, expect rapid increase in absolute

  46. Slide 46: Current trading

    Half Year 2012/13 46 Current trading First 8 weeks First 8 weeks H2 12/13 H2 11/12 Change H1 12/13 Average net private reservations (1) 0.64 0.61 4.9% 0.49 per active site per week Cancellation rate 13.3% 14.1% 0.8% 18.8% (2) Average active sites 393 395 (0.5%) 378 (3) Private forward sales £897.7m

  47. Slide 47: Outlook

    Half Year 2012/13 47 Outlook • Strong start to second half • Mortgage market improving • Continued Government support • Planning system improving • Market fundamentals remain strong

  48. Slide 48: Summary

    Half Year 2012/13 48 Summary • Group making good progress • Expect significant increase in profits in H2 • Confidence to set targets: - Zero net debt by 30 June 2015 - 3x dividend cover by FY16 - Substantial improvement in ROCE in the medium term

  49. Slide 49: Appendices

    Half Year 2012/13 49 Appendices Page • Landbank by land type 50 • Balance sheet – landbank 51 • Approved land payment profile 52 • Land creditors payment profile 53 • Balance sheet – stock & WIP 54 • Joint Ventures – non-London 55 • Non-London joint venture delivery profile 56 • Net interest charge

  50. Slide 50: Landbank by land type

    Full Year 2012 50 Landbank by land type (1) ASP £k 171 179 204 192 252 10,581 Number of plots 25,553 45,481 4,803 9,672 5,453 (2) (2) (2) Impaired old Non-impaired old Non-impaired old Owned new (3) Total owned Conditional (3) <10% GM >10% GM Category of Land (1) Analysis is based on landbank as at

  51. Slide 51: Balance sheet - landbank

    Half Year 2012/13 51 Balance sheet - landbank 31 Dec 2012 30 June 2012 31 Dec 2011 Landbank plots Owned / unconditional contracts 45,481 43,897 46,294 Conditional contracts 10,581 10,312 12,065 Total 56,062 54,209 58,359 Landbank pricing (£’000) Cost of plots acquired 37.4 48.0 48.4 Cost of plots in

  52. Slide 52: Approved land payment profile

    Full Year 2012 52 Approved land payment profile Owned Conditional Approved Total Plots 28,018 8,817 6,790 43,625 Value (£m) 1,201 536 275 2,012 Payment profile (£m) Paid to date 555 12 1 568 H2 12/13 187 79 78 344 FY 13/14 300 154 83 537 FY 15 & beyond 159 291 113 563

  53. Slide 53: Land creditors payment profile

    Full Year 2012 53 Land creditors payment profile 800 790.1 241.5 700 600 363.6 500 £m 400 300 200 114.2 100 70.8 0 - 31-Dec-12 H2 12/13 FY 13/14 FY 14/15 FY 15/16 & beyond

  54. Slide 54: Balance sheet – stock & WIP

    Half Year 2012/13 54 Balance sheet – stock & WIP 31 Dec 2012 31 Dec 2011 Units £m Units £m Stock (build complete) - Reserved 273 335 - Unreserved 865 899 - Showhomes 234 267 Total 1,372 162 1,501 171 Unreserved per active site 2.2 2.2 WIP 1,194 1,119 Part Exchange - Reserved 224 31 204 26 - Unreserv

  55. Slide 55: Joint ventures – non-London

    Half Year 2012/13 55 Joint ventures – non-London Private : Profit Affordable Share (%) JV Partner GDV Total Units (%) The Acres 78.5 : 21.5 Wates £150m 501 78 : 22 - Horley Bluebell Gate 50 : 50 Wates £49m 142 70 : 30 - East Grinstead The Fieldings/ Cissbury Chase 50 : 50 Wates £68m 301 95 : 50 - Wo

  56. Slide 56: Non-London joint venture delivery profile

    Half Year 2012/13 56 Non-London joint venture delivery profile J J J J F MA Mu J A S N D J F MA Mu J A S N D J F MA Mu J A S N a e a p a n ul u e O o e a e a p a n ul u e O o e a e a p a n ul u e O o Landbank n b r r y e y g p ct v c n b r r y e y g p ct v c n b r r y e y g p ct v Dec private units

  57. Slide 57: Net interest charge analysis – non-cash

    Full Year 2012 57 Net interest charge analysis – non-cash £m (unless otherwise stated) H1 12/13 H1 11/12 FY 11/12 Non-cash interest Land creditors 14.1 12.1 28.8 Financing fees 2.8 2.5 3.5 Equity share (6.5) (4.5) (12.0) Kickstart, pension and impairment of 0.2 (0.6) 2.9 interest on JV Total non-cas

  58. Slide 58: Forward sales analysis – owned

    Full Year 2012 58 Forward sales analysis – owned 24 Feb 2013 26 Feb 2012 Change Value (£m) - Private £897.7m £669.9m 34.0% - Affordable £221.4m £251.9m (12.1%) - due in H2 (£m) £918.1m £725.2m 26.6% - due after H2 (£m) £201.0m £196.6m 2.2% Total value £1,119.1m £921.8m 21.4% Plots - Private 3,883 3,

  59. Slide 59: Forward sales analysis – joint ventures

    Full Year 2012 59 (1) Forward sales analysis – joint ventures 24 Feb 2013 26 Feb 2012 Change Value (£m) - Private £80.1m £24.2m 231.0% - Affordable £25.2m £10.0m 152.0% - due in H2 (£m) £43.1m £19.7m 118.8% - due after H2 (£m) £62.2m £14.5m 329.0% Total value £105.3m £34.2m 207.9% Plots - Private 21

  60. Slide 60: Disclaimer

    Full Year 2012 60 Disclaimer This document has been prepared by Barratt Developments PLC (the “Company”) solely for use at a presentation in connection with the Company's Half Year Results Announcement in respect of the 6 months ended 31 December 2012. For the purposes of this notice, the presentati

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