Taylor Wimpey Plc · LSE:TW.
Taylor Wimpey — H1 2016 Earnings Presentation
64 slides from Taylor Wimpey's earnings presentation, Jul 27, 2016
Slide 1: Half Year Results Presentation
Half Year Results Presentation for the period ended 3 July 2016 27 July 2016
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 Trading and outlook Pete Redfern Financial review and quality Ryan Mangold Strategy and conclusions Pete Redfern 3
Slide 4: Trading and outlook
Trading and outlook Pete Redfern Chief Executive
Slide 5: Market conditions
Market conditions H1 2016 Trading good, but running slightly behind strong 2015 Central London slow with stable pricing, as stamp duty headwinds impacted Little visible sign of pre Referendum impact July 2016 Generally the market has performed very well One or two initial small blips i
Slide 6: Our UK market performance
Our UK market performance 27 June 2016 22 June 2015 H1 2016 H2 2015 H1 2015 – 24 July 2016 – 19 July 2015 Average outlets open 287 294 300 305 302 Private sales rate (net) 0.65 0.78 0.66 0.81 0.78 Private sales price £000 269 271 273 258 257 Cancellation rate (private) 17% 12% 13% 10% 11% H1 2016
Slide 7: TW UK market performance
TW UK market performance Customer interest – organic website visits Website calls 150,000 10,000 EU Referendum EU Referendum 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
Slide 8: Mortgage lending
Mortgage lending Impact of mortgage lending was one of two key concerns on morning of 24 June Actual story has been very positive Lenders seem committed to maintaining scale and terms of loans Government and BoE actively monitoring and encouraging Cost of loans has continued to fall 2-year
Slide 9: Rent vs buy
Rent vs buy Monthly cost of buying / renting a comparable Taylor Wimpey property £400 £300 £200 £100 £- £(100) £(200) Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Cheaper to Service Mortgage Cheaper to Rent Cost of buying: based on average quoted mortgage rates
Slide 10: Second hand market, agents and valuers
Second hand market, agents and valuers Second hand market Transaction levels expected to be lower over summer with buyers lacking Help to Buy support, and sellers cautious on timing for new instructions Pricing continues to be stable as low levels of stock for sale impact Agents may be beari
Slide 11: Post Referendum market summary
Post Referendum market summary Underlying fundamentals remain good Demand and supply imbalance not changed, and having a short term impact Undersupply of housing Favourable demographics Customer confidence in the housing market and house prices for the medium term remains strong everywhere
Slide 12: What actions have we taken?
What actions have we taken? Uncertain trading environment Focus on further mitigating potential downside Cautious / prudent additional steps taken Land purchases in progress reviewed and hurdle rates increased Detailed review / stress testing assumptions of existing land contracts against
Slide 13: Outlook
Outlook Market outlook Underlying supply / demand balance remains favourable Mortgage lending and Government policy continues to be favourable Initial signs post Referendum encouraging Risks remain including second hand market and Prime London Land environment remains very encouraging, s
Slide 14: Financial review and quality
Financial review and quality Ryan Mangold Group Finance Director
Slide 15: Summary Group results
Summary Group results £m H1 2016 H1 2015 Change FY 2015 Revenue 1,457.2 1,335.3 9.1% 3,139.8 Gross profit 363.8 330.2 10.2% 788.0 Gross profit margin % 25.0 24.7 0.3ppt 25.1 Operating profit* 279.1 255.9 9.1% 637.0 Operating profit* margin % 19.2 19.2 - 20.3 Profit before tax and 266.6 238.0 12.0% 6
Slide 16: UK performance summary
UK performance summary H1 2016 H1 2015 Change FY 2015 Legal completions – excl JVs 6,019 5,842 3.0% 13,219 Private 4,835 4,730 2.2% 10,710 Affordable 1,184 1,112 6.5% 2,509 Average selling price – excl JVs 238 225 5.8% 230 Private £000 266 248 7.3% 254 Affordable £000 125 124 0.8% 124 Legal completi
Slide 17: Indicative movements in UK operating profit margin
Indicative movements in UK operating profit* margin Annual Impact on H1 2016 H1 2015 to H1 2016 change income statement Market inflation on selling prices c.6%** 4.0% Market inflation on build cost c.3.5% (1.9)% Net economic benefit captured 2.1% Market impact of landbank evolution (0.7)% Net market
Slide 18: Exceptional items and tax
Exceptional items and tax Exceptional items Review of land and WIP net realisable values resulted in net release of £2.2 million on previously impaired sites Tax Effective tax rate of 20.0%, largely reflecting the UK statutory rate UK tax charge predominately relates to current tax Cash tax
Slide 19: Summary Group balance sheet
Summary Group balance sheet Group £m 3 July 2016 28 June 2015 Change 31 Dec 2015 Long term assets and JVs 65.4 57.1 14.5% 49.8 Land 2,881.7 2,672.0 7.8% 2,743.8 WIP 1,396.8 1,083.4 28.9% 1,147.4 Debtors 231.9 229.1 1.2% 209.4 Land creditors (656.3) (506.0) 29.7% (629.8) Other creditors (932.0) (837.
Slide 20: UK landbank
UK landbank Land cost in short term owned landbank is 16.3% of ASP (H1 2015: 16.4%), supported by strategic pipeline conversions Land cost as % of ASP on H1 2016 approvals – 20.2% Revenue in the landbank at 3 July 2016 was £42 billion (28 June 2015: £40 billion) comprising short term land £20
Slide 21: UK land commitments
UK land commitments H1 2016 H1 2015 £m < 1 yr 1-2 yrs 2-5 yrs 5+ yrs total total Expected payments in respect of unconditional 338 175 141 21 675 529 land contracts* Expected payments in respect of conditional 50 24 70 2 146 n/a land contracts Continue to use land creditors selectively Included
Slide 22: Managing UK working capital
Managing UK working capital WIP cash spend vs P&L charge through the cycle 2,500 80% % of next 12 months completions 70% 2,000 60% 1,500 £m 50% 1,000 40% 500 30% 0 20% H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 Development and construction costs in WIP P&L charge (direct build costs) in previous 12 months
Slide 23: Pensions
Pensions Movement in present value of defined benefit obligations Total UK £m H1 2016 FY 2015 FY 2014 FY 2013 Brought forward 177.1 182.4 182.2 242.5 Employer contributions* (14.1) (23.1) (36.3) (48.1) Settlement gain** - - - (4.1) Administration cost 1.4 3.2 3.1 3.2 Interest cost 3.2 6.0 7.5 9.7 Me
Slide 24: Turning profit into cash
Turning profit into cash 800 80 600 75 400 Short term landbank plots 000’s 200 70 £m 0 65 (200) (400) 60 (600) (800) 55 H1 2013 rolling H1 2014 rolling H1 2015 rolling H1 2016 rolling Dividends Pensions, tax, interest Working capital EBITDA* Short term landbank plots * See definitions slide in the a
Slide 25: Managing cash through the cycle
Managing cash through the cycle UK EBITLA per unit through the cycle 250 45% 200 40% £'000 / unit 150 35% 100 30% 50 25% 0 20% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 H1 rolling Overhead costs Direct selling expenses Build cost Land cost Margin* EBITLA % of ASP Preserving Group cash throug
Slide 26: Financing
Financing Net cash at 3 July 2016: £116.7 million (31 Dec 2015: £223.3 million, 28 June 2015: £87.6 million) Committed borrowing facilities £550 million Revolving Credit Facility – undrawn (maturing Feb 2020) £100 million Term Loan (maturing Nov 2020 amortises from Nov 2017) €100 million P
Slide 27: Dividend payment profile
Dividend payment profile Paid (or to be paid) per share (pence) FY 2017*** FY 2016*** FY 2015 Change Ordinary dividend* c.4.60 1.71 1.81 (5.5)% Special dividend** c.9.20 9.20 7.68 19.8% Total c.13.80 10.91 9.49 15.0% Paid (or to be paid) (£m) FY 2017*** FY 2016*** FY 2015 Change Ordinary dividend* c
Slide 28: 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 H
Slide 29: Strategy and conclusions
Strategy and conclusions Pete Redfern Chief Executive
Slide 30: Strategy
Strategy Strategy remains unchanged Business is ‘built’ to manage through the cycle Operational approach Quality over quantity Managing every site to the optimum – outlet opening, volume, margin, return High strategic land proportion Balance sheet structure Low / no debt Tightening
Slide 31: Strong operational and financial position
Strong operational and financial position Strong business – financially and operationally 24 regional businesses located in core UK locations Experienced management team High-quality landbank, underpinned by strong strategic pipeline Solid balance sheet – adjusted gearing of 19.9% includin
Slide 32: UK land portfolio - plots
UK land portfolio ‒ plots 3 July 2016 31 Dec 2015 Owned Controlled Total Total Detailed planning 43,001 5,989 48,990 46,493 Outline planning 15,832 6,202 22,034 22,063 Resolution to grant 1,897 4,884 6,781 7,154 Short term 60,730 17,075 77,805 75,710 Allocated strategic* 4,438 10,975 15,413 18,346 N
Slide 33: Quality of landbank
Quality of landbank Micro location – position within macro location Total: 438 sites in short term owned landbank A B C D Q1 – A 37 64 10 2 Macro location – Q2 – B 79 142 17 - city, broken down by major suburb, town, village or Q3 – C 16 64 5 - rural area Q4 - D 1 1 - - Achieved a 1.7% upside to a
Slide 34: Continued cash generation potential
Continued cash generation potential Ordinary dividend already stress tested against various downside scenarios, including a reduction of 20% on prices and 30% reduction on volumes Illustrative cash generated per home completion in the UK Average selling price change per unit £000 0% -5% -10% -15
Slide 35: Fully committed to Dividend Policy
Fully committed to Dividend Policy Ordinary dividend Ordinary dividend of 5% of net assets, minimum of £150 million, can be sustained through 20% reduction in prices, 30% reduction in volume Special dividend 2016: £300.2 million 2017: c.£300 million Dividend target £1.3 billion of divi
Slide 36: 2016 - 2018 targets
2016 – 2018 targets Three-year targets announced in May remain in place 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 * See definitions slide in the a
Slide 37: Conclusions
Conclusions Market outlook Underlying supply / demand balance remains favourable Mortgage lending and Government policy continues to be favourable Initial signs post Referendum encouraging Risks remain including second hand market and Prime London Value proposition for shareholders Hig
Slide 38: Wimpey
38 Wimpey | ple
Slide 39: Future investor communications
Future investor communications 14 November 2016 Trading update 11 January 2017 Trading update 28 February 2017 Full year results 27 April 2017 AGM and trading update 1 August 2017 Half year results 39
Slide 40: Appendices
Taylor Wimpey plc Half Year Results Presentation for the period ended 3 July 2016 Appendices
Slide 41: Summary income statement
Summary income statement* Group £m H1 2016 H1 2015 Change FY 2015 Revenue 1,457.2 1,335.3 9.1% 3,139.8 Cost of sales (1,093.4) (1,005.1) 8.8% (2,351.8) Gross profit 363.8 330.2 10.2% 788.0 Net operating expenses (84.6) (75.7) 11.8% (155.9) Profit on ordinary activities 279.2 254.5 9.7% 632.1 before
Slide 42: Cash flow summary
Cash flow summary Group £m H1 2016 FY 2015 H2 2015 H1 2015 Profit from ordinary activities before finance costs* 281.4 631.5 377.8 253.7 Increase in inventories (351.0) (269.1) (12.9) (256.2) Other operating items** 29.2 64.5 40.8 23.7 Cash (used) / generated by operations (40.4) 426.9 405.7 21.2 Ta
Slide 43: Group segmental analysis
Group segmental analysis H1 2016 H1 2015 FY 2015 Operating Operating RONOA* Operating Operating RONOA* Operating Operating RONOA* profit* profit* % profit* profit* % profit* profit* % £m margin £m margin £m margin % % % North 136.9 23.6 33.1 115.9 22.7 30.9 251.0 22.9 31.8 Central and 116.2 23.2 34.
Slide 44: North Division
North Division Scotland Yorkshire North North West and and Division Division Midlands As at 3 July 2016 North East North West H1 2016 FY 2015 Number of outlets 44 56 46 146 153 Private sales rate (net) 0.78 0.80 0.71 0.76 0.65 Completions 763 1,107 956 2,826 5,520 Average selling price on 217 205 19
Slide 45: Central and South West Division
Central and South West Division Central and Central and South West South West South West Eastern and Division Division Wales As at 3 July 2016 H1 2016 FY 2015 Number of outlets 50 37 87 95 Private sales rate (net) 1.02 0.79 0.90 0.75 Completions 1,069 980 2,049 4,810 Average selling price on 257 223
Slide 46: 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 3 July 2016 H1 2016 FY 2015 Number of outlets 34 20 54 49 Private sales rate (ne
Slide 47: Movement in Group net assets
Movement in Group net assets H1 2016 rolling H1 2015 rolling Breakdown of 12 months 12 months movement £m £m % Opening net assets 2,417.0 2,350.7 N/A Pre-exceptional net earnings 505.3 409.8 20.9% Net impact of exceptional items 9.9 (0.7) 0.4% Actuarial losses after tax (1.6) (49.2) (0.0)% Net share
Slide 48: UK net operating assets
UK net operating assets £m 3 July 2016 28 Jun 2015 31 Dec 2015 Fixed assets 24 20 22 Investment in JVs 41 36 27 Land 2,777 2,627 2,662 WIP 1,366 1,041 1,146 Total inventories 4,143 3,668 3,808 Debtors 225 226 207 Land creditors (640) (501) (622) Other creditors (875) (802) (830) Total creditors (1,5
Slide 49: Finance charges
Finance charges £m H1 2016 H1 2015 Change FY 2015 Financial indebtedness 5.4 6.1 (0.7) 11.6 Land creditor unwind 8.5 7.6 0.9 15.9 Pensions 3.2 3.5 (0.3) 6.0 Other (4.3) 1.0 (5.3) 0.4 Total 12.8 18.2 (5.4) 33.9 49
Slide 50: UK land portfolio - net cost
UK land portfolio ‒ net cost 3 July 2016 31 Dec 2015 £m Owned Controlled Total Total Detailed planning 1,862 15 1,877 1,827 Outline planning 614 46 660 614 Resolution to grant 37 11 48 34 Sub-total 2,513 72 2,585 2,475 plots 60,730 17,075 77,805 75,710 Strategic 110 64 174 171 plots 27,803 76,003 10
Slide 51: UK short term landbank
UK short term landbank 90,000 5,782 6,043 80,000 3,110 754 77,805 75,710 Plots 70,000 60,000 50,000 31 Dec 2015 Plots acquired Strategic land Completions inc. Land sales Scope changes 3 July 2016 conversion JVs Movement in period 51
Slide 52: UK strategic pipeline
UK strategic pipeline 120,000 3,597 5,782 106,700 709 103,806 100,000 Plots 80,000 60,000 31 Dec 2015 Plots acquired Strategic land Land sales Review and scope 3 July 2016 conversion changes Movement in period 52
Slide 53: Quality of land acquisitions
Quality of land acquisitions Capital allocation of 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 a
Slide 54: North Division
North Division Scotland Yorkshire North North West and and Division Division Midlands North East North West H1 2016 FY 2015 As at 3 July 2016 Short term owned and 8,949 11,677 6,699 27,325 27,967 controlled land portfolio plots Land portfolio years 5.5 5.4 3.6 4.8 5.1 Land portfolio years, three- 5.
Slide 55: Central and South West Division
Central and South West Division Central and Central and South West South West South West Eastern and Wales Division Division As at 3 July 2016 H1 2016 FY 2015 Short term owned and controlled 18,369 15,445 33,814 32,268 land portfolio plots Land portfolio years 7.3 6.7 7.0 6.7 Land portfolio years, t
Slide 56: 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 3 July 2016 H1 2016 FY 2015 Short term owned and controlled 12,267 4,399 16,666
Slide 57: Land disposals
Land disposals £m H1 2016 H1 2015 FY 2015 Proceeds UK 9.3 7.4 35.9 Spain - - - Total 9.3 7.4 35.9 Gross profit UK* 3.3 2.6 6.2 Spain - - - Total 3.3 2.6 6.2 Land disposals are included in revenue and cost of sales * Includes land provision releases 57
Slide 58: 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 58
Slide 59: 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 60: UK customer segmentation
UK customer segmentation 2016 2015 2014 Total reservations H1 FY H2 H1 FY H2 H1 First time buyers 41% 36% 33% 39% 35% 31% 38% Second time buyers 38% 37% 36% 38% 39% 37% 40% Affordable 17% 20% 24% 16% 18% 23% 14% Investor 4% 7% 7% 7% 8% 9% 8% Total 100% 100% 100% 100% 100% 100% 100% Help to Buy* 42%
Slide 61: UK product mix
UK product mix Private 2016 2015 2014 completions H1 FY H2 H1 FY H2 H1 Apartments 10% 13% 15% 11% 18% 18% 18% 1 / 2 / 3 bed houses 48% 47% 46% 49% 45% 45% 46% 4 / 5 bed houses 42% 40% 39% 40% 37% 37% 36% Total 100% 100% 100% 100% 100% 100% 100% Data based on completions excluding JVs 61
Slide 62: UK sales performance
UK sales performance H2 2016 (w/e H1 2016 H2 2015 H1 2015 24 July 2016) Average outlets open 287 294 300 302 Average sales rate (net) 0.69 0.95 0.86 0.94 Average selling price £000 262 246 237 237 H2 2016 (w/e 3 July 2016 31 Dec 2015 28 June 2015 As at 24 July 2016) Total order book value £m 2,237 2
Slide 63: Spain financial summary
Spain financial summary H1 2016 H1 2015 Change FY 2015 Average number of active sites 18 20 (10.0)% 18 Legal completions 53 66 (19.7)% 251 Average selling price (£000) 266 205 29.8% 227 Average selling price (€000) 342 284 20.4% 315 Revenue £m 14.8 14.1 5.0% 58.1 Operating profit* £m 0.3 0.9 (66.7)%
Slide 64: 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