Barratt Redrow Plc · LSE:BTRW
Barratt Redrow — Barratt Developments — FY2014 Earnings Presentation
64 slides from Barratt Redrow's earnings presentation, Sep 10, 2014
Slide 1: Results presentation Year ended 30 June 2014
Full Year 2014 1 Results presentation Year ended 30 June 2014 10 September 2014
Slide 2: Bob Lawson, Chairman
Full Year 2014 2 Bob Lawson Derwenthorpe, Osbaldwick, York Chairman
Slide 3: David Thomas, Group Finance Director
Full Year 2014 3 David Thomas Perry Wood Oaks, Worcester, Worcestershire Group Finance Director
Slide 4: Strong performance across all metrics
Full Year 2014 4 Strong performance across all metrics £k Private ASP Operating margin(1) £m Pre-tax profits(2) 300 15% 400 250 390.6 200 300 10% 13.0% 241.6 150 213.9 200 9.7% 201.8 100 5% 8.2% 192.0 198.9 6.6% 100 50 110.7 0 0% 0 42.7 (3) FY 11 FY 12 FY 13 FY 14 FY 11 FY 12 FY 13 FY 14 FY 11 FY 12
Slide 5: Summary revenue drivers
Full Year 2014 5 Summary revenue drivers FY 14 FY 13 FY 14 v FY 13 Completions Private 11,936 10,978 8.7% Affordable 2,255 2,268 (0.6%) Total 14,191 13,246 7.1% % Affordable 16% 17% (1%) (1) JV 647 417 55.2% Total completions 14,838 13,663 8.6% ASP (£’000) Private 241.6 213.9 12.9% Affordable 105.3
Slide 6: Profit & loss
Full Year 2014 6 Profit & loss (1) £m (unless otherwise stated) FY 14 FY 13 FY 14 v FY 13 Revenue 3,157.0 2,606.2 21.1% Gross profit 529.4 359.2 47.4% Gross margin 16.8% 13.8% 3.0% (2) Total administrative expenses (119.6) (106.5) (12.3%) (2) Operating profit 409.8 252.7 62.2% Operating margin 13.0%
Slide 7: Completions by land type
Full Year 2014 7 Completions by land type 100% 80% 60% 68% 65% % of total completions(1) 49% 60% 40% 33% 26% 20% 23% 20% 18% 14% 12% 12% 0% FY 13 H1 14 H2 14 FY 14 (2) (2) Impaired old Non impaired old New (1) Excluding JV’s (2) Old land owned prior to re-entry into land market in mid-2009
Slide 8: Joint ventures – performance
Full Year 2014 8 Joint ventures – performance Housebuild only FY 14 FY 13 Completions(1) 647 417 Share of profit(2) £40.8m £7.8m • JV owned and controlled landbank portfolio (as at 30 June 2014) – 7,163 total plots(1) – majority for delivery between FY 15 and FY 20(3) – £3.0bn total future gross dev
Slide 9: Pro forma profitability
Full Year 2014 9 Pro forma profitability FY 14 FY 13 £m (unless otherwise stated) Housebuild JV(1) Pro forma Housebuild JV(1) Pro forma Revenue 3,142.6 164.1 3,306.7 2,592.6 67.4 2,660.0 Operating profit(2) 410.8 46.7 457.5 252.7 12.0 264.7 Operating margin 13.1% 28.5% 13.8% 9.7% 17.8% 10.0% (1) Hou
Slide 10: Cash flow
Full Year 2014 10 Cash flow £m FY 14 FY 13 Profit from operations 409.8 249.9 Decrease in net land (pre land acquisitions and disposals) 652.4 584.2 (Increase) / decrease in WIP (116.3) 63.6 Decrease in part exchange and other inventories 38.9 2.9 Decrease in equity share 12.5 39.0 Movement in other
Slide 11: Cash flow (continued)
Full Year 2014 11 Cash flow (continued) £m FY 14 FY 13 Cashflow from operations (pre land acquisitions & disposals) 1,081.1 884.6 Land spend (814.0) (677.5) Land sales 13.8 35.4 Acq of land in a non-wholly controlled subsidiary (0.9) - Investments in JV’s and associates (59.2) (9.9) Dividends receiv
Slide 12: Balance sheet – assets
Full Year 2014 12 Balance sheet – assets £m 30 June 2014 30 June 2013 Goodwill and intangibles 892.2 892.2 Deferred tax assets 19.6 92.1 Equity share 122.4 128.4 Investment in JV’s and associates 199.6 123.5 Pension scheme asset 3.1 - Other non-current(1) 12.3 7.8 Gross landbank 2,348.4 2,127.0 Land
Slide 13: Landbank by land type
Full Year 2014 13 (1) Landbank by land type ASP £k 167 206 236 227 263 18,678 Number of plots 37,262 47,892 3,535 4,541 2,554 (2) (2) Impaired old(2) Non-impaired old Non-impaired old Owned new Total owned Conditional <10% GM >10% GM Category of land (1) Analysis is based on landbank as at 30 June 2
Slide 14: Investment in joint ventures
Full Year 2014 14 Investment in joint ventures £m 30 June 2014 30 June 2013 Housebuilding London 110.9 56.2 Non-London 58.7 36.4 Total housebuilding 169.6 92.6 Other Commercial 4.6 5.3 Equity share joint venture 25.6 25.8 Associates (0.2) (0.2) Total 199.6 123.5
Slide 15: Balance sheet – liabilities
Full Year 2014 15 Balance sheet – liabilities £m 30 June 2014 30 June 2013 Net cash/(debt) 73.1 (25.9) Trade payables (243.4) (250.0) (1) Other payables (536.5) (344.5) Accrual for exceptional interest due to noteholders - (53.0) Current tax (9.7) - Pension obligations - (13.4) Net swaps (19.7) (25.
Slide 16: Net interest charge analysis
Full Year 2014 16 Net interest charge analysis £m FY 14 FY 13 Cash interest Interest on term debt and overdrafts 11.5 12.3 Interest on private placement notes 3.9 20.1 Utilisation / non-utilisation fees on RCF’s 5.7 5.2 Swap interest 5.8 9.5 Other interest (0.2) 0.4 Total cash interest 26.7 47.5 Tot
Slide 17: Guidance for FY 15
Full Year 2014 17 Guidance for FY 15 c. 15,000 (ex JV) Completions: c. 17% affordable c. 700 JV ASP: Total ASP in owned landbank of £227k Total admin expenses: c. £135m JV share of profits: c. £40m Interest cost: c. £55m (£25m cash, £30m non-cash) Land cash spend: c. £1bn Land creditors: c. 1/3 owne
Slide 18: Steven Boyes, Group Chief Operating Officer
Full Year 2014 18 Trumpington Meadows, Trumpington, Cambridge Steven Boyes Group Chief Operating Officer
Slide 19: Significantly improved operating performance
Full Year 2014 19 Significantly improved operating performance • Strength across all regions • Positive pricing momentum • Cost control and supply chain management • Excellent land opportunities • Securing future land pipeline
Slide 20: Regional performance – private sales rate
Full Year 2014 20 Regional performance – private sales rate (1) Per active site per week FY 14 FY 13 % change Northern 0.64 0.47 36.2% Central(2) 0.56 0.48 16.7% East 0.63 0.56 12.5% West(2) 0.63 0.53 18.9% Southern 1.03 0.85 21.2% London 1.69 1.53 10.5% Group 0.69 0.58 19.0% (1) Does not include JV
Slide 21: Regional performance – private completions
Full Year 2014 21 Regional performance – private completions FY 14 FY 13 % change Northern 2,701 2,157 25.2% Central(1) 2,723 2,389 14.0% East 2,124 2,074 2.4% West(1) 1,751 1,513 15.7% Southern(2) 1,785 1,727 3.4% London(2) 1,443 1,380 4.6% Group(2) 12,527 11,240 11.5% (1) FY 13 restated under FY 1
Slide 22: Regional performance – private ASP
Full Year 2014 22 Regional performance – private ASP (£’000) FY 14 FY 13 % change Northern 189.3 179.3 5.6% Central(1) 181.4 169.8 6.8% East 235.0 206.6 13.7% West(1) 225.9 199.7 13.1% Southern(2) 329.3 280.4 17.4% London(2) 478.9 299.8 59.7% Group(3) 241.6 213.9 12.9% Total JVs 499.8 277.1 80.4% (1
Slide 23: Completions analysis
Full Year 2014 23 (1) Completions analysis 17% 16% Affordable 8% Part exchange 16% Help to Buy 4% 31% 10% Other shared equity 6% NewBuy / Mi Newhome 2% 13% 12% Investor Other private 34% 31% FY 13 FY 14 (1) Completions excluding JV’s
Slide 24: Cost environment
Full Year 2014 24 Cost environment Pressures Opportunities • Build materials • Strong and long term supplier relationships - increased industry output led to cost • Further centralised procurement and increases and shortages standardisation across Group - specific pressure on bricks, blocks and • Co
Slide 25: The land market
Full Year 2014 25 The land market • Good supply of first class land Land buying targets opportunities across all regions • 4.5 years land supply (ex JV’s) • Continue to secure Group’s land • Regionally balanced portfolio requirements – at least meeting minimum hurdle rates • Deferred terms • FY 14 a
Slide 26: Land supply hitting target levels
Full Year 2014 26 Land supply hitting target levels Years supply(1) owned and conditional land Plots as at 30 June 2014 6.0 5.8 5.7 5.5 5.5 5.5 5.2 Owned land 47,892 5.0 5.0 4.6 JV JV JV Conditional 4.5 18,678 4.5 4.4 4.4 land 4.2 4.7 JV 4.0 3.8 JV Total 3.7 3.7 66,570 3.5 controlled 3.0 JV owned &
Slide 27: Public sector – best in class
Full Year 2014 27 Public sector – best in class Capability Output • FY 14 secured 6,522 plots with GDV of • Member of all HCA Delivery Partner Panels £1.47bn • Unique specialist public sector partnerships • Advantage in more competitive London and team Southern land markets • Ability to deliver larg
Slide 28: Strategic land bank by region
Full Year 2014 28 Strategic land bank by region 30 June 2014 Plots Sites Northern 20,600 84 Central 12,200 28 East 16,800 49 West 7,700 43 Southern 11,900 35 Group 69,200 239
Slide 29: Deliverability of strategic options
Full Year 2014 29 Deliverability of strategic options Site size – no of units Strategic plots – land categorisation 13% 21% 50% 35% 39% 26% 16% Less than 150 150-250 250-500 500+ Allocated sites (emerging/adopted plans) Required to meet 5 year land supply Medium/long term plan promotion • Site size
Slide 30: Strategic land – securing future land supply
Full Year 2014 30 Strategic land – securing future land supply Strategic conversion to owned landbank 6,000 Strategic land targets 5,000 5,205 • Continue to increase strategic land approval rate 4,000 • Conversion of c. 20,000 plots over next three years Plots 3,000 • c. 20% of total completions fro
Slide 31: Excellent land opportunities
Full Year 2014 31 Excellent land opportunities Catford Green, London Watling Street, Milton Keynes • GDV: £145m • GDV: £195m • Total units: 588 • Total units: 918 • Private ASP: £276k • Private ASP: £265k • Land source: GLA • Land source: Private vendor • Land type: Public land • Land type: Instant
Slide 32: Excellent land opportunities
Full Year 2014 32 Excellent land opportunities Nottingham Business Park, Nottingham Manor Heath, Copmanthorpe, York • GDV: £62m • GDV: £54m • Total units: 290 • Total units: 225 • Private ASP: £250k • Private ASP: £313k • Land source: Wilson Bowden strategic site • Land source: Private vendor • Land
Slide 33: Conclusions
Full Year 2014 33 Conclusions • Strength in performance across all regions • Cost control and supply chain management • Expect modest increase in build costs in FY15 • Land market remains positive • Clear land strategy with focus on securing longer term pipeline • Greater emphasis on strategic land
Slide 34: Mark Clare, Group Chief Executive
Full Year 2014 34 Montague Park, Wokingham, Berkshire Mark Clare The Gateway, Pickering, North Yorkshire Group Chief Executive
Slide 35: Market update
Full Year 2014 35 Market update • Continued market recovery being seen across all regions • Sustained strength in consumer demand - positive economic outlook - return to more normal seasonal trends • Mortgage availability continues to improve - managing relationships with key lenders
Slide 36: Mortgage approvals
Full Year 2014 36 (1) Mortgage approvals 60 Mortgage approvals (000s) (1) 40 20 0 Jan-13 Jan-14 Jul-12 Jul-13 Jul-14 (1) (1) (1) Source: Bank of England. Note: Monthly house purchase approvals
Slide 37: Diversification of customer lending
Full Year 2014 37 (1) Diversification of customer lending Jan 2014 Aug 2014 4% 6% 15% 5% 21% 6% 39% 8% 7% 22% 12% 40% 15% Lloyds Nationwide Santander Natwest Woolwich Leeds Others (1) Share of mortgage lending to Barratt customers. Data sourced from panel of Mortgage Brokers through which c. 65% of
Slide 38: Measures to moderate the market
Full Year 2014 38 Measures to moderate the market November 2013 April 2014 June 2014 • Announced removal of • Introduction of Mortgage • FPC to be given powers capital relief on new Market Review to limit LTI mortgages and mortgages set LTV caps • Refocusing of FLS away • Halifax and Nationwide from
Slide 39: Strengthened operational model
Full Year 2014 39 Strengthened operational model
Slide 40: Targets delivered ahead of schedule
Full Year 2014 40 Targets delivered ahead of schedule Targets for FY 16 16,000 completions (inc JV’s) On track Building profitability 90% completions from higher margin land On track Drive ROCE 18% ROCE Minimal year end net debt Maintain appropriate capital structure Land creditors c. 35% of own
Slide 41: Revised medium term targets
Full Year 2014 41 Revised medium term targets Targets for FY 17 Gross margin Minimum 20% ROCE Minimum 25% Zero year end net debt Maintain appropriate capital structure Land creditors 1/3 of owned land 3x ordinary dividend cover Capital Return Plan Special cash payment programme for 3 years
Slide 42: Completing the transformation to new land
Full Year 2014 42 (1) Completing the transformation to new land 100% Total Average 90% ASP(2) gross Land type £k margin(2) 80% Impaired 167 0% 70% old(3) % of total completions 60% 79% Non impaired 206 c. 11% 90% old(3) 95% 50% New 245(4) c. 20% 40% 30% 20% 13% 10% 8% 3% 8% 0% 2% 2% FY 15 FY 16 FY 1
Slide 43: Securing our future land supply
Full Year 2014 43 Securing our future land supply 100% c. 20% 80% % of total completions c. 20% 60% 40% c. 60% 20% 0% FY 14 FY 15 FY 16 FY 17 Instant Public sector Strategic
Slide 44: Progress on ROCE
Full Year 2014 44 (1) Progress on ROCE > 25.0% 25% 19.5% 20% 15% 14.2% 11.5% 10% 9.0% 8.3% 5% 0% Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Target Jun-17 (1) ROCE is calculated as earnings before interest, tax, operating charges relating to the defined benefit pension scheme and operating exceptional items,
Slide 45: Performance of new land to date
Full Year 2014 45 Performance of new land to date Gross ROCE margin (1) Minimum hurdle rate 20% 25% (2) Completed new land sites to date 21% 39% (1) Site ROCE on land acquisition is calculated as site operating profit (site trading profit less overheads less allocated administrative overheads) divid
Slide 46: Capital Return Plan
Full Year 2014 46 Capital Return Plan Ordinary dividend Special cash Total Total Proposed payment payments (£m) (£m) (pence per share) (£m) (1) (1) November 2014 70 - 70 7.1 Year to (2)(3) (3) 138 100 238 24.2 November 2015 Year to (2)(3) (3) 164 125 289 29.3 November 2016 Year to (2)(3) (3) 178 175
Slide 47: Current trading
Full Year 2014 47 Current trading First 10 weeks First 10 weeks Change FY 15 FY 14 Average net private reservations (1) 0.62 0.66 (6.1%) per active site per week (2) Private forward sales £1,145.6m £880.4m 30.1% (2) Total forward sales £1,505.9m £1,231.3m 22.3% JV total forward sales £249.8m £164.3m
Slide 48: Positive on outlook
Full Year 2014 48 Positive on outlook • Economic conditions continue to improve • Performance of Group remains very strong • Operational model expected to deliver sustainable returns for the long term • Expect to deliver a further significant improvement in performance in FY 15
Slide 49: Q&A
Full Year 2014 49 Q&A Stapeley Gardens, Stapeley, Nantwich Old Merchant Taylors, Croxley Green
Slide 50: Appendices
Full Year 2014 50 Appendices Page • Completions by product mix 51 • Balance sheet – landbank 52 • Approved land payment profile 53 • Land creditors payment profile 54 • Land creditors by type 55 • Balance sheet – stock & WIP 56 • Joint ventures – London 57 • London joint venture delivery profile 58
Slide 51: Completions by product mix
Full Year 2014 51 (1) Completions by product mix 100% 10% 7% 4% 4% 80% 23% 26% 60% 31% 35% 40% 13% 12% 20% 19% 16% 0% FY 13 FY 14 Flats (non-London) 1 & 2 Bed 3 Bed 4 Bed 5 & 6 Bed Flats (London) (1) Completions excluding joint ventures
Slide 52: Balance sheet – landbank
Full Year 2014 52 Balance sheet – landbank 30 June 2014 30 June 2013 Landbank plots Owned / unconditional contracts 47,892 44,516 Conditional contracts 18,678 13,138 Total 66,570 57,654 Landbank pricing (£’000) Cost of plots acquired 50.9 44.0 Cost of plots in P&L 45.9 42.5 Cost of plots in balance
Slide 53: Approved land payment profile
Full Year 2014 53 (1) Approved land payment profile 30 June 2014 Purchased Conditional Approved Total Plots 52,181 16,812 5,326 74,319 Value (£m) 2,497 1,050 258 3,805(2) Payment profile (£m) Purchased Conditional Approved Total Paid to date 1,655 21 1 1,677 FY 15 411 422 106 939 FY 16 204 255 56 51
Slide 54: Land creditors payment profile
Full Year 2014 54 Land creditors payment profile 800 779.4 700 187.3 600 500 224.9 £m 400 300 204.0 200 100 163.2 0 30-Jun-14 H1 15 H2 15 FY 16 FY 17 & beyond
Slide 55: Land creditors by type
Full Year 2014 55 Land creditors by type 30 June 2013 30 June 2014 20% 26% 74% 80% Government Non-government
Slide 56: Balance sheet – stock & WIP
Full Year 2014 56 Balance sheet – stock & WIP 30 June 2014 30 June 2013 Units £m Units £m Stock (build complete) - Reserved 358 356 - Unreserved 427 625 - Showhomes 162 184 Total 947 131 1,165 145 Unreserved per active site 1.2 1.7 WIP (including build complete stock) 1,118 1,002 Part-exchange - Res
Slide 57: Joint ventures – London
Full Year 2014 57 Joint ventures – London (1) Profit Private : Private share JV partner Total GDV Total units Affordable ASP (%) (%) Queensland 50 : 50 L&Q £168m 375 £439k 100 : 0 Terrace, Islington Fulham Riverside, 50 : 50 L&Q £495m 467 £1,177k 86 : 14 Fulham Nine Elms, 50 : 50 L&Q £523m 645 £834k
Slide 58: London joint venture delivery profile
Full Year 2014 58 London joint venture delivery profile Land bank units(1) FY 15 FY 16 FY 17 FY 18 Private Affordable H1 H2 H1 H2 H1 H2 H1 H2 Queensland Terrace, 176 0 Islington Fulham Riverside, 351 14 Fulham Nine Elms, Vauxhall 593 52 Aldgate Place, 313 150 Aldgate Enderby Wharf, 616 154 Greenwich
Slide 59: Joint ventures – non-London
Full Year 2014 59 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 £160m 511 78 : 22 Bluebell Gate, East Grinstead 50 : 50 Wates £51m 142 70 : 30 The Fieldings/ 50 : 50 Wates £76m 301 95 : 5
Slide 60: Financing arrangements
Full Year 2014 60 Financing arrangements Loan Facility Amount Maturity Interest basis RCF facilities(1) £700m May 2018 LIBOR +2.25%(2) Private placement notes(3) - May 2011 Issue £48m August 2017 8.1% July 2019 Pru M&G UK Companies Fund £100m 3m LIBOR +4.5% – July 2021 Get Britain Building & Growing
Slide 61: Net interest charge analysis – non-cash
Full Year 2014 61 Net interest charge analysis – non-cash £m FY 14 FY 13 Non-cash interest Land creditors / deferred payables 35.0 26.5 Financing fees 3.5 4.6 Equity share (5.8) (10.2) Pension/kickstart 0.3 (0.1)(1) Total non-cash interest 33.0 20.8 (1) Restated following the adaption of IAS19 (Revi
Slide 62: Forward sales analysis – owned
Full Year 2014 62 Forward sales analysis – owned 7 September 2014 8 September 2013 Change Value (£m) - Private 1,145.6 880.4 30.1% - Affordable 360.3 350.9 2.7% - due in H1 (£m) 962.9 721.4 33.5% - due after H1 (£m) 543.0 509.9 6.5% Total value 1,505.9 1,231.3 22.3% Plots - Private 4,458 3,579 24.6%
Slide 63: Forward sales analysis – joint ventures
Full Year 2014 63 Forward sales analysis – joint ventures (1) 7 September 2014 8 September 2013 Change Value (£m) - Private 148.9 156.3 (4.7%) - Affordable 100.9 8.0 1,161.3% - due in H1 (£m) 64.6 69.1 (6.5%) - due after H1 (£m) 185.2 95.2 94.5% Total value 249.8 164.3 52.0% Plots - Private 281 285
Slide 64: Disclaimer
Full Year 2014 64 Disclaimer This document has been prepared by Barratt Developments PLC (the “Company”) solely for use at a presentation in connection with the Company's Full Results Announcement in respect of the 12 months ended 30 June 2014. For the purposes of this notice, the presentation (the