Taylor Wimpey Plc · LSE:TW.
Taylor Wimpey — FY2016 Earnings Presentation
68 slides from Taylor Wimpey's earnings presentation, Feb 28, 2017
Slide 1: Full Year Results Presentation for the year ended 31 December 2016
Full Year Results Presentation for the year ended 31 December 2016 28 February 2017
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 2016 overview and operations Pete Redfern Land and planning Jennie Daly Sustainable financial performance Ryan Mangold Current trading and strategy Pete Redfern 3
Slide 4: 2016 overview and operations
2016 overview and operations Pete Redfern Chief Executive
Slide 5: Group financial highlights
Group financial highlights Return on net operating assets* Total dividends paid 30.7 400.0 30 27.1 355.9 308.4 22.5 300.0 20 % £m 200.0 10 100.0 72.7 0 0.0 2014 2015 2016 2014 2015 2016 2016-2018 medium term target: 2016-2018 medium term target: Average of 30% Total £1.3bn over period Operating prof
Slide 6: UK operating highlights
UK operating highlights £1,682m 13.9% £65.5k (2015: £1,779m) (2015: 13.3%) (2015: £59.4k) Total value of year Voluntary employee Contribution per end order book† turnover completion† 0.72 20.8% 9,519 (2015: 0.73) (2015: 20.3%) (2015: 8,660) Private net sales rate Operating Plots converted from (per
Slide 7: UK market performance
UK market performance H2 2016 H1 2016 H2 2015 H1 2015 Average outlets open 286 294 300 302 Private sales rate (net) 0.65 0.78 0.66 0.78 Private sales price £000 279 271 273 257 Cancellation rate (private) 14% 12% 13% 11% 105 new outlets opened in 2016 (2015: 123) 2016 private sales price excludi
Slide 8: UK customer segmentation
UK customer segmentation 2016 2015 Total reservations FY H2 H1 FY H2 H1 First time buyers 38% 34% 41% 36% 33% 39% Second time buyers 36% 34% 38% 37% 36% 38% Affordable 23% 29% 17% 20% 24% 16% Investor 3% 3% 4% 7% 7% 7% Total 100% 100% 100% 100% 100% 100% Help to Buy* 39% 36% 42% 37% 30% 41% Data bas
Slide 9: Central London market performance
Central London market performance H2 2016 H1 2016 H2 2015 H1 2015 Average outlets open 8 9 8 8 Private sales rate (net) 0.42 0.29 0.87 0.53 Private sales price £000 863 1,011 845 1,202 Cancellation rate (private) 14% 24% 12% 5% Net market prices down c.5-6% on average with range of 0-10% Average
Slide 10: Continuous business improvement
Continuous business improvement Health and Business Customer People and Product and safety operating service resources production methods 10
Slide 11: People and resources
People and resources Pete Redfern Chief Executive Ryan James Jordan Jennie Daly Anne Billson- Mangold Group Legal Land Director Ross Group Finance Director Group HR Director Director Daniel Nigel Holland Chris Carney Ingrid Lee Bishop McGowan Divisional Chairman Divisional Chairman Osborne Major Div
Slide 12: Customer service changes
Customer service changes All businesses transitioned to new customer approach model and using our new Home Quality Inspection (HQI) process All businesses now have a ‘restructured role’ Head of Customer Service and supporting Customer Relationship Managers Full buy-in from all staff to the end
Slide 13: Customer service
Customer service Initial impacts Measurably better standard of finish – delivering up to a 70% decrease in defects during our Home Aftercare checks Increased positive feedback from customers Need to continue to focus on engaging contractors and delivering consistently Leasehold houses No
Slide 14: Production and Project 2020
Production and Project 2020 Project 2020 nearing final conclusions Unsurprisingly there is no silver bullet to production constraints Existing modular / offsite construction methods: Only viable on apartment schemes and certain high volume suburban schemes Lacks the balance of flexibility
Slide 15: Land and planning
Land and planning Jennie Daly Land Director
Slide 16: Land market
Land market Short term land market Land pricing stable with good levels of quality opportunities across a range of site sizes and geographies Notable activity from RSL sector, especially in the South East London market Land pricing remains competitive and our focus is on locations and stru
Slide 17: UK land pipeline
UK land pipeline 31 Dec 2016 31 Dec 2015 Plots Owned Controlled Total Total Detailed planning 39,709 4,151 43,860 46,493 Outline planning 15,532 6,356 21,888 22,063 Resolution to grant 2,046 8,440 10,486 7,154 Short term 57,287 18,947 76,234 75,710 Short term with 38,778 - 38,778 42,855 implementabl
Slide 18: Our UK planning permissions
Our UK planning permissions 17,000 Sites with implementable planning permission 15,000 94.1% 13,000 11,000 9,000 4.4% 7,000 0.5% 1.0% 5,000 Started on site as at 31 December 2016 2008 2009 2010 2011 2012 2013 2014 2015 2016 Starting on site Q1 2017 Permissions gained Completions Starting on site Q2
Slide 19: Capital allocation
Capital allocation Net operating Net operating assets* – assets* – 2016 cap 2016 delivery North £860m £816m Central and £750m £730m South West London and South East, including £1,130m £1,035m Central London * See definitions slide in the appendix 19
Slide 20: Making our assets work harder
Making our assets work harder Embedding a return on capital discipline Focusing on planning pedigree, delivery skills and timing Robust Land Purchase Exercises with regular reviews of progress against expectations Investing to optimise future growth prospects and manage cyclical risks by enc
Slide 21: Site based ROCE
Quality of land acquisitions Land approvals in the period 33% 32% 31% Site based ROCE* 30% 29% 28% 27% 26% 23.0% 23.5% 24.0% 24.5% 25.0% 25.5% 26.0% 26.5% 27.0% Contribution margin* 2012 average 2013 average 2014 average 2015 average 2016 average * See definitions slide in the appendix 21
Slide 22: Housing White Paper – 'Fixing the housing market'
Housing White Paper – ‘Fixing the housing market’ “There is no silver bullet” A “new” housing target of 225,000 to 275,000 additional homes p.a. Clarity for Starter Homes policy Three main themes: Getting the right homes built in the right places Speeding up delivery Diversifying the m
Slide 23: Sustainable financial performance
Sustainable financial performance Ryan Mangold Group Finance Director
Slide 24: Summary Group results
Summary Group results £m (before exceptional items) FY 2016 FY 2015 Change Revenue 3,676.2 3,139.8 17.1% Gross profit 940.4 788.0 19.3% Gross profit margin % 25.6 25.1 0.5ppt Operating profit* 764.3 637.0 20.0% Operating profit* margin % 20.8 20.3 0.5ppt Profit before tax and exceptional 733.4 603.8
Slide 25: UK performance summary
UK performance summary FY 2016 FY 2015 Change Legal completions – excl JVs 13,808 13,219 4.5% Private 11,145 10,710 4.1% Affordable 2,663 2,509 6.1% Average selling price – excl JVs 255 230 10.9% Private £000 286 254 12.6% Affordable £000 124 124 - Legal completions – JVs 73 122 (40.2)% Share of pro
Slide 26: Indicative movements in UK operating profit margin
Indicative movements in UK operating profit* margin Annual Impact on 2016 2015 to 2016 change income statement Market inflation on selling prices c.5.0%** 3.9% Market inflation on build cost c.3.5% (1.9)% Net economic benefit captured 2.0% Market impact of landbank evolution (0.8) % Net market impac
Slide 27: Tax
Tax £m Asset / (liability) Current tax Deferred tax Net tax As at 1 Jan 2016 1.7 55.7 57.4 Income statement* (136.3) (7.3) (143.6) SOCI / SOCIE 2.3 7.7 10.0 Cash paid 71.0 - 71.0 Forex (0.1) 1.3 1.2 As at 31 Dec 2016 (61.4) 57.4 (4.0) Pre-exceptional underlying tax rate of 19.6% (2015: 20.1%) Ex
Slide 28: Summary Group balance sheet
Summary Group balance sheet Group £m 31 Dec 2016 31 Dec 2015 Change Long term assets and JVs 74.8 49.8 50.2% Land 2,652.5 2,743.8 (3.3)% WIP 1,331.5 1,147.4 16.0% Debtors 178.6 209.4 (14.7)% Land creditors (599.8) (629.8) (4.8)% Other creditors (830.8) (865.6) (4.0)% Pensions and post retirement ben
Slide 29: UK landbank
UK landbank Land cost in short term owned landbank is 15.4% of ASP (2015: 16.3%), supported by strategic pipeline conversions Land cost as % of ASP on 2016 approvals – 18.7% Potential revenue in the landbank at 31 Dec 2016 was £42 billion (31 Dec 2015: £40 billion), comprising short term land
Slide 30: Managing UK working capital
Managing UK working capital WIP cash spend vs P&L charge 2,500 70% 60% 2,000 50% 1,500 £m 40% 1,000 30% 20% 500 10% 0 0% 2012 2013 2014 2015 2016 Development and construction costs in WIP P&L charge (direct build costs) in previous 12 months Cash spend in previous 12 months % of next 12 months compl
Slide 31: Pensions
Pensions Movement in present value of defined benefit obligations Total UK £m FY 2016 FY 2015 FY 2014 FY 2013 Brought forward 177.1 182.4 182.2 242.5 Employer contributions* (23.1) (23.1) (36.3) (48.1) Settlement gain** - - - (4.1) Administration cost 3.3 3.2 3.1 3.2 Interest cost 6.1 6.0 7.5 9.7 Me
Slide 32: Managing cash through the cycle
Managing cash through the cycle 300 UK EBITLA per unit 45% 250 40% £'000 / unit 200 35% 150 30% 100 50 25% 0 20% 2011 2012 2013 2014 2015 2016 Margin* Land cost (net) Build cost Direct selling expenses Overhead costs EBITLA % of ASP Turning profit into cash 75.1 75.7 76.2 80 700 70.6 65.3 65.4 70 50
Slide 33: Dividend payment profile
Dividend payment profile Change Paid (or to be paid) per share (pence) FY 2017*** FY 2016 FY 2015 FY 2015 to FY 2016 Ordinary dividend* c.4.60 1.71 1.81 (5.5)% Special dividend** 9.20 9.20 7.68 19.8% Total c.13.80 10.91 9.49 15.0% Change Paid (or to be paid) (£m) FY 2017*** FY 2016 FY 2015 FY 2015 t
Slide 34: Summary
Summary Focus on delivery of medium term targets 2016-2018 An average annual return on net operating assets* of 30% An average operating profit* margin of c.22% A total of £1.3 billion of dividends to be paid in cash to shareholders over the period Maintain balance sheet discipline Group F
Slide 35: Current trading and strategy
Current trading and strategy Pete Redfern Chief Executive
Slide 36: UK market performance – to date
UK market performance – to date H1 2017 (w/e H2 2016 H1 2016 H2 2015 H1 2015 19 Feb 2017) Average outlets open 285 286 294 300 302 Private sales rate (net) 0.91 0.65 0.78 0.66 0.78 Private sales price £000 284 279 271 273 257 Cancellation rate (private) 10% 14% 12% 13% 11% Strong sales start to th
Slide 37: TW UK market performance
TW UK market performance Customer interest – organic website visits Website calls 150,000 10,000 120,000 8,000 90,000 6,000 60,000 4,000 30,000 2,000 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Week number Week number 2014 2015 2016 2017
Slide 38: Mortgage lending
Mortgage lending Overall cost of borrowing remains at an all time low January January January 2-year fixed rates 2015 2016 2017 HTB equity loan 1.89% – 3.74% 1.74% – 2.19% 1.64% - 1.89% 85% LTV (new build) 2.74% – 2.79% 1.99% 1.74% Post-Referendum, interest rates have fallen further and expectat
Slide 39: 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 Interest rate % 10 60% 50% 8 40% 6 30% 4 20% 2 10% 0% 0 1983 1985 1988 1991 1994 1996 1999 2002 2005 2007 2010 2013 2016 Interest rate London UK FPC recommend to stress test assuming Bank Rate increases
Slide 40: Loan to income ratio (LTI)
Loan to income ratio (LTI) 16 14 12 10 % of total 8 6 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 New mortgages with LTI ratios between 4.0 and 4.5 as % of total New mortgages with LTI ratios greater than 4.5 as % of total New mortgages with LTI ratios greater than 5 as % of total S
Slide 41: Taylor Wimpey strategic priorities
Taylor Wimpey strategic priorities Steady sustainable growth, above 14k, particularly on large sites Careful monitoring of cyclical risk in the medium term, and the balance between growth and risk Land strategy Continual improvement in landbank quality Expect to maintain short term scale i
Slide 42: Outlook and summary
Outlook and summary 2017 trading remains robust with a healthy start to the year Without a major change in interest rates or lending, we expect low but positive house price inflation for the year Our base case is now for a prolonged period of low house price growth with regional and market var
Slide 43: Taylor Wimpey
43 Wimpey | ple
Slide 44: Future investor communications
Future investor communications 27 April 2017 AGM and trading update 1 August 2017 Half year results 13 November 2017 Trading update 44
Slide 45: Appendices
Taylor Wimpey plc Full Year Results Presentation for the year ended 31 December 2016 Appendices
Slide 46: Summary income statement
Summary income statement* Group £m FY 2016 FY 2015 Change H1 2016 Revenue 3,676.2 3,139.8 17.1% 1,457.2 Cost of sales (2,735.8) (2,351.8) 16.3% (1,093.4) Gross profit 940.4 788.0 19.3% 363.8 Net operating expenses (177.3) (155.9) 13.7% (84.6) Profit on ordinary activities 763.1 632.1 20.7% 279.2 bef
Slide 47: Cash flow summary
Cash flow summary Group £m FY 2016 H2 2016 H1 2016 FY 2015 Profit from ordinary activities before finance costs* 762.6 481.2 281.4 631.5 (Increase) / decrease in inventories (113.3) 237.7 (351.0) (269.1) Other operating items** (27.1) (56.3) 29.2 64.5 Cash generated / (used) by operations 622.2 662.
Slide 48: Group segmental analysis
Group segmental analysis FY 2016 FY 2015 Operating Operating RONOA* Operating Operating RONOA* profit* profit* % profit* profit* % £m margin £m margin % % North 280.0 22.6 34.4 251.0 22.9 31.8 Central and South West 280.7 23.3 39.1 243.2 22.6 34.1 London and South East 250.4 22.0 24.7 203.2 22.3 22.
Slide 49: North Division
North Division Scotland, North West North North North East and West Division Division As at 31 Dec and Yorkshire Midlands FY 2016 FY 2015 Number of outlets 74 76 150 153 Private sales rate (net) 0.71 0.65 0.68 0.65 Completions 2,920 3,068 5,988 5,520 Average selling price on 212 202 207 196 completi
Slide 50: Central and South West Division
Central and South West Division Central and Central and East and Wales and South West South West Central West Division Division As at 31 Dec FY 2016 FY 2015 Number of outlets 45 39 84 95 Private sales rate (net) 0.74 0.76 0.75 0.75 Completions 2,499 2,311 4,810 4,810 Average selling price on 255 227
Slide 51: London and South East Division including Central London
London and South East Division including Central London London and London and South East, South East South East London excluding London Division inc. Division inc. market† Central London Central London market† As at 31 Dec FY 2016 FY 2015 Number of outlets 36 15 51 49 Private sales rate (net) 0.80 0
Slide 52: Movement in Group net assets
Movement in Group net assets Breakdown of 31 Dec 2016 31 Dec 2015 movement £m £m % Opening net assets 2,723.3 2,535.3 N/A Pre-exceptional net earnings 589.7 482.3 21.7% Net impact of exceptional items (0.4) 7.5 (0.0)% Actuarial losses after tax (58.6) (9.3) (2.2)% Net share scheme and other movement
Slide 53: UK net operating assets
UK net operating assets £m 31 Dec 2016 31 Dec 2015 Fixed assets 24 22 Investment in JVs 50 27 Land 2,574 2,662 WIP 1,288 1,146 Total inventories 3,862 3,808 Debtors 177 207 Land creditors (577) (622) Other creditors (779) (830) Total creditors (1,356) (1,452) Pension liability and PRMA (234) (178) P
Slide 54: Financing
Financing Net cash at 31 Dec 2016: £364.7 million (31 Dec 2015: £223.3 million) Adjusted gearing (net debt plus land creditors) – 8.1% (31 Dec 2015: 14.9%) Average net debt of £87.4 million (31 Dec 2015: £94.8 million net debt) Borrowings and facilities: Fully undrawn £550 million Revolvin
Slide 55: Finance charges
Finance charges £m FY 2016 FY 2015 Change Financial indebtedness 10.9 11.6 (0.7) Land creditor unwind 17.7 15.9 1.8 Pensions 6.1 6.0 0.1 Other (3.1) 0.4 (3.5) Total 31.6 33.9 (2.3) 55
Slide 56: UK land commitments
UK land commitments 2016 2015 £m < 1 yr 1-2 yrs 2-5 yrs 5+ yrs total total Committed cash payments in respect of unconditional 275 173 138 21 607 653 land contracts Expected cash payments in respect of conditional land 126 45 71 13 255 n/a contracts Included in unconditional land contracts at 31 D
Slide 57: UK land portfolio ‒ net cost
UK land portfolio ‒ net cost 31 Dec 2016 31 Dec 2015 £m Owned Controlled Total Total Detailed planning 1,746 11 1,757 1,827 Outline planning 491 39 530 614 Resolution to grant 39 23 62 34 Sub-total 2,276 73 2,349 2,475 plots 57,287 18,947 76,234 75,710 Strategic 135 60 195 171 plots 27,826 80,190 10
Slide 58: UK short term landbank
UK short term landbank 100,000 9,519 (13,881) 90,000 6,355 80,000 (1,469) 75,710 76,234 Plots 70,000 60,000 50,000 31 Dec 2015 Plots acquired Strategic land Completions inc. Land sales Review and 31 Dec 2016 conversion JVs scope changes Movement in period 58
Slide 59: UK strategic pipeline
UK strategic pipeline 13,603 (9,519) 120,000 (2,768) 106,700 108,016 100,000 Plots 80,000 60,000 31 Dec 2015 Plots acquired Strategic land Land sales Review and scope 31 Dec 2016 conversion changes Movement in period 59
Slide 60: North Division
North Division Scotland, North West North North North East and West Division Division and Yorkshire Midlands FY 2016 FY 2015 As at 31 Dec Short term owned and controlled land portfolio plots 14,913 14,115 29,028 27,967 Land portfolio years 5.1 4.6 4.8 5.1 Cost per plot £000* 27.3 31.7 29.3 29.0 ASP
Slide 61: Central and South West Division
Central and South West Division Central and Central and East and Wales and South West South West Central West Division Division As at 31 Dec FY 2016 FY 2015 Short term owned and controlled 16,589 15,351 31,940 32,268 land portfolio plots Land portfolio years 6.6 6.6 6.6 6.7 Cost per plot £000* 33.0
Slide 62: London and South East Division including Central London
London and South East Division including Central London London and London and South East, South East South East London excluding Division inc. Division inc. market† Central London Central London London market† As at 31 Dec FY 2016 FY 2015 Short term owned and controlled 11,462 3,804 15,266 15,475 la
Slide 63: Land disposals
Land disposals £m FY 2016 FY 2015 Proceeds UK 48.1 35.9 Spain - - Total 48.1 35.9 Gross profit UK 11.8 6.2 Spain - - Total 11.8 6.2 Land disposals are included in revenue and cost of sales 63
Slide 64: Real house prices
Real house prices £200,000 £150,000 £100,000 £50,000 £0 1987 1989 1991 1993 1996 1998 2000 2002 2005 2007 2009 2011 2014 2016 Nominal prices Real prices Source: Nationwide – Nominal house prices 64
Slide 65: UK product mix
UK product mix 2016 2015 Private completions FY H2 H1 FY H2 H1 Apartments 14% 17% 10% 13% 15% 11% 1 / 2 / 3 bed houses 47% 47% 48% 47% 46% 49% 4 / 5 / 6 bed houses 39% 36% 42% 40% 39% 40% Total 100% 100% 100% 100% 100% 100% Data based on completions excluding JVs 65
Slide 66: UK sales performance
UK sales performance H1 2017 (w/e 19 H2 2016 H1 2016 H2 2015 H1 2015 Feb 2017) Average outlets open 285 286 294 300 302 Average sales rate (net) 0.93 0.90 0.95 0.86 0.94 Average selling price £000 280 235 246 237 237 H1 2017 31 Dec 3 July 31 Dec 28 June (w/e 19 2016 2016 2015 2015 As at Feb 2017) To
Slide 67: Spain financial summary
Spain financial summary FY 2016 FY 2015 Change Average number of active sites 19 18 5.6% Legal completions 304 251 21.1% Average selling price (£000) 303 227 33.5% Average selling price (€000) 358 315 13.7% Revenue £m 93.6 58.1 61.1% Operating profit* £m 20.6 10.0 106.0% Operating profit* margin % 2
Slide 68: 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, attributed to the shareholders of the parent, excluding exceptional items