Bellway P.l.c. · LSE:BWY

Bellway P.l.c — H1 2013 Earnings Presentation

86 slides from Bellway P.l.c's earnings presentation, Mar 26, 2013

1. Slide 1: Results Presentation: Half year ended 31 January 2013

   Results Presentation Half year ended 31 January 2013

2. Slide 2: Agenda

   Agenda 1. Overview 2. Strategic and operating review 3. Finance review 4. Current trading and outlook 5. Questions and answers 6. Appendices Results presentation 26 March 2013 - Page 2 -

3. Slide 3: Overview

   Overview John Watson Non Executive Chairman Results presentation 26 March 2013 - Page 3 -

4. Slide 4: Highlights

   Highlights  Homes sold up 5.8% to 2,597  ASP up 2.6% to £187,426  Total revenue increased by 9.6% to £502.5m  Operating margin up 270 ppts to 12.8%  Profit before taxation up 47.5% to £59.9m  Earnings per share up 50.4% to 37.9p  Return on capital employed increased to 10.5%  Net asset value

5. Slide 5: Notes

   Notes Results presentation 26 March 2013 - Page 5 -

6. Slide 6: Strategic and operating review

   Strategic and operating review Ted Ayres Chief Executive Results presentation 26 March 2013 - Page 6 -

7. Slide 7: Notes

   Notes Results presentation 26 March 2013 - Page 7 -

8. Slide 8: Creating value

   Creating value  Creating shareholder value through:- – Growth in net asset value – Progressive annual dividend payments Results presentation 26 March 2013 - Page 8 -

9. Slide 9: Notes

   Notes Results presentation 26 March 2013 - Page 9 -

10. Slide 10: Improvement in NAV

    Improvement in NAV  Improvement in NAV through:- – Volume growth – Average selling price growth – Operating margin growth – Improvement in return on capital employed Results presentation 26 March 2013 - Page 10 -

11. Slide 11: Notes

    Notes Results presentation 26 March 2013 - Page 11 -

12. Slide 12: Volume growth

    Volume growth Volume  5.8% increase in volume 2,750 5.8%  Average growth of 6.1% in 2,500 5.3% previous 3 financial years 3.8% 2,250 11.6%  Strong performance in 2,597 north – up 9% 2,455 2,332 2,000 2,247  In the south volumes have 2,014 increased by 2.9% 1,750 Jan 09 Jan 10 Jan 11 Jan 12 Jan 1

13. Slide 13: Notes

    Notes Results presentation 26 March 2013 - Page 13 -

14. Slide 14: Volume growth

    Volume growth  Volume growth driven by more sales outlets:- − Expect average sales outlets to increase by 5% compared to last year − Average of 215 outlets in H1 − Expect average of 218 outlets for full year  New divisions possible  Ability to extend capacity beyond 6,500 units Results presentati

15. Slide 15: Notes

    Notes Results presentation 26 March 2013 - Page 15 -

16. Slide 16: Average selling price growth

    Average selling price growth ASP £000  ASP increased over period of nil 190.0 house price inflation 2.6% 8.5%  Ability to adapt to changes in 180.0 the market place  National coverage has enabled 8.1% increased exposure to the south 170.0 187.4 where demand remains 182.8 strongest 160.0 (0.2%) 16

17. Slide 17: Notes

    Notes Results presentation 26 March 2013 - Page 17 -

18. Slide 18: Average selling price growth - London presence

    Average selling price growth  Presence in London market:- - 25 active sales outlets in London - Expertise in development of high rise apartments - Private average selling price in London of around £240k – affordable in the context of the London market Results presentation 26 March 2013 - Page 18 -

19. Slide 19: Notes

    Notes Results presentation 26 March 2013 - Page 19 -

20. Slide 20: Completion analysis

    Completion analysis 2013 2012 521, 21% 428, 16% 395, 15% 407, 17% 140, 5% 330, 13% 401, 15% 177, 7% 135, 5% 119, 5% 38, 2% 26, 1% 67, 3% 911, 36% 957, 39% Second time buyers Shared equity Other buyers Other second time buyers Bellway shared equity Housing association Part exchange used as an incenti

21. Slide 21: Notes

    Notes Results presentation 26 March 2013 - Page 21 -

22. Slide 22: Operating margin growth

    Operating margin growth  Operating margin growth driven by:- – Acquisition of higher margin land – Reduction in impaired land – Efficient control of cost base Results presentation 26 March 2013 - Page 22 -

23. Slide 23: Notes

    Notes Results presentation 26 March 2013 - Page 23 -

24. Slide 24: Build costs

    Build costs  Subcontract increases benign – 0.5% to 1.0%  Minor increases in bricks, blocks and timber  Cost pressures of building regulations / code  Standardised product could mitigate cost pressures Results presentation 26 March 2013 - Page 24 -

25. Slide 25: Notes

    Notes Results presentation 26 March 2013 - Page 25 -

26. Slide 26: Focus on return on capital

    Focus on return on capital  Minimum hurdle rates on land acquisition  Forward funding from HAs helps to achieve higher returns  Site contracted in November 2010  Agreed land price of £3.4 million  10% deposit  Balance due on receipt of DPP  Gross margin > 21%  Bulk disposal to HA – staged pa

27. Slide 27: Notes

    Notes Results presentation 26 March 2013 - Page 27 -

28. Slide 28: Land buying

    Land buying  £145 million expended on land and land creditors  Land market softer for acquisitions in excess of £10 million  Strong competition for traditional housing sites below £5 million Results presentation 26 March 2013 - Page 28 -

29. Slide 29: Notes

    Notes Results presentation 26 March 2013 - Page 29 -

30. Slide 30: Land buying

    Land buying  Land bank increased to 32,025 plots  Pipeline increased by 1,400 plots  1,723 plots moved from pipeline to land with DPP  363 plots acquired with the benefit of a DPP Results presentation 26 March 2013 - Page 30 -

31. Slide 31: Notes

    Notes Results presentation 26 March 2013 - Page 31 -

32. Slide 32: Land bank

    Land bank as at 31 January 31 July 2013 2012 3 levels to our land bank DPP: Plots owned with planning 17,125 17,636 Pipeline: Plots pending planning 14,900 13,500 Total plots 32,025 31,136 Strategic: Long term potential plots >4,000 >3,900 Heads of terms agreed on further 4,300 plots as at 10 March

33. Slide 33: Notes

    Notes Results presentation 26 March 2013 - Page 33 -

34. Slide 34: Finance review

    Finance review Keith Adey Finance Director Results presentation 26 March 2013 - Page 34 -

35. Slide 35: Notes

    Notes Results presentation 26 March 2013 - Page 35 -

36. Slide 36: Group results

    Group results For the six months ended 31 January 2013 2012 Mvt Revenue £502.5m £458.6m 9.6% Gross profit £89.7m 17.9% £69.9m 15.2% 28.3% Administrative expenses (£25.3m) (5.1%) (£23.5m) (5.1%) 7.7% Operating profit £64.4m 12.8% £46.4m 10.1% 38.8% Net finance costs (£4.5m) (£5.8m) (22.4%) Profit bef

37. Slide 37: Notes

    Notes Results presentation 26 March 2013 - Page 37 -

38. Slide 38: Revenue

    Revenue For the six months ended 31 January 2013 2012 % Homes sold 2,597 2,455 5.8% Average sales price £187,426 £182,753 2.6% Housing revenue £486.7m £448.7m 8.5% Non housing revenue £15.8m £9.9m 59.6% Total housing revenue £502.5m £458.6m 9.6% Results presentation 26 March 2013 - Page 38 -

39. Slide 39: Notes

    Notes Results presentation 26 March 2013 - Page 39 -

40. Slide 40: Sales statistics

    Sales statistics For the six months ended 31 January 2013 2012 % Private housing Homes sold 2,202 2,048 7.5% Average selling price £199,140 £193,095 3.1% Social housing Homes sold 395 407 (2.9%) Average selling price £122,131 £130,715 (6.6%) Results presentation 26 March 2013 - Page 40 -

41. Slide 41: Notes

    Notes Results presentation 26 March 2013 - Page 41 -

42. Slide 42: Sales statistics

    Sales statistics For the six months ended 31 January 2013 2012 % North Homes sold 1,278 1,173 9.0% Average selling price £160,500 £151,468 6.0% South (inc. London) Homes sold 1,319 1,282 2.9% Average selling price £213,516 £211,378 1.0% London Boroughs Homes sold 413 326 26.7% Average selling price

43. Slide 43: Notes

    Notes Results presentation 26 March 2013 - Page 43 -

44. Slide 44: Sales statistics

    Sales statistics For the six months ended 31 January 2013 2012 Product mix analysis 100% 15% 12% Houses vs Flats 90% 3% 4% 80% Houses 70% 73% 23% 70% 26% 72% 60% 77% Apartments 30% 27% 50% 34% 40% 32% 30% Size 20% 8% 13% 10% 15% 15% Av. Sq. feet / home 984 959 0% Jan 13 Jan 12 ASP / square foot £192

45. Slide 45: Notes

    Notes Results presentation 26 March 2013 - Page 45 -

46. Slide 46: Sales statistics

    Sales statistics For the six months ended 31 January Selling price 2013 2012 Up to £100,000 12% 14% £100,001 to £150,000 28% 32% £150,001 to £200,000 25% 23% £200,001 to £250,000 17% 14% 35% 31% Over £250,000 18% 17% Results presentation 26 March 2013 - Page 46 -

47. Slide 47: Notes

    Notes Results presentation 26 March 2013 - Page 47 -

48. Slide 48: Operating performance

    Operating performance For the six months ended 31 January Completions by land type 2013 2012 100% 90% Gross margin 17.9% 15.2% 80% c. 41% 70% c. 62% 60% Admin. expenses (5.1%) (5.1%) 50% 40% c. 37% Operating margin 12.8% 10.1% 30% c. 18% 20% 10% c. 20% c. 22% 0% Jan 13 Jan 12 Operating profit £64.4m

49. Slide 49: Notes

    Notes Results presentation 26 March 2013 - Page 49 -

50. Slide 50: Finance expense

    Finance expense For the six months ended 31 January 2013 2012 % Net bank interest payable inc. fees £1.8m £3.0m (40.0%) Preference dividend £1.0m £1.0m - Land creditors / debtors – IAS 39 £1.8m £1.6m 12.5% Pension cost £0.2m £0.2m - Other interest (£0.3m) - - Net finance expense £4.5m £5.8m (22.4%)

51. Slide 51: Notes

    Notes Results presentation 26 March 2013 - Page 51 -

52. Slide 52: Earnings

    Earnings For the six months ended 31 January 2013 2012 % Profit before tax £59.9m £40.6m 47.5% Taxation (£13.9m) (£10.2m) 36.3% Effective tax rate 23.2% 25.1% Profit after tax £46.0m £30.4m 51.3% Earnings per share 37.9p 25.2p 50.4% Dividend 9.0p 6.0p 50.0% Dividend cover 4.2 4.2 Results presentatio

53. Slide 53: Notes

    Notes Results presentation 26 March 2013 - Page 53 -

54. Slide 54: Capital structure

    Capital structure as at 31 January 31 July 2013 2012 Net bank borrowings £75.4m £40.6m Preference debt £20.0m £20.0m Net debt £95.4m £60.6m Equity £1,164.3m £1,133.1m Capital employed £1,259.7m £1,193.7m Gearing 8.2% 5.3% Land creditors £147.3m £120.6m Capital employed including land creditors £1,40

55. Slide 55: Notes

    Notes Results presentation 26 March 2013 - Page 55 -

56. Slide 56: Value creation

    Value creation as at 31 January 31 January Pre write downs Post write downs 2013 2012 1,100 RoCE 10.5% 8.4% hare per s 17 % 1,000 ow th > lg r To ta 31 January 31 January 2013 2012 Pence 900 Dividend 9.0p 6.0p 800 31 January 31 July 2013 2012 700 Jul 07 Jul 08 Jul 09 Jul 10 Jul 11 Jul 12 Jan 13 NAV

57. Slide 57: Notes

    Notes Results presentation 26 March 2013 - Page 57 -

58. Slide 58: Capital employed

    Capital employed as at 31 January 31 July 2013 2012 Assets Fixed assets £19.8m £21.2m Inventory £1,485.1m £1,399.8m Shared equity £35.1m £35.1m Debtors £67.5m £74.4m £1,607.5m £1,530.5m Liabilities Pension deficit (£10.9m) (£11.5m) Creditors (£189.6m) (£204.7m) Land creditors (£147.3m) (£120.6m) (£3

59. Slide 59: Notes

    Notes Results presentation 26 March 2013 - Page 59 -

60. Slide 60: Inventory

    Inventory as at 31 January 31 July 2013 2012 Land with planning £705.8m £687.6m Land pending planning £198.5m £165.3m Work in progress £506.0m £479.5m Showhomes £50.3m £45.5m Part exchange stock £24.5m £21.9m Total £1,485.1m £1,399.8m Results presentation 26 March 2013 - Page 60 -

61. Slide 61: Notes

    Notes Results presentation 26 March 2013 - Page 61 -

62. Slide 62: Land with planning

    Land with planning Average Plots Cost plot cost Brought forward 1 August 2012 17,636 £687.6m £39.0k Sold (2,597) (£119.9m) £46.2k 15,039 £567.7m £37.7k Net purchases 2,086 £138.1m £66.2k Carried forward 31 January 2013 17,125 £705.8m £41.2k Results presentation 26 March 2013 - Page 62 -

63. Slide 63: Notes

    Notes Results presentation 26 March 2013 - Page 63 -

64. Slide 64: Shared equity

    Shared equity as at 31 January 31 July 2013 2012 Number of assets owned 2,838 2,728 Book value (BV) £35.1m £35.1m Original loan (OL) £75.7m £74.6m BV / OL 46% 47% Cumulative redemptions to date (units) 267 232 Cumulative redemption proceeds as % of OL 74% 72% Results presentation 26 March 2013 - Pag

65. Slide 65: Notes

    Notes Results presentation 26 March 2013 - Page 65 -

66. Slide 66: Cash flow

    Cash flow (£4.4m) For the six months ended 31 January H1 Average debt of £57.9m Results presentation 26 March 2013 - Page 66 -

67. Slide 67: Notes

    Notes Results presentation 26 March 2013 - Page 67 -

68. Slide 68: Finance summary

    Finance summary For the six months ended 31 January Movement Volume growth +5.8% Average selling price growth +2.6% Operating margin growth +270 ppts Profit before taxation growth +47.5% Return on capital growth +210 ppts Dividend growth +50% Net asset value growth +24p Results presentation 26 March

69. Slide 69: Notes

    Notes Results presentation 26 March 2013 - Page 69 -

70. Slide 70: Current trading and outlook

    Current trading and outlook as at Ted Ayres Chief Executive Results presentation 26 March 2013 - Page 70 -

71. Slide 71: Notes

    Notes Results presentation 26 March 2013 - Page 71 -

72. Slide 72: Market place

    Market place  Averaged 97 reservations per week in H1  Averaged 133 reservations per week since 1 February – an increase of over 10%  NewBuy has accounted for 12% of reservations since 1 February Results presentation 26 March 2013 - Page 72 -

73. Slide 73: Notes

    Notes Results presentation 26 March 2013 - Page 73 -

74. Slide 74: Order book

    Order book  Current order book of £507.4 million compared to £498.5 million last year  Order book made up of 963 social homes and 1,783 private homes  53% of order book contracted  94% of current year target secure Results presentation 26 March 2013 - Page 74 -

75. Slide 75: Notes

    Notes Results presentation 26 March 2013 - Page 75 -

76. Slide 76: Summary

    Summary  Organic growth strategy should maximise value creation through:- – Increase in net asset value – Growing annual dividend payments Results presentation 26 March 2013 - Page 76 -

77. Slide 77: Notes

    Notes Results presentation 26 March 2013 - Page 77 -

78. Slide 78: Questions and answers

    Questions and answers The Coppice, Takeley Results presentation 26 March 2013 - Page 78 -

79. Slide 79: Notes

    Notes Results presentation 26 March 2013 - Page 79 -

80. Slide 80: Appendices

    Appendices 1.Land creditor payments 2.Land bank 3.Order book Results presentation 26 March 2013 - Page 80 -

81. Slide 81: Notes

    Notes Results presentation 26 March 2013 - Page 81 -

82. Slide 82: Appendix - Land creditor payments

    Appendix 1 - Land creditor payments For the six months ended 31 January 160 147.3 79.7 140 120 100  Land creditors represent 16% of land £m 80 28.4 book value. 60 39.2 40  Only £108m of committed land 20 expenditure within next - 12 months. Balance at 31 H2 2012/2013 H1 2013/2014 Thereafter Januar

83. Slide 83: Notes

    Notes Results presentation 26 March 2013 - Page 83 -

84. Slide 84: Appendix - Land bank

    Appendix 2 – Land bank Analysis of plots in land bank with DPP Cumulative land expenditure since downturn (£m) 100% 90% 80% 1,000 42% 54% 70% 59% 800 60% 50% 600 40% 35% 1,001 27% 30% 24% 856 400 20% 551 23% 10% 17% 19% 200 301 0% Jan 13 Jul 12 Jul 11 93 Newly acquired plots (> 20%) 0 Plots without

85. Slide 85: Notes

    Notes Results presentation 26 March 2013 - Page 85 -

86. Slide 86: Appendix - Order book

    Appendix 3 – Order book as at 31 January 2013 31 January 2012 Movement Private Social Total Private Social Total Private Social Total % % % At 1 August 1,499 1,034 2,533 1,485 1,012 2,497 0.9% 2.2% 1.4% Reservations 2,181 350 2,531 1,977 340 2,317 10.3% 2.9% 9.2% Completions (2,202) (395) (2,597) (2

Bellway p.l.c. — H1 2013 Earnings Presentation on 6ix