Barratt Redrow Plc · LSE:BTRW
Barratt Redrow — Barratt Developments — FY2015 Earnings Presentation
64 slides from Barratt Redrow's earnings presentation, Sep 9, 2015
Slide 1: Full Year 2015 Results presentation
Full Year 2015 1 Results presentation Year ended 30 June 2015 9 September 2015
Slide 2: Another year of excellent progress
Full Year 2015 2 Another year of excellent progress (1) Total completions +11% Gross margin +220 bps PBT +45% (2) ROCE +440 bps (3) Total cash return £250m (1) Includes joint ventures (‘JV’s’) in which the Group has an interest (2) Return on Capital Employed (‘ROCE’) is calculated as earnings before
Slide 3: Summary revenue drivers
Full Year 2015 3 Summary revenue drivers FY15 FY14 FY15 v FY14 Completions Private 12,746 11,936 6.8% Affordable 2,853 2,255 26.5% Total 15,599 14,191 9.9% % Affordable 18% 16% 200 bps (1) JV 848 647 31.1% Total completions (inc JV’s) 16,447 14,838 10.8% ASP (£’000) Private 262.5 241.6 8.7% Affordab
Slide 4: Profit & loss
Full Year 2015 4 Profit & loss £m (unless otherwise stated) FY15 FY14 FY15 v FY14 Revenue 3,759.5 3,157.0 19.1% Gross profit 714.3 529.4 34.9% Gross margin 19.0% 16.8% 220 bps Total administrative expenses (137.5) (119.6) (15.0%) Operating profit 576.8 409.8 40.8% Operating margin 15.3% 13.0% 230 bp
Slide 5: Joint ventures – uplift in completions and profit
Full Year 2015 5 Joint ventures – uplift in completions and profit Housebuild JV’s only FY16 (f’cast) FY15 FY14 (1) Completions - London c. 630 501 442 - Non-London c. 370 347 205 Total c. 1,000 848 647 % Affordable c. 21% 29% 9% (2) Share of profit - London c. £50m £35.5m £35.8m - Non-London c. £10
Slide 6: Higher pro forma Group operating margin
Full Year 2015 6 Higher pro forma Group operating margin FY15 FY14 £m (unless otherwise (1) (1) stated) Housebuild JV Pro forma Housebuild JV Pro forma Revenue 3,702.3 190.4 3,892.7 3,142.6 164.1 3,306.7 Operating profit 570.7 52.0 622.7 410.8 46.7 457.5 Operating margin 15.4% 27.3% 16.0% 13.1% 28.5
Slide 7: Cash flow
Full Year 2015 7 Cash flow £m FY15 FY14 Profit from operations 576.8 409.8 - net increase in land (489.4) (230.3) - increase in land creditors 219.6 35.0 Net land investment (269.8) (195.3) WIP (169.2) (43.6) Other working capital movements 121.2 121.1 Net interest paid (25.8) (29.5) Tax paid (42.7)
Slide 8: Cash flow (continued)
Full Year 2015 8 Cash flow (continued) £m FY15 FY14 (1) Net cash from operating activities 186.1 245.9 Net investment in JV’s 45.3 (35.6) Other investing activities (5.4) (4.3) Cashflow before dividends and financing 226.0 206.0 Dividends paid (117.7) (55.9) Financing activities / shares 5.1 (51.1)
Slide 9: Run down of legacy assets
Full Year 2015 9 Run down of legacy assets £m 30 June 2015 31 December 2014 30 June 2014 (1) Old land 259.7 344.9 430.3 (1) WIP on old land 210.4 297.1 340.7 Equity share 107.0 116.9 122.4 Equity share – JV 25.6 25.6 25.6 Commercial - Pre 2009 33.6 37.2 36.5 - Since 2009 16.5 14.7 14.5 Total commerc
Slide 10: Legacy land assets – rapid reduction
Full Year 2015 10 Legacy land assets – rapid reduction Old land (impaired & non-impaired) (1) – plots remaining • Expect further significant run off of ‘old’ land over next 2 years • Residual tail of larger sized legacy sites • Will continue to accelerate run off if market conditions allow (2) (1) O
Slide 11: Transformation of the landbank
Full Year 2015 11 (1) Transformation of the landbank ASP £k 159 207 261 252 254 253 27% 63% 4% 4% 2% (2) (2) (2) Category of land (1) Analysis is based on landbank as at 30 June 2015 and on current selling prices (2) Old land contracted prior to re-entry into land market in mid-2009
Slide 12: Guidance for FY16
Full Year 2015 12 Guidance for FY16 c. 15,750 (ex JV) Completions: c. 17% affordable c. 1,000 JV ASP: Total ASP in owned landbank of £252k Total admin expenses: c. £145m JV share of profits: c. £60m c. £55m Interest cost: (£27m cash, £28m non-cash) Land cash spend: c. £1bn Land creditors: c. 1/3 own
Slide 13: Steven Boyes, Chief Operating Officer
Full Year 2015 13 Steven Boyes Chief Operating Officer Oak Court, Bishop Sutton, Somerset
Slide 14: Further good progress in FY15
Full Year 2015 14 Further good progress in FY15 • Strong sales across all regions • Continued positive momentum on pricing • New site openings driving increased completions • Actively managing build costs • Secured attractive land opportunities in line with targets
Slide 15: Strong H2 sales performance
Full Year 2015 15 Strong H2 sales performance Private sales rate per H1 15 H2 15 FY15 • Strong, consistent sales active site per week performance in H2 Northern 0.56 0.70 0.62 • Focus remains on maximising Central 0.52 0.58 0.55 sales whilst driving business (1) East 0.55 0.67 0.62 performance West
Slide 16: Continued positive momentum on pricing
Full Year 2015 16 Continued positive momentum on pricing Private ASP FY15 FY15 vs FY14 • Underlying house price inflation contributed to broadly half the Northern 205.6 +8.6% Group increase in private ASP Central 207.9 +14.6% • London decline in FY15 ASP (1) East 262.7 +11.8% reflects lower proporti
Slide 17: Good progress on new site openings
Full Year 2015 17 Good progress on new site openings Average active sites (1) (1) Includes JV sites
Slide 18: Barratt London – strong growth from balanced portfolio
Full Year 2015 18 Barratt London – strong growth from balanced portfolio London FY15 reservations – Step up in FY15 completions (1) private ASP bandings • 1,101 private (+7%) • 363 affordable (+159%) • 501 JV’s (+13%) Diverse portfolio • Delivery in 16 London Boroughs (2) • Landbank plots : - Zone 1
Slide 19: Build cost pressures moderated
Full Year 2015 19 Build cost pressures moderated Build materials Labour • Supply chain performing well – no • Continued pressure on skilled labour significant capacity issues in FY15 • Investing in skills training, apprentices and • Brick & block supply secured for FY16 graduate schemes • Minimal ma
Slide 20: Land model – driving returns, minimising risk
Full Year 2015 20 Land model – driving returns, minimising risk Owned Conditional Strategic Target • c. 3.5 years • c. 1.0 years • Increase strategic options • c. 20% of completions in FY17 Key features • Consented • Consent expected within 6- • Viability review twice p.a. 12 months • 76 dual brande
Slide 21: The land market remains positive
Full Year 2015 21 The land market remains positive • Good availability of excellent land opportunities • Continue to secure Group’s land requirements – at least meeting minimum hurdle rates • FY15 – approved acquisition of 16,956 plots (114 sites), totalling £957.0m • FY16 – expect to approve a tota
Slide 22: Public sector land – a key strength
Full Year 2015 22 Public sector land – a key strength Key benefits Barratt – Best in class • Excellent land source • Unique specialist public sector team with - Government to release 150,000 plots unrivalled experience by 2020 - limited competition - important alternative land supply • Member of all
Slide 23: Catford Green, London
Full Year 2015 23 Catford Green, London Division: Barratt London Aldgate Land source: GLA / DPP Former use: Catford Greyhound Stadium GDV: £154m Total units: 588 Launch date: July 2014 Expected completion: June 2018
Slide 24: Fairmilehead, Edinburgh
Full Year 2015 24 Fairmilehead, Edinburgh Division: East Scotland Land source: Scottish Water / OJEU Former use: Water treatment works GDV: £57m Total units: 183 Launch date: June 2013 Expected completion: December 2017
Slide 25: Hollygate Park, Nottingham
Full Year 2015 25 Hollygate Park, Nottingham Division: North Midlands / East Midlands Land source: HCA / DPP Former use: Cotgrave colliery GDV: £104m Total units: 463 Launch date: March 2015 Expected completion: June 2020
Slide 26: Strategic land – increasing importance
Full Year 2015 26 Strategic land – increasing importance Strategic land completions Strategic land targets • Targeting c. 20% of total completions in FY17 (1) • Strategic portfolio of 71,600 plots (284 locations) • FY15 – approved 11,280 strategic plots (44 locations) • FY15 – converted 5,239 plots
Slide 27: A deliverable strategic portfolio
Full Year 2015 27 A deliverable strategic portfolio Site size – no of units Strategic plots – land categorisation • Focus on deliverable sites under 250 • Good mix of shorter and medium term units opportunities
Slide 28: Operating model driving higher returns
Full Year 2015 28 Operating model driving higher returns • Maximising sales opportunity – balance of value and volume • New site openings – prime locations delivering higher returns • Actively managing build costs • Securing longer term land supply – at least meeting hurdle rates
Slide 29: David Thomas, Chief Executive
Full Year 2015 29 David Thomas The Gateway, Pickering, North Yorkshire Chief Executive The Orchards, Hardwicke, Gloucester
Slide 30: Market fundamentals remain attractive
Full Year 2015 30 Market fundamentals remain attractive • Supply-demand imbalance • Strong Government support for housing • Positive lending environment, with rates continuing to remain low • Attractive land market • Limited competition from smaller housebuilders Old Merchant Taylors, Croxley Green
Slide 31: Key indicators support market trends
Full Year 2015 31 Key indicators support market trends Affordability Mortgage Housing Housebuilders’ Index(1) rates(2) completions(3) share(4) 29% 1.79% 131k Nationals – 54% LTV: 95% Regionals – 34% SME’s – 12% (1) Source: Halifax. Index based on mortgage repayments as a percentage of income, as at
Slide 32: Barratt’s leading operational strengths
Full Year 2015 32 Barratt’s leading operational strengths • Highest quality homes meeting consumer demand • Leading sales, marketing and customer experience • Construction excellence and efficiency • Targeted and measured land buying strategy
Slide 33: Driving business performance further
Full Year 2015 33 Driving business performance further • Leveraging our operating structure • Effective build management • Securing longer term land supply • Investing in our people
Slide 34: Group’s medium term targets
Full Year 2015 34 Group’s medium term targets Targets for FY17 Gross margin Minimum 20% ROCE Minimum 25% c. 4.5 years land supply (ex JV) Landbank FY17 completions: c. 20% public sector, c. 20% strategic Maintain appropriate Minimal year end net cash capital structure Land creditors 1/3 of owned lan
Slide 35: Further progress on gross margin
Full Year 2015 35 Further progress on gross margin Positive drivers / upside >20.0% • Increased contribution from new higher margin land • Regional land market remains attractive • Positive house price inflation • Increased contribution from strategic land
Slide 36: Strong increase in ROCE
Full Year 2015 36 (1) Strong increase in ROCE Positive drivers / upside >25.0% • Run down of non-performing legacy assets • Improved profitability • Higher potential ROCE on public land (1) ROCE is calculated as earnings before interest, tax, operating charges relating to the defined benefit pension
Slide 37: New land continues to outperform hurdles
Full Year 2015 37 New land continues to outperform hurdles (1) Gross margin ROCE Minimum hurdle rate 20% 25% (2) Completed new land sites to date 21% 38% (1) Site ROCE on land acquisition is calculated as site operating profit (site trading profit less overheads less allocated administrative overhea
Slide 38: Maintaining an appropriate capital structure
Full Year 2015 38 Maintaining an appropriate capital structure Targets for FY17 Status Land creditors 1/3 of owned landbank Year end net debt Minimal cash balance Average net debt Further reduction to c. £250m Progress in FY16
Slide 39: Strong cash returns over three years
Full Year 2015 39 (1) Strong cash returns over three years Ordinary Special cash Total capital Total pence per dividend payment return share (£m) (£m) (£m) Paid to date 118 - 118 11.9p Proposed payments November 2015 102 100 202 20.3p Year to November 2016 175(2)(3) 125 300 30.2p(3) Year to November
Slide 40: Current trading remains strong
Full Year 2015 40 Current trading remains strong First 10 weeks First 10 weeks Change FY16 FY15 Average net private reservations (1) 0.68 0.62 9.7% per active site per week Active sites (1)(2) 390 382 2.1% (including JV’s) Average net private reservations 257 224 14.7% per week Total forward sales (
Slide 41: Positive on outlook
Full Year 2015 41 Positive on outlook • Strong consumer demand • Positive mortgage lending environment • Land market remains attractive • Build material cost pressures moderated Further good progress expected in FY16 Performance supports Capital Return Plan
Slide 42: Q&A
Full Year 2015 42 Clements Gate, Hawkwell, Hockley Q&A Old Merchant Taylors, Croxley Green
Slide 43: Appendices
Full Year 2015 43 Locksbridge Park, Picket Piece, Andover Appendices Old Merchant Taylors, Croxley Green
Slide 44: Appendices
Full Year 2015 44 Appendices Page • Completions analysis – buyer type 45 • Completions analysis – product mix 46 • Balance sheet – assets 47 • Balance sheet – landbank 48 • Approved land payment profile 49 • Land creditors payment profile 50 • Owned and conditional landbank by region 51 • Strategic
Slide 45: Completions analysis – buyer type
Full Year 2015 45 (1) Completions analysis – buyer type (1) Completions excluding JV’s
Slide 46: Completions analysis – product mix
Full Year 2015 46 (1) Completions analysis – product mix (1) Completions excluding JV’s
Slide 47: Balance sheet – assets
Full Year 2015 47 Balance sheet – assets £m 30 June 2015 30 June 2014 Goodwill and intangibles 892.2 892.2 Deferred tax assets - 19.6 Equity share 107.0 122.4 Investment in JV’s and associates 200.0 199.6 Pension scheme asset 5.3 3.1 (1) Other non-current 11.5 12.3 Gross landbank 2,826.1 2,348.4 Lan
Slide 48: Balance sheet – landbank
Full Year 2015 48 Balance sheet – landbank 30 June 2015 30 June 2014 Landbank plots Owned / unconditional contracts 51,640 47,892 Conditional contracts 18,883 18,678 Total landbank plots 70,523 66,570 JV plots – owned / conditional 6,325 7,163 Total landbank plots (including JV’s) 76,848 73,733 Land
Slide 49: Approved land payment profile
Full Year 2015 49 (1) Approved land payment profile 30 June 2015 Purchased Conditional Approved Total Plots 69,864 16,786 4,625 91,275 Value (£m) 3,626 912 224 4,762(2) Payment profile (£m) Purchased Conditional Approved Total Paid to date 2,584 23 - 2,607 FY16 494 238 101 833 FY17 252 258 61 571 FY
Slide 50: Land creditors payment profile
Full Year 2015 50 Land creditors payment profile
Slide 51: Owned and conditional landbank by region
Full Year 2015 51 Owned and conditional landbank by region Years supply(1) owned and conditional land Plots as at 30 June 2015 Owned land 51,640 JV JV JV Conditional JV 18,883 JV land JV Total 70,523 controlled JV owned & 6,325 conditional(2) Total 76,848 (3) (1) Years supply based on number of comp
Slide 52: Strategic land bank by region
Full Year 2015 52 Strategic land bank by region 30 June 2015 Plots Sites Northern 20,600 93 Central 13,900 37 East 18,200 87 West 6,700 34 Southern 12,200 33 Group 71,600 284
Slide 53: Balance sheet – stock & WIP
Full Year 2015 53 Balance sheet – stock & WIP 30 June 2015 30 June 2014 Units £m Units £m Stock (build complete) - Reserved 433 358 - Unreserved 425 427 - Showhomes 127 162 Total 985 153 947 131 Unreserved per active site 1.1 1.2 WIP (including build complete stock) 1,287 1,118 Part-exchange - Reser
Slide 54: Investment in joint ventures and associates
Full Year 2015 54 Investment in joint ventures and associates £m 30 June 2015 30 June 2014 Housebuilding London 124.6 110.9 Non-London 44.6 58.7 Total housebuilding 169.2 169.6 Other Commercial 5.1 4.6 Equity share joint venture 25.6 25.6 Associates 0.1 (0.2) Total 200.0 199.6
Slide 55: Joint ventures – London
Full Year 2015 55 (1) Joint ventures – London Profit Private : Private share JV partner Total GDV Total units Affordable ASP (%) (%) Queensland 50 : 50 L&Q £180m 375 £471k 100 : 0 Terrace, Islington Fulham Riverside, 50 : 50 L&Q £585m 468 £1,397k 86 : 14 Fulham Aldgate Place, 50 : 50 British Land £3
Slide 56: London joint venture delivery profile
Full Year 2015 56 London joint venture delivery profile (1) Landbank units FY16 FY17 FY18 FY19 FY20 Private Affordable H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 Queensland Terrace, 8 0 Islington Fulham Riverside, 279 14 Fulham Aldgate Place, 313 94 Aldgate Nine Elms, Vauxhall 593 26 Enderby Wharf, 586 111 Green
Slide 57: Joint ventures – non-London
Full Year 2015 57 (1) Joint ventures – non-London Profit Private : Housebuild only share JV partner Total GDV Total units Affordable (%) (%) The Acres, Horley 78.5 : 21.5 Wates £161m 511 78 : 22 Bluebell Gate, East Grinstead 50 : 50 Wates £50m 142 70 : 30 The Fieldings/ 50 : 50 Wates £83m 305 95 : 5
Slide 58: Balance sheet – liabilities
Full Year 2015 58 Balance sheet – liabilities £m 30 June 2015 30 June 2014 Trade payables (392.5) (243.4) (1) Other payables (564.2) (536.5) Current tax / deferred tax (50.6) (9.7) Net swaps (17.3) (19.7) (1) Excluding land creditors
Slide 59: Net interest charge analysis
Full Year 2015 59 Net interest charge analysis £m FY15 FY14 Cash interest Interest on term debt and overdrafts 10.3 11.5 Interest on private placement notes 3.9 3.9 Utilisation / non-utilisation fees on RCF’s 4.8 5.7 Swap interest 7.0 5.8 Other interest 1.4 (0.2) Total cash interest 27.4 26.7 Total
Slide 60: Net interest charge analysis – non-cash
Full Year 2015 60 Net interest charge analysis – non-cash £m FY15 FY14 Non-cash interest Land creditors / deferred payables 31.6 35.0 Financing fees 3.0 3.5 Equity share (4.6) (5.8) Pension (0.4) 0.3 Total non-cash interest 29.6 33.0
Slide 61: Financing arrangements
Full Year 2015 61 Financing arrangements Loan Facility Amount Maturity Interest basis (1) (2) RCF facilities £700m December 2019 LIBOR +2.00% Private placement notes (3) £48m August 2017 8.1% - May 2011 Issue July 2019 (4) Pru M&G UK Companies Fund £100m 3m LIBOR +4.25% – July 2021 Get Britain Build
Slide 62: Forward sales analysis – owned
Full Year 2015 62 Forward sales analysis – owned 6 September 2015 7 September 2014 Change Value (£m) - Private 1,332.3 1,145.6 16.3% - Affordable 512.2 360.3 42.2% - due in H1 (£m) 1,159.0 962.9 20.4% - due after H1 (£m) 685.5 543.0 26.2% Total value 1,844.5 1,505.9 22.5% Plots - Private 4,788 4,458
Slide 63: Forward sales analysis – joint ventures
Full Year 2015 63 (1) Forward sales analysis – joint ventures 6 September 2015 7 September 2014 Change Value (£m) - Private 370.1 148.9 148.6% - Affordable 107.3 100.9 6.3% - due in H1 (£m) 143.2 64.6 121.7% - due after H1 (£m) 334.2 185.2 80.5% Total value 477.4 249.8 91.1% Plots - Private 680 281
Slide 64: Disclaimer
Full Year 2015 64 Disclaimer This document has been prepared by Barratt Developments PLC (the “Company”) solely for use at a presentation in connection with the Company's Full Year Results Announcement in respect of the year ended 30 June 2015. For the purposes of this notice, the presentation (the