Barratt Redrow Plc · LSE:BTRW
Barratt Redrow — Barratt Developments — H1 2014/15 Earnings Presentation
66 slides from Barratt Redrow's earnings presentation, Feb 25, 2015
Slide 1: Results presentation: six months ended 31 December 2014
Half Year 2014/15 1 Results presentation Six months ended 31 December 2014 25 February 2015
Slide 2: Excellent first half progress
Half Year 2014/15 2 Excellent first half progress (1) Total completions +12.5% (1)(2) Active sites +5% Gross margin +340 bps PBT +75% (3) ROCE +740 bps DPS +50% (1) Includes joint ventures (‘JV’s’) in which the Group has an interest (2) As at 31 December 2014 (3) Return on Capital Employed (‘ROCE’)
Slide 3: David Thomas, Group Finance Director
Half Year 2014/15 3 David Thomas Group Finance Director Glas y Dorlan, Jersey Marine, Neath
Slide 4: Summary revenue drivers
Half Year 2014/15 4 Summary revenue drivers H1 14/15 H1 13/14 H1 14/15 vs H1 13/14 Completions Private 5,563 5,202 6.9% Affordable 1,149 751 53.0% Total 6,712 5,953 12.7% % Affordable 17% 13% 4% (1) JV 259 242 7.0% Total completions 6,971 6,195 12.5% ASP (£’000) Private 253.2 225.3 12.4% Affordable
Slide 5: Profit & loss
Half Year 2014/15 5 Profit & loss £m (unless otherwise stated) H1 14/15 H1 13/14 H1 14/15 vs H1 13/14 Revenue 1,576.3 1,264.9 24.6% Gross profit 274.7 176.8 55.4% Gross margin 17.4% 14.0% 3.4% Total administrative expenses (50.6) (37.3) (35.7%) Operating profit 224.1 139.5 60.6% Operating margin 14.
Slide 6: Joint ventures – performance
Half Year 2014/15 6 Joint ventures – performance Housebuild JV’s only H1 14/15 H1 13/14 (1) Completions 259 242 (2) Share of profit £15.7m £10.2m • JV owned and controlled landbank portfolio (as at 31 December 2014) – 6,904 total plots(1) – majority for delivery between FY 15 and FY 20(3) – £3.1bn t
Slide 7: Pro forma profitability
Half Year 2014/15 7 Pro forma profitability H1 14/15 H1 13/14 (1) (1) £m (unless otherwise stated) Housebuild JV Pro forma Housebuild JV Pro forma Revenue 1,563.8 69.4 1,633.2 1,262.7 55.0 1,317.7 Operating profit 222.5 18.4 240.9 140.2 12.5 152.7 Operating margin 14.2% 26.5% 14.8% 11.1% 22.7% 11.6%
Slide 8: Cash flow
Half Year 2014/15 8 Cash flow £m H1 14/15 H1 13/14 Profit from operations 224.1 139.5 Decrease in net land (pre land acquisitions and disposals) 257.4 280.1 Increase in WIP (201.7) (133.8) (Increase) / decrease in part exchange and other inventories (5.8) 39.0 Decrease in equity share 8.9 4.8 Moveme
Slide 9: Cash flow (continued)
Half Year 2014/15 9 Cash flow (continued) £m H1 14/15 H1 13/14 Cash flow from operations (pre land acquisitions & disposals) 303.5 322.1 Land spend (432.0) (340.9) Land sales 7.8 5.0 Investments in JV’s and associates (10.3) (16.1) Dividends received from JV’s and associates 12.0 - Cash flow from op
Slide 10: Balance sheet – assets
Half Year 2014/15 10 Balance sheet – assets £m 31 December 2014 31 December 2013 Goodwill and intangibles 892.2 892.2 Deferred tax assets 9.3 64.5 Equity share 116.9 127.1 Investment in JV’s and associates 213.7 149.7 Pension scheme asset 6.8 - (1) Other non-current 12.4 9.9 Gross landbank 2,631.5 2
Slide 11: Landbank by land type
Half Year 2014/15 11 (1) Landbank by land type ASP £k 164 207 247 238 260 (2 (2 (2) ) ) Category of land (1) Analysis is based on landbank as at 31 December 2014 and on current selling prices (2) Old land owned prior to re-entry into land market in mid-2009
Slide 12: Legacy assets
Half Year 2014/15 12 Legacy assets £m 31 December 2014 31 December 2013 (1) Old land (impaired & non-impaired excl commercial) 344.9 530.4 (1) WIP on old land (impaired & non-impaired excl commercial) 297.1 408.9 Equity share 116.9 127.1 Equity share – JV 25.6 25.6 Commercial 51.9 59.3 Total 836.4 1
Slide 13: Balance sheet – liabilities
Half Year 2014/15 13 Balance sheet – liabilities £m 31 December 2014 31 December 2013 Net debt (134.2) (155.0) Trade payables (303.3) (243.2) (1) Other payables (476.5) (349.5) Current tax (31.9) (0.6) Pension obligations - (4.4) Net swaps (20.8) (22.2) (1) Excluding land creditors
Slide 14: Net interest charge analysis
Half Year 2014/15 14 Net interest charge analysis £m H1 14/15 H1 13/14 Cash interest Interest on term debt and overdrafts 4.3 5.1 Interest on private placement notes 2.0 2.0 Utilisation / non-utilisation fees on RCF’s 3.2 2.9 Swap interest 3.6 3.6 Other interest 0.5 0.6 Total cash interest 13.6 14.2
Slide 15: Financing arrangements
Half Year 2014/15 15 Financing arrangements Loan Facility Amount Maturity Interest basis RCF facilities £700m(1) December 2019 LIBOR +1.50%(2) Private placement notes £48m(3) August 2017 8.1% - May 2011 Issue July 2019 Pru M&G UK Companies Fund £100m 3m LIBOR +4.0%(4) – July 2021 Get Britain Buildin
Slide 16: Guidance for FY 15
Half Year 2014/15 16 Guidance for FY 15 c. 15,000 (ex JV) Completions: c. 17% affordable c. 700 JV ASP: Total ASP in owned landbank of £238k Total admin expenses: c. £135m JV share of profits: c. £40m c. £55m Interest cost: (£25m cash, £30m non-cash) Land cash spend: c. £950m Land creditors: c. 1/3
Slide 17: Steven Boyes, Group Chief Operating Officer
Half Year 2014/15 17 Steven Boyes Group Chief Operating Officer Castlewell, Ellon, Aberdeenshire
Slide 18: Strong operating performance
Half Year 2014/15 18 Strong operating performance • Robust sales performance • Strong momentum on ASP • Rebalanced first half delivery • Excellent progress on new site openings • Cost pressures moderated • Securing excellent land opportunities
Slide 19: Regional performance – private sales rate
Half Year 2014/15 19 Regional performance – private sales rate Per active site per week H1 14/15 H1 13/14 H1 12/13 Northern 0.56 0.62 0.40 (1) Central 0.52 0.53 0.42 (2) East 0.55 0.56 0.47 (1) West 0.50 0.61 0.45 (2) Southern 0.81 0.97 0.69 (2) London 1.21 2.00 1.33 (2) Group 0.58 0.67 0.49 London
Slide 20: Regional performance – private completions
Half Year 2014/15 20 Regional performance – private completions H1 14/15 H1 13/14 % change Northern 1,492 1,127 32.4% Central 1,158 1,102 5.1% (1) East 1,038 1,005 3.3% West 797 765 4.2% (1) Southern 777 812 (4.3%) (1) London 507 614 (17.4%) (1) Group 5,769 5,425 6.3% (1) Includes JV completions in
Slide 21: Regional performance – private ASP
Half Year 2014/15 21 Regional performance – private ASP (£’000) H1 14/15 H1 13/14 % change Northern 203.7 185.0 10.1% Central 205.2 177.4 15.7% (1) East 258.8 223.7 15.7% West 236.6 216.2 9.4% (1) Southern 345.9 313.6 10.3% (1) London 516.5 356.2 45.0% (2) Group 253.2 225.3 12.4% Total JVs 587.3 428
Slide 22: Progression of ASP
Half Year 2014/15 22 (1) Progression of ASP £k (1) Based on private ASP, excluding JV’s
Slide 23: Change in product mix
Half Year 2014/15 23 (1) Change in product mix Completions by product mix Average unit size (1) Completions excluding JV’s
Slide 24: Barratt London – completions profile
Half Year 2014/15 24 Barratt London – completions profile London reservations – private ASP London completions profile bandings – 12mths to 31 Dec 2014(1) (1) ASP bandings compiled based on private reservations, including JV’s
Slide 25: Average active sites
Half Year 2014/15 25 Good progress on new site openings Average active sites H1 14/15: 96 (1) (1) Includes JV sites
Slide 26: The Chocolate Works, York
Half Year 2014/15 26 The Chocolate Works, York • Former Terry’s chocolate factory • Outstanding location, close to York city centre • David Wilson branded • Launching in June – very strong interest with over 4,000 enquiries to date • GDV: £94m • Total units: 319 • Private ASP: £354k • Land source: G
Slide 27: Baggeridge Village, Staffordshire
Half Year 2014/15 27 Baggeridge Village, Staffordshire • Former Baggeridge brickworks • Greenbelt site with excellent transport links • Worked in partnership with Wienerberger to secure planning • GDV: £45m • Total units: 181 • Private ASP: £317k • Land source: Wienerberger • Land type: Brownfield
Slide 28: Brooklands, Milton Keynes
Half Year 2014/15 28 Brooklands, Milton Keynes • Partnership with Places for People • Excellent location on the edge of Milton Keynes • Dual branded with 4 distinct outlets to maximise sales opportunity • Very strong demand to date – 1.3 net private sales per week per outlet • GDV: £471m • Total uni
Slide 29: Aldgate Place, London
Half Year 2014/15 29 Aldgate Place, London • Joint venture with British Land • Adjacent to our recently completed Altitude development • Excellent location on edge of City • Altitude team provide expertise and continuity • GDV: £300m • Total units: 463 • Private ASP: £783k • Land source: British Lan
Slide 30: Cost environment – build costs
Half Year 2014/15 30 Cost environment – build costs Build materials Labour • Increased production - particularly UK • Labour shortages location specific manufactured materials • Higher rates encouraged return of • Long term, established supplier labour relationships • Campaigns to attract new worker
Slide 31: Driving further efficiencies
Half Year 2014/15 31 Driving further efficiencies Commercial programme • Enhancing commercial IT systems • Streamlining processes • Increasing surveyors’ capacity to focus on driving further site efficiencies Sales & marketing • On-line appointment booking • Improved lead management • Investment in
Slide 32: The land market
Half Year 2014/15 32 The land market • Good availability of excellent land opportunities - whilst SE remains most competitive, our strengthened position reflects strategic pull through and public sector land success • Continue to secure Group’s land requirements – at least meeting minimum hurdle rat
Slide 33: Strategic land – securing future land supply
Half Year 2014/15 33 Strategic land – securing future land supply Strategic land completions Strategic land targets • Continue to increase strategic land delivery • Conversion of c. 20,000 plots over next three years • Increasing % of completions from strategic land - 16% in H1 14/15 - targeting c.
Slide 34: Summary
Half Year 2014/15 34 Summary • Strong first half performance • On track to deliver target completions for FY 15 • Continue to benefit from changes in product mix • Positive momentum on new site openings • Cost pressures moderated, driving further efficiencies • Securing attractive future land pipeli
Slide 35: Mark Clare, Group Chief Executive
Half Year 2014/15 35 Mark Clare The Gateway, Pickering, North Yorkshire Group Chief Executive Marston Park, Marston Moretaine, Bedford
Slide 36: Market update
Half Year 2014/15 36 Market update • Market fundamentals remain positive • Strong demand across all regions • Improved lending environment • Excellent land opportunities • Cross party support for housing
Slide 37: Newbuild advantage
Half Year 2014/15 37 (1) Newbuild advantage Newbuild – HTB1 scheme Second hand – 95% LTV Monthly Monthly Lender Rate Fee payment Rate Fee payment Halifax 2.94% £999 £891 4.99% £999 £1,403 Leeds 2.49% £199 £847 n/a n/a n/a Nationwide 1.89% £999 £790 4.64% - £1,354 NatWest 2.93% - £890 4.95% - £1,397
Slide 38: Strong cross party support for housing
Half Year 2014/15 38 Strong cross party support for housing Today Current expectations for post election policy(1) Conservative Labour Equity share • HTB shared equity • HTB shared equity to 2020 • Support for FTB buyers • HTB mortgage guarantee • HTB mortgage guarantee and newbuild running to 2016
Slide 39: Group's medium term targets
Half Year 2014/15 39 Group’s medium term targets Targets for FY 17 Gross margin Minimum 20% ROCE Minimum 25% c. 4.5 years land supply (ex JV) Landbank FY 17 completions: c. 20% public sector, c. 20% strategic Maintain appropriate capital Minimal year end net cash structure Land creditors 1/3 of owne
Slide 40: Performance of gross margin
Half Year 2014/15 40 Performance of gross margin > 20.0% (1) • H1 14/15 gross margin +340bps to 17.4% (1) Proforma
Slide 41: Progress on ROCE
Half Year 2014/15 41 (1) Progress on ROCE > 25.0% (1) ROCE is calculated as earnings before interest, tax, operating charges relating to the defined benefit pension scheme and operating exceptional items, divided by average net assets adjusted for goodwill and intangibles, tax, cash, loans and borro
Slide 42: Performance of new land to date
Half Year 2014/15 42 Performance of new land to date Gross (1) ROCE margin 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 overheads) di
Slide 43: Landbank criteria and future land supply
Half Year 2014/15 43 Landbank criteria and future land supply Land buying targets • c. 4.5 years land supply (ex JV’s) • Regionally balanced portfolio • Deferred terms • Minimum hurdle rates - 20% gross margin - 25% ROCE(1) (1) Site ROCE on land acquisition is calculated as site operating profit (si
Slide 44: Maintain appropriate capital structure
Half Year 2014/15 44 Maintain appropriate capital structure Targets for FY 17 Status Land creditors 1/3 of owned landbank Year end net debt Minimal cash balance Average net debt Further reduction to c. £250m On track
Slide 45: Capital Return Plan
Half Year 2014/15 45 Capital Return Plan • Interim dividend 4.8p per share 29.6p 24.4p • Expect to pay c. 89.9p(2) per share to FY 17 • Returning c. 18% of the Group’s market capitalisation (1) Based on Reuters consensus estimates of earnings per share of 43.0p for FY 15, 50.9p for FY 16 (2) Based u
Slide 46: Driving the business forward
Half Year 2014/15 46 Driving the business forward • Drive process efficiency • Improve delivery by utilising ‘future construction methods’ • Lead on quality, service and design • Secure the longer term land bank • Attract and retain the best people in the sector
Slide 47: Current trading
Half Year 2014/15 47 Current trading First 8 weeks First 8 weeks Change H2 14/15 H2 13/14 Average net private reservations (1) 0.71 0.76 (6.6%) per active site per week Active sites (1)(2) 414 382 8.4% (including JV’s) Average net private reservations 279 285 (2.1%) per week Total forward sales (2)
Slide 48: Positive on outlook
Half Year 2014/15 48 Positive on outlook • Strong consumer demand • Positive mortgage lending environment • Step up in production and rate of site openings • Cost base pressures moderated • Land market remains attractive • Performance supports Capital Return Plan High level of confidence in deliveri
Slide 49: Q&A
Half Year 2014/15 49 Wedgwood Park, Barlaston, Stoke-on-Trent Q&A Old Merchant Taylors, Croxley Green
Slide 50: Appendices
Half Year 2014/15 50 Winnington Village, Winnington, Northwich Appendices Old Merchant Taylors, Croxley Green
Slide 51: Appendices
Half Year 2014/15 51 Appendices Page • Completions analysis 52 • Capital Return Plan 53 • Balance sheet – landbank 54 • Approved land payment profile 55 • Land creditors payment profile 56 • Strategic landbank by region 57 • Balance sheet – stock & WIP 58 • Investment in joint ventures 59 • Joint ve
Slide 52: Completions analysis
Half Year 2014/15 52 (1) Completions analysis (1) Completions excluding JV’s
Slide 53: Capital Return Plan
Half Year 2014/15 53 Capital Return Plan(1) Ordinary Special cash dividend payment Total Total pence per (£m) (£m) (£m) share Paid November 2014 70 - 70 7.1 Proposed payments (2)(3) (3) Year to November 2015 142 100 242 24.4 (2)(3) (3) Year to November 2016 169 125 294 29.6 (2)(3) (3) Year to Novemb
Slide 54: Balance sheet – landbank
Half Year 2014/15 54 Balance sheet – landbank 31 December 2014 31 December 2013 Landbank plots Owned / unconditional contracts 50,444 48,079 Conditional contracts 18,503 14,565 Total landbank plots 68,947 62,644 Landbank pricing (£’000) Cost of plots acquired 57.0 46.3 Cost of plots in P&L 38.7 47.5
Slide 55: Approved land payment profile
Half Year 2014/15 55 (1) Approved land payment profile 31 December 2014 Purchased Conditional Approved Total Plots 60,567 16,555 4,439 81,561 Value (£m) 3,031 972 175 4,178(2) Payment profile (£m) Purchased Conditional Approved Total Paid to date 2,075 15 - 2,090 H2 14/15 280 209 28 517 FY 16 369 30
Slide 56: Land creditors payment profile
Half Year 2014/15 56 Land creditors payment profile
Slide 57: Strategic land bank by region
Half Year 2014/15 57 Strategic land bank by region 31 December 2014 Plots Sites Northern 21,500 88 Central 12,600 31 East 16,500 51 West 8,100 39 Southern 11,900 33 Group 70,600 242
Slide 58: Balance sheet – stock & WIP
Half Year 2014/15 58 Balance sheet – stock & WIP 31 December 2014 31 December 2013 Units £m Units £m Stock (build complete) - Reserved 293 300 - Unreserved 505 539 - Showhomes 161 157 Total 959 139 996 126 Unreserved per active site 1.3 1.5 WIP (including build complete stock) 1,321 1,136 Part-excha
Slide 59: Investment in joint ventures
Half Year 2014/15 59 Investment in joint ventures £m 31 December 2014 31 December 2013 Housebuilding London 127.4 82.1 Non-London 55.9 37.6 Total housebuilding 183.3 119.7 Other Commercial 4.8 4.6 Equity share joint venture 25.6 25.6 Associates - (0.2) Total 213.7 149.7
Slide 60: Joint ventures – London
Half Year 2014/15 60 Joint ventures – London (1) Profit Private : Private share JV partner Total GDV Total units Affordable ASP (%) (%) Queensland 50 : 50 L&Q £176m 375 £461k 100 : 0 Terrace, Islington Fulham Riverside, 50 : 50 L&Q £525m 467 £1,251k 86 : 14 Fulham Aldgate Place, 50 : 50 British Land
Slide 61: London joint venture delivery profile
Half Year 2014/15 61 London joint venture delivery profile (1) Landbank units FY 15 FY 16 FY 17 FY 18 Private Affordable H1 H2 H1 H2 H1 H2 H1 H2 Queensland Terrace, 102 0 Islington Fulham Riverside, 304 14 Fulham Aldgate Place, 313 150 Aldgate Nine Elms, Vauxhall 593 52 Enderby Wharf, 616 154 Greenw
Slide 62: Joint ventures – non-London
Half Year 2014/15 62 Joint ventures – non-London (1) 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 £51m 142 70 : 30 The Fieldings/ 50 : 50 Wates £77m 301 95
Slide 63: Net interest charge analysis – non-cash
Half Year 2014/15 63 Net interest charge analysis – non-cash £m HY 14/15 HY 13/14 Non-cash interest Land creditors / deferred payables 17.2 16.2 Financing fees 1.6 1.4 Equity share (2.5) (2.8) Pension (0.2) 0.2 Total non-cash interest 16.1 15.0
Slide 64: Forward sales analysis – owned
Half Year 2014/15 64 Forward sales analysis – owned 22 February 2015 23 February 2014 Change Value (£m) - Private 1,377.5 1,323.2 4.1% - Affordable 439.6 424.9 3.5% - due in H2 (£m) 1,419.3 1,291.8 9.9% - due after H2 (£m) 397.8 456.3 (12.8%) Total value 1,817.1 1,748.1 3.9% Plots - Private 5,239 5,
Slide 65: Forward sales analysis – joint ventures
Half Year 2014/15 65 Forward sales analysis – joint ventures (1) 22 February 2015 23 February 2014 Change Value (£m) - Private 314.3 181.8 72.9% - Affordable 143.9 6.2 2,221.0% - due in H2 (£m) 152.3 152.0 0.2% - due after H2 (£m) 305.9 36.0 749.7% Total value 458.2 188.0 143.7% Plots - Private 601
Slide 66: Disclaimer
Half Year 2014/15 66 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 2014. For the purposes of this notice, the present
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