Vistry Group Plc · LSE:VTY
Vistry — Bovis Homes Group — FY2018 Earnings Presentation
42 slides from Vistry's earnings presentation, Feb 28, 2019
Slide 1: Full year results 2018
Bovis Homes Group PLC Full year results 2018 28 February 2019 www.bovishomesgroup.co.uk
Slide 2: Agenda
Agenda • Highlights • Financial review • CEO review - Operational update - Medium term targets • Outlook • Q&A Stanton Cross, Wellingborough Slide 1
Slide 3: Highlights
Highlights • Significant operational improvements delivered a step change in business and financial performance • Record year of profits with a 47.4% increase in PBT • Transformation of build quality and customer service • Controlled and disciplined period ends • Significant improvement in operating
Slide 4: Highlights
Highlights • Strong land acquisition and strategic land conversion, with excellent land visibility • Successful launch of new Phoenix housing range and revised sales specification • New Partnership Housing Division launching in 2019 • Good demand in first eight weeks with sales rate of 0.58, up 15.7
Slide 5: Financial review
Financial review Earl Sibley Group Finance Director Sherford, Plymouth Slide 4
Slide 6: Income statement
Income statement (£m) FY17 FY18 Change Revenue 1,028.2 1,061.4 3% Gross profit 184.6 230.9 25% Administrative expenses (56.6) (56.7) 0% Operating profit before exceptional items 128.0 174.2 36% Exceptional items (6.8) - Profit before interest and tax 121.2 174.2 44% Finance cost (7.2) (6.1) Profit b
Slide 7: Housing revenue analysis
Housing revenue analysis FY17 FY18 Change Average sales price (£k) Private 334.5 337.4 1% Affordable 123.4 134.8 9% Total 272.4 273.2 0% Volume Private 2,573 2,567 0% Affordable 1,072 1,192 11% Total 3,645 3,759 3% Housing revenue (£m) Private 860.6 866.2 1% Affordable 132.3 160.7 21% Net housing re
Slide 8: Analysis of profit
Analysis of profit FY17 FY18 £m unless otherwise stated Housing Land Total Housing Land Total sales sales Revenue 996.2 32.0 1,028.2 1,047.3 14.1 1,061.4 Gross profit 182.2 2.4 184.6 229.7 1.2 230.9 Administrative expenses (56.6) (56.7) Operating profit pre exceptional items 128.0 174.2 Gross margin
Slide 9: Sales prices and construction costs
Sales prices and construction costs FY17 FY18 Change Sales price per home (£000’s) 272.4 273.2 0% Sales price per sq ft (£’s) 251.3 261.5 4% Private sales price (£000’s) 334.5 337.4 1% Private sales price per sq ft (£’s) 279.6 287.9 3% Construction cost per home (£000’s) 165.2 163.7 -1% Construction
Slide 10: Cash generation
Cash generation (£m) FY17 FY18 Housing receipts 1,086.9 1,054.8 Construction expenditure (681.6) (708.5) Overheads (54.7) (55.1) Operating cash flow 350.6 291.2 Cash expenditure on land (225.8) (174.5) Land sales receipts 36.9 29.1 Dividend payment (60.4) (129.7) Non-trading items 5.0 (34.2) Net cas
Slide 11: Land activity in the year
Land activity in the year • Continue to see good opportunities in the land market • 4,164 plots acquired across 19 developments - 99% with an ASP <£600k Macclesfield • High quality conversion from Haslington Edwalton valuable strategic land bank Tamworth totalling 1,958 plots in the year Essington H
Slide 12: Land bank
Land bank 31 Dec 2017 2018 Total consented land bank 17,096 17,328 Joint venture plots - 1,496 Owned land bank plots 17,096 15,832 Land bank years(1) 4.3yrs 4.0yrs Average plots per site 146 135 Average sales price £293k £305k Average land cost £53k £55k Plot cost / ASP 18% 18% Average gross margin
Slide 13: Strong land bank fundamentals
Strong land bank fundamentals • 96% of private land bank plots with ASP <£600K, 42% with ASP <£300k - Only 1% of plots acquired in 2018 with ASP >£600k • Acquisitions increasing our proportion of 2/3 bedroom homes and reducing overall Group ASP • Balanced land portfolio across all seven regions 9% 4
Slide 14: Net assets
Net assets (£m) 31 Dec 2017 30 June 2018 31 Dec 2018 Land 913.4 831.9 858.7 Land creditors (246.7) (195.6) (293.3) Land net of creditors 666.7 636.3 565.4 Work in progress 408.6 473.1 461.5 Other assets 92.1 117.0 100.2 Other liabilities (255.7) (207.9) (192.8) Net cash 144.9 42.8 126.8 Net assets 1
Slide 15: Balance sheet optimisation - aiming for £250m
Balance sheet optimisation - aiming for £250m Land - Land disposals (£66m) £153m - Sherford JV (£15m) - Expect c. £68m net cash benefit from JV of Wellingborough in H1 19 - Disposal of out of operating area site (c. £4m) in 2019 Work in progress - Reduction in part exchange (£26m) £43m - Underlying
Slide 16: Operational Update
Furrowfields, Bishops Itchington Operational Update Greg Fitzgerald Chief Executive Officer Slide 15
Slide 17: Transformed our customer service
Transformed our customer service • Customer satisfaction central to all we have done in 2018 - Controlled and disciplined period ends • 4 star HBF customer satisfaction rating for 2018, up from 2 star in 2017 - All seven regions trending at least 4 star - New HBF year tracking ahead • Customer servi
Slide 18: Step change in build quality
Step change in build quality • Further progress on build quality - Six NHBC Pride in the Job Awards - NHBC Construction Quality Review - 18% improvement over 2 years - NHBC reportable items for 2018 down 66% since Dec 2016 • High calibre construction directors, site managers, and site teams across a
Slide 19: The Phoenix Collection
The Phoenix Collection • Excellent progress on implementing new housing range - 34 sites replanned totalling 1,664 units - 19 further sites in the replanning process - Two show homes from new range launched with excellent customer feedback - First completions in Q2 2019 • c. 15% of private completio
Slide 20: High quality, skilled workforce
High quality, skilled workforce • Investment in full range of training and development programmes - In-house Bovis Homes Training Centre - 4,505 training days in 2018, up 14% - Covers all business functions including subcontractors • Leadership training programme - Delivered to more than 140 employe
Slide 21: Building a better Bovis Homes
Building a better Bovis Homes • Key priority of investing in efficient processes and developing our operational teams • 18 months into 3.5 year plan implementing major business change programme • COINS successfully rolled-out across the Group in Spring 2018 - Significant improvement in process, repo
Slide 22: Value from strategic land
Value from strategic land • Strategic land is very well positioned As at 31 Dec 2018 Total sites Total plots - Major progress on a number of significant 0 – 150 plots 13 1,124 land projects during 2018 150 – 300 plots 18 3,965 - Deliverability of high quality developments 300 – 500 plots 9 3,095 in
Slide 23: Partnership housing
Partnership housing • Launching new Partnership Housing Division - Keith Carnegie, CEO Partnership Housing - Working alongside our operating regions • Bovis very well positioned - Land led strategy reflecting our high quality, deliverable strategic land bank - Strong relationships with the HAs – sig
Slide 24: New Bovis, new brand
New Bovis, new brand • Introducing a refreshed brand identity for Bovis Homes • Visually demonstrating the change and progress made - Current identity more than 20 years old • Significant research undertaken with more than 300 responses • Key objectives - To modernise the brand including the humming
Slide 25: Market environment
Market environment • Fundamentals remain strong - High level of consumer demand - Strong support for the sector with Help to Buy extended - Low interest rate environment - Competitive mortgage market - High employment levels • Alternative routes to market through Heylo, PRS and Partnerships availabl
Slide 26: Well positioned low risk housebuilder
Well positioned low risk housebuilder • New housing range reflects modern living • High quality, well designed family homes 1 • Prime locations typically on the edge of towns or villages 2 • No exposure to London market; Our DNA no developments within M25 building and selling quality family homes •
Slide 27: Strong sales position for 2019
Strong sales position for 2019 • Focused on price optimisation and controlled growth • New sales specification successfully implemented - Further opportunities with ‘Select’ range of Homes you’ll love – help you’ll really value optional extras s and upgra Help des Your choice of option • Help to Buy
Slide 28: Medium term targets
Medium term targets Greg Fitzgerald Chief Executive Officer Shinfield Meadows, Shinfield Slide 27
Slide 29: Progress with medium term targets
Progress with medium term targets Target Progress to date Timing / outlook 4 star HBF customer satisfaction rating - Expect to achieve 4 star HBF customer satisfaction score for 2018 Achieved - Maintain 4 star rating 3 - 3% increase in completions in FY18, in-line with 2020 4,000 completions p.a. ex
Slide 30: Progress with margin initiatives
Progress with margin initiatives 1. Price optimisation 3. Cost reduction • Controlled volume growth • Getting it right first time • Revised sales commission structure • c. 1% non-utilisation of contingency • c. 1% margin opportunity resulting in c. 0.3% margin opportunity 2. Specification review 4.
Slide 31: Enhanced cash returns to shareholders
Enhanced cash returns to shareholders Ordinary dividend - Strategy of maximising sustainable dividends to shareholders - FY18: total ordinary dividend up 20% to 57 pence per share (FY17: 47.5 pence per share) - Ordinary dividend cover to move to two times by FY20 Special cash returns - Capital retur
Slide 32: Strong outlook
Strong outlook • Strong sales position - 0.58 sales per site per week in the first 8 weeks, up 15.7% on the prior year - 48% of FY 19 consensus revenues secured • Controlled volume growth - Maintaining high build quality and level of customer service • Investment in people, process and systems acros
Slide 33: Q&A
Q&A Slide 32
Slide 34: Disclaimer - important notice
Disclaimer - important notice Certain statements in this presentation are forward looking statements. Forward looking statements involve evaluating a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those statements
Slide 35: Appendices
Bovis Homes Group PLC Full year results 2018 Appendices Hampton Lea, Malpas Slide 34
Slide 36: Key metrics
Key metrics Revenue (£m) Operating profit margin (%) Profit before tax (£m) 1,061.4m 16.4% 168.1m 1061.40 17.300 170.0 1,054.8 1,061.4 17.3 168.1 17.0 1,028.2 160.1 16.4 154.7 15.2 946.5 849.12 12.975 127.5 133.5 809.4 12.5 636.84 114.0 8.650 85.0 424.56 4.325 42.5 212.28 0.00 0.000 0.0 2014 2015 20
Slide 37: Strength of land bank across the regions
Strength of land bank across the regions • Strength of land bank across our 4315 West East operating regions 3452 1,496 1,561 • Proximity to regional office remains Owned plots a key criteria for land acquisition 2589 2,625 going forward 2,261 2,167 2,021 1726 1,897 1,700 • Stanton Cross, Wellingbor
Slide 38: Sherford and Wellingborough
Sherford and Wellingborough • Sherford - Formation of 50:50 JV (1,496 plots) with Clarion Housing Group - Net cash benefit totalling £15.1m - Strong sales rate with robust pricing • Wellingborough - Expect to form 50:50 JV (1,561 plots) realising net cash benefit totalling c. £68m - Development laun
Slide 39: Work in progress and other assets
Work in progress and other assets (£m) 31 Dec 2017 30 June 2018 31 Dec 2018 Stock (including show homes) 23.1 23.8 28.6 Housing and infrastructure WIP 333.9 394.2 359.7 Wellingborough WIP 31.9 44.6 56.9 Part exchange 19.7 10.5 16.3 Total work in progress 408.6 473.1 461.5 Debtors - Help to Buy 1.5 4
Slide 40: Interest charge
Interest charge 12 months ended 31 Dec (£m) 2017 2018 Bank interest and commitment fees (2.4) (1.9) Issue cost amortisation (0.6) (0.8) Imputed interest on land (5.1) (3.6) Pension financing (0.2) 0.2 Imputed interest on available for sale assets 1.1 0.0 Total (7.2) (6.1) Slide 39
Slide 41: Land creditor payments
Land creditor payments 300 250 £112m 200 £m 150 £298m £106m 100 50 £80m 0 <1 year 1-2 year 2 year+ Note: The above figures are on an absolute cash basis. Balance sheet land creditors figure of £293m as at 31 December 2018 is on an IFRS accounting basis Slide 40
Slide 42: Other liabilities
Other liabilities (£m) 31 Dec 2017 30 June 2018 31 Dec 2018 Creditors 231.2 187.3 169.2 Corporation tax liability 16.9 14.0 18.1 Deferred tax liability 0.6 1.0 0.7 Provisions - Customer care provision 1.4 - - - Other 5.6 5.6 4.8 Other liabilities 255.7 207.9 192.8 Slide 41