Taylor Wimpey Plc · LSE:TW.
Taylor Wimpey — FY2014 Earnings Presentation
59 slides from Taylor Wimpey's earnings presentation, Mar 3, 2015
Slide 1: Full Year Results Presentation for the year ended 31 December 2014
Full Year Results Presentation for the year ended 31 December 2014 3 March 2015
Slide 2: Disclaimer
Disclaimer This presentation is not intended to, and does not constitute or form part of, any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities in Taylor Wimpey plc or any other invitation or inducement to en
Slide 3: Agenda
Agenda Performance and land Pete Redfern Financial delivery and quality Ryan Mangold Market and outlook Pete Redfern 3
Slide 4: Performance and land
Performance and land Pete Redfern Chief Executive 4
Slide 5: 2014 highlights
2014 highlights • Operating profit* margin increased to 17.9% (2013: 13.6%) • Return on net operating assets* of 22.5% (2013: 16.8%) • Tangible net asset value* per share up 11.9% to 77.9p (2013: 69.6p), 15.8% growth in net assets before cash distributions • £73m total cash paid to shareholders in 2
Slide 6: UK performance – operational highlights
UK performance – operational highlights £234k 16.5% £49.6k Private average Increase in ASP in Contribution per selling price on private order book to completion completions 31 Dec 2014 0.64 18.0% 10.8k Private net sales rate UK operating Plots converted from (per outlet per week) profit* margin stra
Slide 7: Our UK market performance
Our UK market performance H2 2014 H1 2014 H2 2013 H1 2013 Average outlets open 298 307 318 312 Private sales rate (net) 0.58 0.71 0.59 0.67 Private sales price £000 248 238 227 211 Cancellation rate (private) 16% 11% 13% 14% • c.35% of total 2014 sales using Help to Buy • 103 new outlets opened in 2
Slide 8: South Division operating area
South Division operating area • Average selling price on completions* – 2014: £233k 1,857 Completions* – 2013: £204k ASP £196k • Private sales rate** 0.66 sales rate** – 2014: 0.69 3,472 – 2013: 0.70 Completions *†† 1,949 ASP £270k †† • Average plot cost as % of Completions* 0.76 sales rate** †† ASP
Slide 9: North Division operating area
North Division operating area • Average selling price on completions* 1,497 Completions* – 2014: £183k ASP £197k – 2013: £172k 0.58 sales rate** • Private sales rate** – 2014: 0.58 1,555 Completions* – 2013: 0.54 ASP £183k 1,964 • Average plot cost as % of ASP Completions* 0.61 sales rate** in owned
Slide 10: Land strategy in 2014/15
Land strategy in 2014/15 • Short term landbank in target range – 75k plots is 5.4 years on 14k completions • Strategic conversions at record levels, future pipeline strong • Active in the short term market – focused on improving quality rather than growing net position • Taking longer term decisions
Slide 11: Short term landbank
Short term landbank Movements in year 31 December 2013 70,628 Planning status + Plots acquired 8,315 2014 2013 Detailed planning 43,616 42,640 + Strategic land conversion 10,779 Outline planning 22,313 20,178 - Completions (12,454) Resolution to grant 9,207 7,810 - Land sales (409) Total 75,136 70,6
Slide 12: Strategic pipeline
Strategic pipeline Plots converted from Site size (plots) Strategic pipeline in 2014 15 - 150 Movements in year 150 - 300 Over 300 31 December 2013 109,974 + Plots acquired 17,993 - Strategic land conversion (10,779) - Land sales - - Review and scope change (7,602) 31 December 2014 109,586 • Another
Slide 13: Strategic pipeline
Strategic pipeline Plots converted from SiteKey: size (plots) All active sites Strategic pipeline in 2014 Strategically 15 - 150 sourced Movements in year 150 Not -strategically 300 sourced Over 300 31 December 2013 109,974 + Plots acquired 17,993 - Strategic land conversion (10,779) - Land sales -
Slide 14: London delivery and future potential
London delivery and future potential 2014 Relative to total 2015 estimate (Including JVs) Average outlets 18 6% 20 – 21 Private sales rate (net) 0.92 144% 0.8 - 1.0 Completions 1,018 8% 1,100 - 1,200 Average ASP (on completions) 342 161% 430 - 450 % forward sold at 1 January 65% N/A 60% - 70% Averag
Slide 15: High-quality operational business: customer service and product
High-quality operational business • Customer service – Always a strong focus for Taylor Wimpey – Greater levels of service are value adding as location and product quality improves – H1 2015 focus on mapping out a new service offering for roll out in H2 – Improvements planned to communication, deliv
Slide 16: High-quality operational business: people and IT
High-quality operational business • People – Competitive marketplace but turnover has remained low – All major recruitment programmes increased: - Doubled graduate programme, management trainee targets and apprenticeships - Introduced site management apprenticeship programme - Increased trade employ
Slide 17: Financial delivery and quality
Financial delivery and quality Ryan Mangold Group Finance Director 17
Slide 18: Summary Group results
Summary Group results Continuing Group £m FY 2014 FY 2013 Change Revenue 2,686.1 2,295.5 17.0% Gross profit 620.9 449.3 38.2% Gross margin % 23.1% 19.6% 3.5ppt Operating profit* 480.7 312.9 53.6% Operating margin % 17.9% 13.6% 4.3ppt Profit before tax and exceptional 450.1 268.4 67.7% items Adjusted
Slide 19: UK performance summary
UK performance summary FY 2014 FY 2013 Change Legal completions – total 12,454 11,696 6.5% Private 10,116 9,423 7.4% Affordable 2,178 2,124 2.5% JVs 160 149 7.4% Ave selling price – total £000 213 191 11.5% Private £000 234 210 11.4% Affordable £000 115 110 4.5% Operating profit* £m 476.5 312.8 52.3
Slide 20: Indicative movements in UK operating margin
Indicative movements in UK operating margin Annual change Impact on 2014 profit and loss account 2013 to 2014 Market inflation 10%* 6.6% Build cost 6%** (3.2)% Net economic benefit captured 3.4% NRV provision release (1.2)% Net market impact 2.2% Improvement in land mix 2.2% Reduced NRV utilisation
Slide 21: UK per plot analysis
UK per plot analysis 220 200 53.2 45.3 45.3 24.3% 180 38.1 38.1 22.0% 39.6 22.0% 34.2 34.2 39.6 19.6% 19.6% Key 160 30.0 27.6 27.6 33.633.6 18.3% 18.3% 21.1% 21.1% 30.0 15.9% 19.1% Contribution 17.8% 15.9% 19.1% 17.8% margin 140 Selling 120 52.2% expenses 55.1% 55.2% 55.1% 53.2% 100 58.1% 56.9% 59.1
Slide 22: UK cost and construction environment
UK cost and construction environment FY 2014 FY 2013 FY 2012 Total build cost per sq ft (£/sq ft) 114 105 103 Private build cost per sq ft (£/sq ft) 114 107 104 % apartments of private completions 18% 20% 24% Private average sq ft per unit 1,042 1,038 1,013 • National deals and central procurement -
Slide 23: Growth in Group net assets
Growth in Group net assets Breakdown of £m 31 Dec 2014 31 Dec 2013 annual movement % Opening net assets 2,251.8 1,989.5 N/A Pre-exceptional net earnings 359.7 214.7 16.0% Net impact of exceptional items 14.7 25.1 0.6% Profit from discontinued operations 0.0 31.3 N/A Actuarial (losses) / gains after
Slide 24: Investment in landbank
Investment in landbank Land cost on Land cost on balance sheet Number of plots balance sheet Number of plots £m 31 Dec 2014 £m 31 Dec 2013 31 Dec 2014 31 Dec 2013 Short term owned 2,263 58,969 1,823 50,873 Short term controlled 64 16,167 27 19,755 Total short term 2,327 75,136 1,850 70,628 Strategic
Slide 25: Quality of landbank
Quality of landbank 100% 20% 80% 15% Operating margin 60% 10% 40% 5% 20% 0% 0% FY 2011 FY 2012 FY 2013 FY 2014 Short term landbank completions completions completions completions FY 2014 Pre 2009 short term land Pre 2009 strategic land Post 2009 strategic land Post 2009 short term land Operating Mar
Slide 26: Capital allocation
Capital allocation since 2012 – land investment appraisal 70% Capital allocation 60% Average per plot 28.0% 50% 27.5% ROCE ROCE 40% 27.0% 30% 26.5% 23.5% 24.0% 24.5% 25.0% 25.5% 20% Contribution margin 2012 2013 2014 10% 20% 22% 24% 26% 28% 30% 32% Contribution margin 2012 2013 2014 • Land cost as %
Slide 27: Turning profit into cash
Turning profit into cash 500 450 400 350 300 £m 250 200 150 100 50 0 Operating WIP Trade Land & land Other Pension Cash Interest Dividends & Capital Net debt profit* payables creditors working generated financing expenditure movement capital by activities operations • Net land spend £796m (2013: £57
Slide 28: Pensions
Pensions • Actuarial valuation completed during the year • Reduced total contributions to £23 million per annum from 2015 through to the end of 2018, from £53 million previously committed • Completed medically underwritten buy-in for £206 million (£9 million below technical provision) – Significantl
Slide 29: Balance sheet and financing structure
Balance sheet and financing structure • Upgraded to investment grade by Fitch (BBB-) • Committed facilities totalling £650 million – Revolving credit facility extended in February 2015 to 2020 – Reduced margins and fees, saving £2.5 million per annum – Average maturity of committed facilities now 5
Slide 30: Summary
Summary • Medium term targets 2015 - 2017: – Average 20% operating profit* margin – At least 20% return on net operating* assets each year – Average 15% pa increase in net asset value (inc. returns to shareholders) – Operating profit conversion into operating cash* of an average of 65% FY 2011 FY 20
Slide 31: Market and outlook
Market and outlook Pete Redfern Chief Executive 31
Slide 32: TW UK market performance
TW UK market performance Week 1 2012 Week 1 2013 Week 1 2014 Week 1 2015 Customer interest Sales rate Number of outlets 32
Slide 33: TW UK market performance
TW UK market performance H1 2015 (w/e H2 2014 H1 2014 H2 2013 H1 2013 01/03/2015) Average outlets open 304 298 307 318 312 Private sales rate (net) 0.70 0.58 0.71 0.59 0.67 Private sales price £000 240 248 238 227 211 Cancellation rate (private) 12% 16% 11% 13% 14% H1 2015 (w/e 31 Dec 29 Jun 31 Dec
Slide 34: UK supply and demand continues to be out of balance
UK supply and demand continues to be out of balance 400,000 300,000 Completions 200,000 100,000 0 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 Financial year ending Total Private Housing associations / Council Source: Department for Communities and Local Government 34
Slide 35: Real house prices remain below peak
Real house prices remain below peak £200,000 £150,000 £100,000 £50,000 £0 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 Nominal prices Real prices Source: Nationwide – Nominal house prices ONS - RPI 35
Slide 36: FTB mortgage payments as % of pay / interest rates
FTB mortgage payments as % of pay / interest rates 100% 16 90% 14 80% 12 70% % of take home pay 10 60% Interest rate % 50% 8 40% 6 30% 4 20% 2 10% 0% 0 1983 1986 1990 1993 1997 2000 2004 2007 2011 2014 Interest Rates London UK • FPC recommend to stress test assuming Bank Rate increases by 3% (approx
Slide 37: Mortgage interest rates falling in Q1
Mortgage interest rates falling in Q1 2 year fixed rates January 2014 July 2014 January 2015 HTB equity loan 2.34% – 3.24% 2.94% – 3.64% 1.89% – 3.74% 85% LTV (new build) 3.24% – 3.59% 3.24% – 3.49% 2.74% – 2.79% • Bank rate low / lower for longer • Lending broad based and competitive • Signs of wag
Slide 38: Other 2015 market drivers
Other 2015 market drivers • General election – Uncertain election outcome – Broadly consistent support for ‘evolutionary’ planning policy – Not currently seeing a measurable impact on market of election – Expect any affect to be limited over the year • Build costs – Pressure on build costs lower tha
Slide 39: Turning profit into cash
Turning profit into cash • Optimum level of short term land reached • Margins of c.20%, ongoing improvements in RONOA • Investments in London self-sustaining on RONOA Generating significant and sustainable levels of cash • Increased confidence in market stability • Increased certainty of operation
Slide 40: Conclusions
Conclusions 2015 – 2017 FY 2014 medium term targets Operating profit* margin % 17.9 20 Return on net operating assets* % 22.5 20 Net asset annual growth NAV (pre-cash distribution) % 15.8 15 Cash conversion % 43 65 • High degree of confidence in delivering strategic 3 year targets • Further bottom l
Slide 41: Future investor communications
Future investor communications • 23 April 2015 IMS and AGM • 29 July 2015 Half year results • 16 November 2015 Trading update 41
Slide 42: Questions and Answers
Taylor plc . reais Questions and Answers
Slide 43: Appendices
Taylor Wimpey plc Full Year Results Presentation for the year ended 31 December 2014 Appendices 43
Slide 44: Summary income statement
Summary income statement* Continuing Group £m FY 2014 FY 2013 Change H1 2014 Revenue 2,686.1 2,295.5 17.0% 1,190.1 Cost of sales (2,065.2) (1,846.2) 11.9% (930.7) Gross profit 620.9 449.3 38.2% 259.4 Net operating expenses (142.8) (139.6) 2.3% (68.1) Profit on ordinary activities 478.1 309.7 54.4% 1
Slide 45: Average selling prices in short term owned and controlled landbank
Average selling prices in short term owned and controlled landbank South North Average selling Average selling price price £202k £204k + 10% Average selling + 11% price £205k + 8% Average selling price £179k + 8% Average selling price Average selling £251k price + 16% Average selling £471k + 18% pri
Slide 46: Summarised Group balance sheet
Summarised Group balance sheet £m 31 Dec 2014 31 Dec 2013 Change Long term assets and JVs 57.9 47.2 22.7% Land 2,582.4 2,180.1 18.5% WIP 907.7 748.7 21.2% Debtors 213.7 229.3 (6.8)% Land creditors (487.7) (349.0) 39.7% Other creditors (783.8) (638.6) 22.7% Pensions and post retirement benefits (183.
Slide 47: 2014 cash flow summary
2014 cash flow summary £m FY 2014 H2 2014 H1 2014 FY 2013 Profit from ordinary activities before finance costs* 496.8 286.6 210.2 355.3 - discontinued - - - 31.3 Other non-cash items 0.2 16.5 (16.3) (98.0) Increase in inventories (409.1) (165.0) (244.1) (92.8) Decrease / (increase) in receivables 20
Slide 48: 2014 cash flow summary – continued
2014 cash flow summary – continued £m FY 2014 H2 2014 H1 2014 FY 2013 Cash generated by / (used in) operations 207.2 223.0 (15.8) 132.4 Tax 0.1 - 0.1 0.9 Interest paid (14.6) (8.4) (6.2) (35.2) Net cash (used in) / from 192.7 214.6 (21.9) 98.1 operating activities Investing activities (10.2) (10.2)
Slide 49: Pensions
Pensions Movement in present value of defined FY 2012 FY 2014 FY 2013 benefit obligations Restated*** £m Total UK Total UK Total UK Brought forward 182.2 242.5 208.2 Employer contributions* (36.3) (48.1) (52.4) Settlement gain** - (4.1) - Administration cost 3.1 3.2 4.0 Interest cost 7.5 9.7 9.4 Mea
Slide 50: Number of residential units approved
Number of residential units approved England North of Southern Wales Scotland Great Britain Midlands All England England 2007 65,645 37,613 109,209 212,467 10,765 29,109 252,341 2008 40,892 25,290 102,377 168,559 6,894 22,541 197,994 2009 27,598 19,334 79,078 126,010 3,894 17,800 147,704 2010 33,714
Slide 51: UK net operating assets
UK net operating assets £m 31 Dec 2014 31 Dec 2013 31 Dec 2012 Fixed assets 19 12 12 Investment in JVs 38 34 31 Land 2,537 2,141 2,002 WIP 870 721 714 Total inventories 3,407 2,862 2,716 Debtors 211 227 195 Land (481) (347) (372) Other (754) (617) (578) Total creditors (1,235) (964) (950) Pension li
Slide 52: UK land portfolio – plots
UK land portfolio ‒ plots 31 Dec 2014 31 Dec 2013 Owned Controlled Pipeline Total Total Detailed planning 40,502 3,114 343 43,959 42,939 Outline planning 15,994 6,319 2,268 24,581 22,182 Resolution to grant 2,473 6,734 - 9,207 8,265 Sub-total 58,969 16,167 2,611 77,747 73,386 Allocated strategic 6,2
Slide 53: UK land portfolio – net cost
UK land portfolio ‒ net cost 31 Dec 2014 31 Dec 2013 £m Owned Controlled Total Total Detailed planning 1,658 33 1,691 1,517 Outline planning 525 14 539 305 Resolution to grant 81 17 98 28 Sub-total 2,264 64 2,328 1,850 plots 58,969 16,167 75,136 70,628 Strategic 106 55 161 257 plots 31,326 78,260 10
Slide 54: South Division operating area
South Division operating area Eastern South South South South London West & East & Division Division market† Wales London FY 2014 FY 2013 As at 31 Dec 2014 Short term owned and controlled land 12,637 16,613 17,317 46,567 43,263 4,700 portfolio plots Land portfolio years 6.8 8.5 5.0 6.4 6.1 5.1 1,857
Slide 55: North Division operating area
North Division operating area Scotland Yorkshire West North North & North & North Midlands Division Division East West FY 2014 FY 2013 As at 31 Dec 2014 1,497 Completions* Short term owned and ASP £197k 0.58 sales rate** controlled land 8,598 11,753 8,218 28,569 27,365 portfolio plots Land portfolio
Slide 56: UK product mix
UK product mix 2014 2013 Completions % FY H2 H1 FY H2 H1 Apartments 18% 18% 18% 20% 20% 19% 1 / 2 / 3 bed 45% 45% 46% 43% 43% 42% houses 4 / 5 bed houses 37% 37% 36% 37% 37% 39% Total 100% 100% 100% 100% 100% 100% 56
Slide 57: 2014 sales performance
2014 sales performance H1 2015 (w/e H2 2014 H1 2014 H2 2013 H1 2013 01/03/2015) Average outlets open 304 298 307 318 312 Average sales rate (net) 0.76 0.75 0.83 0.73 0.78 Average selling price £000 230 217 221 200 200 H1 2015 (w/e 31 Dec 29 Jun 31 Dec 30 Jun As at 01/03/2015) 2014 2014 2013 2013 Tot
Slide 58: Spain financial summary
Spain financial summary* FY 2014 FY 2013 Change £m Average number of active sites 18 15 20.0% Legal completions 164 118 39.0% Average selling price (£000) 198 194 2.1% Average selling price (€000) 250 229 9.2% Revenue £m 33.7 24.1 39.8% Operating profit £m** 4.2 0.1 4,100.0% Operating margin % 12.5%
Slide 59: Definitions
Definitions • Operating profit is defined as profit on ordinary activities before net finance costs, exceptional items and tax, after share of results of joint ventures. • Adjusted basic earnings per share represents earnings from continuing operations, excluding exceptional items and tax on excepti