Bellway P.l.c. · LSE:BWY
Bellway P.l.c — H1 2016 Earnings Presentation
90 slides from Bellway P.l.c's earnings presentation, Mar 22, 2016
Slide 1: Results Presentation Half year ended 31 January 2016
Results Presentation Half year ended 31 January 2016
Slide 2: Agenda
Agenda 1. Strategic update 2. Finance review 3. Operating review 4. Current trading and outlook 5. Questions and answers 6. Appendices Results presentation 22 March 2016 - Page 2 -
Slide 3: Strategic update
Strategic update Ted Ayres Chief Executive Results presentation 22 March 2016 - Page 3 -
Slide 4: Consistent strategy for growth
Consistent strategy for growth Demand Supply Capacity Good quality land Customer demand is robust New 18th division opened in opportunities at attractive across the country Coventry rates of return Help to Buy extended until 2021 Positive planning environment Five new divisions opened in England and
Slide 5: Notes
Notes Results presentation 22 March 2016 - Page 5 -
Slide 6: Operational highlights
Operational highlights 18 divisions Investing in land Accelerating Strong order Proactive build book at 13 balance sheet March 2016 management 5 new divisions 37,879 owned c.9,000 plots in Capital turn of since August and controlled Value of £1.2bn construction 1.3 times 2013 plots Facilitating furt
Slide 7: Notes
Notes Results presentation 22 March 2016 - Page 7 -
Slide 8: Delivering substantial value
Delivering substantial value Reinvestment in the A strong focus on Progressive dividend Volume growth business is growing return on capital policy the net asset value + 11.6% + 480 bps + 36.0% + 7.5% since July ‘15 No. of homes sold Return on capital Interim dividend Net asset value * 43.7% increase
Slide 9: Notes
Notes Results presentation 22 March 2016 - Page 9 -
Slide 10: Finance review
Finance review Keith Adey Finance Director Results presentation 22 March 2016 - Page 10 -
Slide 11: Notes
Notes Results presentation 22 March 2016 - Page 11 -
Slide 12: Group results
Group results For the half year ended 31 January 2016 2015 Mvt Revenue £1,084.9m £831.2m 30.5% Gross profit £272.4m 25.1% £195.3m 23.5% +160 bps Administrative expenses (£39.9m) (3.7%) (£29.6m) (3.6%) 34.8% Operating profit £232.5m 21.4% £165.7m 19.9% +150 bps Share of result of JVs (£0.2m) - - Net
Slide 13: Notes
Notes Results presentation 22 March 2016 - Page 13 -
Slide 14: Strong revenue growth
Strong revenue growth For the half year ended 31 January 2016 2015 Mvt Homes sold 4,188 3,754 11.6% Average selling price £257,280 £219,343 17.3% Housing revenue £1,077.5m £823.4m 30.9% Non housing revenue £7.4m £7.8m (5.1%) Total revenue £1,084.9m £831.2m 30.5% Results presentation 22 March 2016 -
Slide 15: Notes
Notes Results presentation 22 March 2016 - Page 15 -
Slide 16: Housing revenue: social mix
Housing revenue: social mix For the half year ended 31 January Homes sold Average selling price (‘ASP’) + 16.0% 2016 2015 - 6.0% Private Social 2016 2015 2016 2015 Private Social Social housing completions expected to be Private ASP is c.1% to 2% ahead of >15% of total for full year. budget. Further
Slide 17: Notes
Notes Results presentation 22 March 2016 - Page 17 -
Slide 18: Housing revenue: geographic mix
Housing revenue: geographic mix For the half year ended 31 January 2016 2015 Mvt Completion analysis 2016 2015 North 53% 52% Homes sold 1,973 1,822 8.3% Average selling price £204,107 £187,777 8.7% South (inc. London) Revenue analysis Homes sold 2,215 1,932 14.6% 2016 2015 63% 59% Average selling pr
Slide 19: Notes
Notes Results presentation 22 March 2016 - Page 19 -
Slide 20: Record operating performance
Record operating performance 2016 2015 2015 2015 Operating profit bridge H1 H1 H2** FY** (£10.3m) Gross profit £272.4m £195.3m £232.6m £427.9m 25.1% 23.5% 24.9% 24.2% Administrative expenses (£39.9m) (£29.6m) (£37.9m) (£67.5m) * (3.7%) (3.6%) (4.1%) (3.8%) Operating £232.5m £165.7m £194.7m £360.4m p
Slide 21: Notes
Notes Results presentation 22 March 2016 - Page 21 -
Slide 22: Net finance expense
Net finance expense For the half year ended 31 January 2016 2015 Mvt Net bank interest payable inc. fees £2.1m £3.3m (36.4%) Non bank interest: £3.6m £3.5m 2.9% Made up of:- Land creditors / debtors – IAS 39 £3.7m £3.5m 5.7% Pension cost £0.1m £0.1m -% Other interest (£0.2m) (£0.1m) 100% Total £5.7m
Slide 23: Notes
Notes Results presentation 22 March 2016 - Page 23 -
Slide 24: Substantial earnings growth
Substantial earnings growth For the half year ended 31 January EPS growth 2016 2015 Mvt Profit before tax £226.6m £158.9m 42.6% Taxation (£44.5m) (£32.5m) 36.9% Effective tax rate 19.6% 20.5% Profit after tax £182.1m £126.4m 44.1% Half year profits now exceed those achieved in the full year to July
Slide 25: Notes
Notes Results presentation 22 March 2016 - Page 25 -
Slide 26: Balance sheet
Balance sheet As at 31 January 31 July 2016 2015 Assets Fixed assets £14.7m £16.4m Investment in joint ventures £4.4m £29.0m Inventory £2,334.8m £2,135.3m Debtors £76.0m £67.2m Assets held for sale £26.2m £-m £2,456.1m £2,247.9m Liabilities Pension deficit (£6.1m) (£7.5m) Creditors (£420.5m) (£433.4
Slide 27: Notes
Notes Results presentation 22 March 2016 - Page 27 -
Slide 28: Inventory
Inventory As at 31 January 31 July 2016 2015 Mvt Total land £1,464.7m £1,296.9m £167.8m Made up of:- DPP: land with detailed planning £1,165.5m £1,040.9m £124.6m permission Pipeline and strategic land £299.2m £256.0m £43.2m Work in progress £792.0m £763.7m £28.3m Showhomes £61.2m £57.5m £3.7m Part e
Slide 29: Notes
Notes Results presentation 22 March 2016 - Page 29 -
Slide 30: Land with detailed planning permission
Land with detailed planning permission Average Plots Cost plot cost Brought forward 1 August 2015 21,411 £1,040.9m £48.6k Sold (4,188) (£229.2m) £54.7k Net purchases 5,856 £353.8m £60.4k Carried forward 31 January 2016 23,079 £1,165.5m £50.5k Results presentation 22 March 2016 - Page 30 -
Slide 31: Notes
Notes Results presentation 22 March 2016 - Page 31 -
Slide 32: Land creditors
Land creditors Increase of £83m reflects additional land buying activity. Land creditors are often a more cost effective form of finance than bank debt. Due date Results presentation 22 March 2016 - Page 32 -
Slide 33: Notes
Notes Results presentation 22 March 2016 - Page 33 -
Slide 34: Cash flow
Cash flow For the half year ended 31 January Operating cash flow re- invested to secure future Gearing of 3.5% growth (£0.6m) Net debt and land creditors represent only 19.7% of NAV Results presentation 22 March 2016 - Page 34 -
Slide 35: Notes
Notes Results presentation 22 March 2016 - Page 35 -
Slide 36: Further RoCE improvement
Further RoCE improvement RoCE is key metric when 31 January 31 January appraising land. 2016 2015 Accelerated disposal of Capital turn 1.28 1.15 underperforming assets, e.g. shared equity debt and Barking 31 January 31 January Riverside. 2016 2015 RoCE 27.6% 22.8% Careful consideration of sites with
Slide 37: Notes
Notes Results presentation 22 March 2016 - Page 37 -
Slide 38: Dividend
Dividend 31 January 31 January Compounding effect of 2016 2015 Mvt reinvesting earnings has resulted in 36% growth in interim dividend. Dividend 34.0p 25.0p 36.0% Focus on growth, not yield, is delivering enhanced value for Dividend per share (pence) shareholders. Expect full year dividend cover of
Slide 39: Notes
Notes Results presentation 22 March 2016 - Page 39 -
Slide 40: Value creation
Value creation As at 53% return over 2.5 years 31 January 31 July + 53.1% Mvt 2016 2015 NAV 1,383p 1,286p 7.5% 31 January 31 January Mvt 2016 2015 RoE 22.3% 18.0% 430 bps NAV at July 13 NAV growth Cumulative dividend paid Further value creation for shareholders Results presentation 22 March 2016 - P
Slide 41: Notes
Notes Results presentation 22 March 2016 - Page 41 -
Slide 42: Operating review
Operating review Ted Ayres Chief Executive Results presentation 22 March 2016 - Page 42 -
Slide 43: Notes
Notes Results presentation 22 March 2016 - Page 43 -
Slide 44: Trading review
Trading review Strong performance in north influenced by new outlets in 2016 2015 Mvt primary locations. Weekly sales rate Timing of outlets in London affects H1 156 139 12.2% southern sales rate. Help to Buy represents 30% of sales and is helping maintain a low level of incentives. Weekly sales rat
Slide 45: Notes
Notes Results presentation 22 March 2016 - Page 45 -
Slide 46: Sales outlets
Sales outlets Average active outlets In H1 opened 44 new outlets with the closure of 49. Investment in new divisions should result in a further 45 new outlets in H2 with the expected closure of 40. Five new divisions opened since August 2013 - all have capacity for further outlet growth. Results pre
Slide 47: Notes
Notes Results presentation 22 March 2016 - Page 47 -
Slide 48: Ashberry
Ashberry Ashberry is intended to improve sales rates. Drives improving site RoCE. Regional Chairmen control sales price releases to manage competition between divisions. Completed 14 units at Ibstock. Ashberry has improved sales rate from 30 to in excess of 60 per annum. Positive customer feedback w
Slide 49: Notes
Notes Results presentation 22 March 2016 - Page 49 -
Slide 50: London
London Sales demand is resilient. Exposure is predominantly in zone 2 and beyond. Around half of London plots in land bank have a private average selling price < £500 psf – well within the scope of Help to Buy. 23 active sites and 23 expected to open in next 12 to 24 months. 25% of capital employed
Slide 51: Notes
Notes Results presentation 22 March 2016 - Page 51 -
Slide 52: Barking Riverside
Barking Riverside Barking Riverside reviewed as a result of focus on RoCE. Barking Riverside Relieved of substantial infrastructure funding requirements. Interest in Barking sold in March 2016. Fair value of consideration is £43.5m. New option to draw down 2,600 plots on commercial terms. Proceeds w
Slide 53: Notes
Notes Results presentation 22 March 2016 - Page 53 -
Slide 54: Accelerating production
Accelerating production Material costs Sub-contract costs Cost pressures relatively Reduced volatility in benign. sub-contract labour rates. Easing of availability of materials in supply New sub-contractors chain. introduced to complement existing base. Over 9,000 plots under production Cost base up
Slide 55: Notes
Notes Results presentation 22 March 2016 - Page 55 -
Slide 56: Land procurement
Land procurement Land market still attractive. Average intake gross margin around 23%. Competition from large housebuilders and better funded regional players outside London. Within London, private equity developers and RSLs compete for land. Larger sites available in the market place but we remain
Slide 57: Notes
Notes Results presentation 22 March 2016 - Page 57 -
Slide 58: Planning environment
Planning environment 2016 Positive planning environment Brought forward at 1 August ‘15 21,411 with around 250,000 planning Already controlled: DPP obtained in the period 4,349 permissions per year. Bought with benefit of DPP 1,507 Strengthened strategic land Total additions 5,856 department. Sold (
Slide 59: Notes
Notes Results presentation 22 March 2016 - Page 59 -
Slide 60: Land bank
Land bank As at 31 January 31 July 2016 2015 Owned and controlled plots 37,879 36,211 Made up of:- DPP: plots with detailed planning permission 23,079 21,411 Pipeline: plots pending an implementable DPP 14,800 14,800 Strategic plots > 6,600 > 6,000 Strategic plots are only those long term plots whic
Slide 61: Notes
Notes Results presentation 22 March 2016 - Page 61 -
Slide 62: Current trading and outlook
Current trading and outlook Ted Ayres Chief Executive Results presentation 22 March 2016 - Page 62 -
Slide 63: Notes
Notes Results presentation 22 March 2016 - Page 63 -
Slide 64: Current trading and order book
Current trading and order book Current order book Sales up 37% to 209 per Value (£m) week in period since 1 +7.2% February. Positively affected by recent release of London developments. Units +5.3% Help to Buy in London has generated significant interest. Order book at 13 March increased to £1.2 bn.
Slide 65: Notes
Notes Results presentation 22 March 2016 - Page 65 -
Slide 66: Outlook
Outlook New housing bill should accelerate introduction of starter homes and streamline planning process. Anticipate further divisional expansion in current market conditions. Intend to deliver volume growth of at least 10% in this financial year. Sustained, long term returns Results presentation 22
Slide 67: Notes
Notes Results presentation 22 March 2016 - Page 67 -
Slide 68: Questions and answers
Questions and answers Saxon Fields, Bicester, Oxfordshire Results presentation 22 March 2016 - Page 68 -
Slide 69: Notes
Notes Results presentation 22 March 2016 - Page 69 -
Slide 70: Appendices
Appendices 1. Guidance 2. Geographic analysis 3. London presence 4. Product analysis 5. Buyer analysis 6. ASP analysis 7. Order book at 31 January 8. Land supply 9. Strategic land 10. Land bank glossary Results presentation 22 March 2016 - Page 70 -
Slide 71: Notes
Notes Results presentation 22 March 2016 - Page 71 -
Slide 72: Appendix 1 – Guidance
Appendix 1 – Guidance 31 July 2016 ASP growth Around 10% Volume growth At least 10% Operating margin Approaching 22% Average bank debt Around £125m Social completions >15% Dividend 3 x cover Results presentation 22 March 2016 - Page 72 -
Slide 73: Notes
Notes Results presentation 22 March 2016 - Page 73 -
Slide 74: Appendix 2 – Geographic analysis
Appendix 2 – Geographic analysis Unit completions For the half year ended 31 January Private Social Total 2016 2015 2016 2015 2016 2015 No. No. No. No. No. No. North 1,704 1,569 269 253 1,973 1,822 South 1,940 1,534 275 398 2,215 1,932 Existing offices New office Total 3,644 3,103 544 651 4,188 3,75
Slide 75: Notes
Notes Results presentation 22 March 2016 - Page 75 -
Slide 76: Appendix 3 – London presence
Appendix 3 – London presence Results presentation 22 March 2016 - Page 76 -
Slide 77: Notes
Notes Results presentation 22 March 2016 - Page 77 -
Slide 78: Appendix 4 – Product analysis
Appendix 4 – Product analysis For the half year ended 31 January Product mix analysis Selling price analysis 2016 2015 2016 2015 Flats Houses London flats Townhouses 1 & 2 bed Up to £100,000 £100,001 - £150,000 £150,001 - £200,000 Non-London flats 3 bed 4+ bed £200,001 - £250,000 £250,001 - £300,000
Slide 79: Notes
Notes Results presentation 22 March 2016 - Page 79 -
Slide 80: Appendix 5 – Buyer analysis
Appendix 5 – Buyer analysis For the half year ended 31 January 2016 2015 Second time buyers Deposit assisted and first time Other buyers buyers Other second time buyers Unassisted first time buyers Housing Association Part exchange Help to Buy Investor NewBuy Results presentation 22 March 2016 - Pag
Slide 81: Notes
Notes Results presentation 22 March 2016 - Page 81 -
Slide 82: Appendix 6 – ASP analysis
Appendix 6 – ASP analysis For the half year ended 31 January ASP / square foot (£) 2016 2015 Mvt Private Social Total Private Social Total Private Social Total North 197 115 188 184 110 176 7.1% 4.5% 6.8% South - made up of:- 349 158 328 293 174 272 19.1% (9.2%) 20.6% London 483 276 480 371 255 356
Slide 83: Notes
Notes Results presentation 22 March 2016 - Page 83 -
Slide 84: Appendix 7 – Order book as at 31 January
Appendix 7 – Order book as at 31 January As at 31 January 2016 31 January 2015 Movement Private Social Total Private Social Total Private Social Total At 1 August 3,305 1,263 4,568 3,164 1,199 4,363 4.5% 5.3% 4.7% Reservations 3,291 763 4,054 2,948 656 3,604 11.6% 16.3% 12.5% Completions (3,644) (54
Slide 85: Notes
Notes Results presentation 22 March 2016 - Page 85 -
Slide 86: Appendix 8 – Land supply
Appendix 8 – Land supply As at 31 January Owned and controlled land (plots) Land with DPP Pipeline Balanced geographic land bank. 4.5 years supply at current output. North South Results presentation 22 March 2016 - Page 86 -
Slide 87: Notes
Notes Results presentation 22 March 2016 - Page 87 -
Slide 88: Appendix 9 – Strategic land
Appendix 9 – Strategic land As at Strategic land by category >6,600 plots with positive 31 January 2016 31 July 2015 planning status. Bolstered divisional land Allocation only Application only teams. Both allocation and application Results presentation 22 March 2016 - Page 88 -
Slide 89: Notes
Notes Results presentation 22 March 2016 - Page 89 -
Slide 90: Appendix 10 – Land bank glossary
Appendix 10 – Land bank glossary Owned and controlled plots DPP: Plots owned or unconditionally contracted by the Group where there is an implementable detailed planning permission. Pipeline: Plots owned or controlled by the Group pending an implementable detailed planning permission, with developme