Taylor Wimpey Plc · LSE:TW.
Taylor Wimpey — H1 2019 Earnings Presentation
69 slides from Taylor Wimpey's earnings presentation, Jul 31, 2019
Slide 1: Half Year Results Presentation
Half Year Results Presentation for the half year ended 30 June 2019 31 July 2019
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 Overview and current trading Pete Redfern Financial review, costs and efficiency Chris Carney Strategy progress and outlook Pete Redfern 3
Slide 4: Overview and current trading
Overview and current trading Pete Redfern Chief Executive
Slide 5: H1 2019 environment
H1 2019 environment ▪ Market ▪ Levels of interest remain strong ▪ Pricing broadly flat overall, generally weaker at higher price points and in the south east ▪ Divergence of second hand market has some but limited impact ▪ Signs of confidence over last few weeks ▪ Customers ▪ Benign lending environm
Slide 6: Group financial highlights
Group financial highlights Return on net operating assets* Cash conversion* 30.9 30.9 103.7 29.4 100 30.0 86.4 71.3 20.0 % % 10.0 0.0 0 H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 H1 2019 2018-2023 medium term target: 2018-2023 medium term target: Increase to 35% Convert 70-100% of operating profit* int
Slide 7: KPIs
KPIs Customer H1 2019 H2 2018 H1 2018 FY 2018 Customer satisfaction – would you recommend 8-week score % 89 90 90 90 Customer satisfaction – would you recommend 9-month score % 77 77 76 76 Build quality Construction Quality Review – average score out of 6 4.05 3.88 4.01 3.93 Average reportable items
Slide 8: UK market performance – to date
UK market performance – to date H2 2019 (w/e 28 July 2019) H1 2019 H2 2018 H1 2018 H2 2017 H1 2017 Average outlets open 245 257 266 280 284 292 Private sales rate (net) 0.90 1.00 0.76 0.83 0.66 0.87 Private sales price 308 298 290 296 287 289 £000 Cancellation rate 17% 14% 15% 13% 15% 11% (private)
Slide 9: 2019 UK market performance - lead indicators
2019 UK market performance - lead indicators 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
Slide 10: Land market and politics
Land market and politics ▪ Short term land market ▪ Competition remains, particularly in small and mid range sites ▪ Encouraging renewed activity, focussed on disciplined requirements of each BU land strategy, maintaining choices and agility ▪ London market ▪ Land decisions challenging given sales e
Slide 11: UK land pipeline
UK land pipeline 30 June 2019 31 Dec 2018 Plots Owned Controlled Total Total Detailed planning 40,989 3,628 44,617 43,996 Outline planning 11,873 7,774 19,647 18,619 Resolution to grant 2,073 10,723 12,796 13,380 Short term 54,935 22,125 77,060 75,995 Short term with 38,136 - 38,136 40,795 implement
Slide 12: Site based ROCE
Quality of land acquisitions 42.0% 40.0% 38.0% Site based ROCE* 36.0% 34.0% 32.0% 30.0% 28.0% 26.0% 24.0% 23.0% 24.0% 25.0% 26.0% 27.0% 28.0% 29.0% Contribution margin* 2013 2014 2015 2016 2017 2018 H1 2019 At current costs and current selling prices in year of acquisition * See definitions slide in
Slide 13: Summary
Summary ▪ Market is stable – better than expected given the wider uncertainty ▪ Mortgage market continues to be competitive and employment trends are healthy ▪ Underlying forward indicators continue to be strong – appointments booked up over 20% year on year ▪ Land market opportunities are still goo
Slide 14: Financial review, costs and efficiency
Financial review, costs and efficiency Chris Carney Group Finance Director
Slide 15: Summary Group results
Summary Group results £m (before exceptional items) H1 2019 H1 2018 Change FY 2018 Revenue 1,732.7 1,719.8 0.8% 4,082.0 Gross profit 409.6 445.0 (8.0)% 1,074.5 Gross profit margin % 23.6 25.9 (2.3)ppt 26.3 Operating profit* 311.9 344.3 (9.4)% 880.2 Operating profit* margin % 18.0 20.0 (2.0)ppt 21.6
Slide 16: UK performance summary
UK performance summary H1 2019 H1 2018 Change FY 2018 Legal completions – excl JVs 6,432 6,367 1.0% 14,822 Private 4,838 4,854 (0.3)% 11,421 Affordable 1,594 1,513 5.4% 3,401 Average selling price – excl JVs 261 257 1.6% 264 Private £000 301 295 2.0% 302 Affordable £000 139 135 3.0% 137 Legal comple
Slide 17: Indicative movements in UK operating profit margin
Indicative movements in UK operating profit* margin Impact on H1 2019 H1 2018 to H1 2019 Annual change income statement Market inflation on selling prices c.1.3%** 0.8% Market inflation on build cost c.4.0% (2.3)% Net economic benefit captured (1.5)% Market impact of landbank evolution (0.5)% Net ma
Slide 18: UK margin drivers and build cost
UK margin drivers and build cost £000 per unit H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 ASP 205.6 224.5 237.8 253.1 257.1 260.8 Net land cost** (44.1) (41.3) (40.3) (43.7) (40.6) (40.6) Build cost (109.3) (118.9) (131.0) (137.4) (143.7) (152.5) Direct selling expenses (6.9) (8.4) (6.8) (6.5)
Slide 19: Cost and efficiency programme update
Cost and efficiency programme update ▪ Designed around 15 workstreams ▪ 10 of 15 technology enabled / eight of 15 moved from design and development to test, pilot or deployment ▪ Overall good progress ▪ Dedicated resources and senior management sponsorship for each workstream ensuring goals are clea
Slide 20: How the cost and efficiency programme is changing the business
How the cost and efficiency programme is changing the business Workstream Roles impacted Change When? Bill of Quantities Quantity Surveyor, Variation orders automatically populated in Bill of Quantities. Now Buyer Re-key and reconciliation tasks that previously took hours now take minutes Workflow B
Slide 21: Summary Group balance sheet
Summary Group balance sheet Group £m 30 June 2019 1 July 2018 Change 31 Dec 2018 Long term assets and JVs 122.4 124.8 (2.4) 100.2 Land 2,809.8 2,746.3 63.5 2,757.7 WIP 1,605.2 1,537.8 67.4 1,430.5 Debtors 236.4 216.3 20.1 190.4 Land creditors (717.7) (668.1) (49.6) (738.6) Other creditors (825.6) (9
Slide 22: Dividend payment profile
Dividend payment profile Change Paid (or to be paid) FY 2018 to per share (pence) FY 2020*** FY 2019 FY 2018 FY 2019 Ordinary dividend* 7.6 7.6 4.9 55.1% Special dividend** c.11.0 10.7 10.4 2.9% Total c.18.6 18.3 15.3 19.6% Change Paid (or to be paid) FY 2018 to (£m) FY 2020*** FY 2019 FY 2018 FY 20
Slide 23: Investing in quality for the long term
Investing in quality for the long term ▪ Strategic targets 2018-2023 ▪ Increase of return on net operating assets* to 35% ▪ Maintaining operating profit* margins at c.21-22% ▪ Cash conversion* of between 70 and 100% of operating profit* into operating cash flow* ▪ Increased landbank efficiency – red
Slide 24: Strategy progress and outlook
Strategy progress and outlook Pete Redfern Chief Executive
Slide 25: Strategy summary
Strategy summary ▪ Long term direction focused on identifying customer needs and aspirations and delivering them in a commercially sound way ▪ Build on existing strategic land assets and skills, and work our land harder in a less constrained land environment ▪ Invest in the build and delivery capaci
Slide 26: Overview of strategy progress
Overview of strategy progress ▪ Customer service and quality processes embedded ▪ New customer facing teams fully in place and operating ▪ Finishing quality improvements and processes fully implemented, build quality improvement underway ▪ Still seeing effects on customers from build delays ▪ Broade
Slide 27: Drivers of sales rates
Drivers of sales rates ▪ Quality of locations and products ▪ Outlets opened at the right stage for customers and with sales tools in place ▪ Reputation and strength of sales teams and processes ▪ Quality of specification in competitive environments ▪ Product breadth at site level ▪ Price? ▪ Sales an
Slide 28: Customer focus
Customer focus ▪ Customer technology (Touchpoint and Options Configurator) now complete and rolled out to all new customers ▪ 89% of customers ‘would recommend’ Taylor Wimpey, slightly down on H1 2018 due to Q4 2018 returns, but increased CQR of 4.05 (H1 2018: 4.01) demonstrates not compromising on
Slide 29: Investment in build quality
Investment in build quality ▪ Investment in apprentices and training programmes on site has increased materially ▪ 393 current apprentices – an increase of 28% ▪ Apprentice Training Managers / Master Craftsmen in 11 businesses, an increase of 175% ▪ Quality Manager role implementation in early stage
Slide 30: Investment in build quality
Investment in build quality ▪ Delivery Excellence Programme ▪ Site Managers will have phone or tablet access to systems for real time reporting ▪ TW developed app as a platform of information including manuals, documentation and drawings. It will also be developed so that Build Quality Checklists ar
Slide 31: Employer of choice
Employer of choice ▪ Employee Survey 2019 ▪ 94% would recommend Taylor Wimpey as a great place to work ▪ 95% are proud to work at Taylor Wimpey ▪ 98% ‘Agree’ and ‘Strongly Agree’ that Taylor Wimpey takes Health & Safety in the workplace seriously ▪ 96% ‘Agree’ and ‘Strongly Agree’ Taylor Wimpey aims
Slide 32: Operating environment – outlook
Operating environment – outlook ▪ Market and customer outlook ▪ Mortgage availability / accessibility and interest rates remain key ▪ Employment levels healthy ▪ Base case for stable pricing ▪ Structural undersupply of housing continues to underpin long term ▪ Political / regulatory ▪ Wider macro un
Slide 33: Wimpey
33 Wimpey | ple
Slide 34: Future investor communications
Future investor communications ▪ 13 November 2019 Trading update ▪ 14 January 2020 Trading update ▪ 26 February 2020 Full year results 2019 ▪ 23 April 2020 AGM and trading update ▪ 29 July 2020 Half year results 2020 ▪ 11 November 2020 Trading update 34
Slide 35: Appendices
Taylor Wimpey plc Half Year Results Presentation for the half year ended 30 June 2019 Appendices
Slide 36: Summary income statement
Summary income statement* Group £m H1 2019 H1 2018 Change FY 2018 Revenue 1,732.7 1,719.8 0.8% 4,082.0 Cost of sales (1,323.1) (1,274.8) 3.8% (3,007.5) Gross profit 409.6 445.0 (8.0)% 1,074.5 Net operating expenses (97.5) (98.6) (1.1)% (199.6) Profit on ordinary activities 312.1 346.4 (9.9)% 874.9 b
Slide 37: Cash flow summary
Cash flow summary Group £m H1 2019 FY 2018 H2 2018 H1 2018 Profit from ordinary activities before finance costs* 312.1 828.8 512.4 316.4 (Increase) / decrease in inventories (239.9) (1.7) 185.3 (187.0) Exceptional items - 46.1 16.1 30.0 Other operating items** (88.2) (57.8) (93.4) 35.6 Cash generate
Slide 38: Group segmental analysis
Group segmental analysis H1 2019 H1 2018 FY 2018 Operating Operating Operating Operating profit* Operating profit* Operating profit* profit* margin RONOA* profit* margin RONOA* profit* margin RONOA* £m % % £m % % £m % % North 134.4 20.7 34.2 133.4 20.9 33.8 307.1 21.6 36.6 Central and South 124.8 20
Slide 39: North Division – segmental analysis
North Division – segmental analysis Scotland, North West North North North Yorkshire and Division Division As at 30 June 2019 and North East Yorkshire Midlands H1 2019 FY 2018 Number of outlets 58 37 29 124 135 Private sales rate (net) 0.92 0.97 0.83 0.91 0.75 Completions 1,146 880 895 2,921 6,431 A
Slide 40: Central and South West Division – segmental analysis
Central and South West Division – segmental analysis Central and Central and South West South West East and Wales and Division Division As at 30 June 2019 Central West H1 2019 FY 2018 Number of outlets 41 29 70 72 Private sales rate (net) 1.20 1.23 1.21 0.88 Completions 1,271 981 2,252 5,259 Average
Slide 41: London and South East Division – segmental analysis
London and South East Division – segmental analysis London and London and South East South East South East excl. London Division Division As at 30 June 2019 London market† market† H1 2019 FY 2018 Number of outlets 40 12 52 49 Private sales rate (net) 0.96 0.77 0.91 0.80 Completions 991 268 1,259 3,1
Slide 42: Tax
Tax Current tax Deferred tax Net tax Asset / (liability) £m £m £m As at 1 January 2019 (69.9) 40.7 (29.2) Income statement (53.1) (4.7) (57.8) SOCI / SOCIE 0.1 (0.6) (0.5) Cash paid 71.5 - 71.5 Forex - (0.1) (0.1) As at 30 June 2019 (51.4) 35.3 (16.1) ▪ Pre-exceptional underlying tax rate of 19.3% (
Slide 43: Managing UK working capital
Managing UK working capital Movement in UK construction WIP Rolling 12 months to June 2,500 80% 70% 2,000 60% 1,500 50% £m 40% 1,000 30% 20% 500 10% - 0% Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Development & construction costs in WIP P&L charge (direct build costs) in previous 12 months Cash spend
Slide 44: Movement in Group net assets
Movement in Group net assets H1 2019 rolling H1 2018 rolling Breakdown of 12 months 12 months movement £m £m % Opening net assets 2,950.6 2,778.9 N/A Pre-exceptional net earnings 667.4 658.3 22.6% Net impact of exceptional items (13.3) (24.2) (0.5)% Actuarial (loss) / gains after tax (45.8) 31.0 (1.
Slide 45: UK net operating assets
UK net operating assets £m 30 June 2019 1 July 2018 31 Dec 2018 Fixed assets 52 54 51 Investment in JVs 70 70 48 Land 2,718 2,635 2,659 WIP 1,525 1,478 1,363 Total inventories 4,243 4,113 4,022 Debtors 234 214 189 Land creditors (709) (641) (716) Other creditors (745) (845) (744) Total creditors (1,
Slide 46: Finance charges
Finance charges £m H1 2019 H1 2018 Change FY 2018 Financial indebtedness 2.4 2.7 (11.1)% 5.2 Foreign exchange movements 0.5 0.4 25.0% 1.0 Unwind of land creditors and 9.0 10.3 (12.6)% 18.5 other items Pensions 1.8 0.7 157.1% 1.1 Interest on IFRS 16 leases 0.2 0.2 - 0.5 Total 13.9 14.3 (2.8)% 26.3 46
Slide 47: Pensions
Pensions Movement in present value of defined benefit obligations Total UK £m H1 2019 FY 2018 FY 2017 FY 2016 IAS 19 (surplus) / deficit brought (30.9) (23.9) 232.7 177.1 forward Employer contributions* (26.1) (34.1) (23.1) (23.1) Administration cost 1.0 1.9 3.0 3.3 Interest cost 1.8 1.1 5.9 6.1 Inc
Slide 48: Pension fund contributions
Pension fund contributions ▪ Funding update as at 30 June 2019 ▪ Technical provisions deficit of £117 million and funding level of 95.3% ▪ Deficit contributions of £40 million per year re-instated from January 2019 until the earlier of full funding or Q4 2020 ▪ Funding level is re-assessed quarterly
Slide 49: UK land commitments
UK land commitments As at 30 As at 31 June Dec £m < 1 yr 1-2 yrs 2-5 yrs 5+ yrs 2019 2018 Committed cash payments in respect of unconditional 357 195 175 14 741 749 land contracts Expected cash payments in respect of conditional land 104 82 45 5 236 367 contracts ▪ Included in unconditional land con
Slide 50: UK land portfolio ‒ net cost
UK land portfolio ‒ net cost 30 June 2019 31 Dec 2018 £m Owned Controlled Total Total Detailed planning 1,899 26 1,925 1,934 Outline planning 449 99 548 473 Resolution to grant 25 23 48 54 Sub-total 2,373 148 2,521 2,461 plots 54,935 22,125 77,060 75,995 Strategic 88 96 184 185 plots 30,502 100,663
Slide 51: UK landbank
UK landbank ▪ Land cost in short term owned landbank is 15.3% of ASP (H1 2018: 14.6%), supported by strategic pipeline conversions ▪ Land cost as % of ASP on H1 2019 approvals – 21.2% ▪ Potential revenue in the landbank at 30 June 2019 was £51 billion (1 July 2018: £48 billion), comprising short ter
Slide 52: UK short term landbank
UK short term landbank 4,165 (6,498) 3,411 80,000 (13) 77,060 75,995 70,000 Plots 60,000 50,000 31 Dec 2018 Plots acquired Strategic land Completions Land sales Review and 30 June 2019 conversion incl. JVs scope changes Movement in period Data includes JV plots 52
Slide 53: UK strategic pipeline
UK strategic pipeline 140,000 6,793 (4,165) 1,120 131,165 127,417 120,000 Plots 100,000 80,000 31 Dec 2018 Plots acquired Strategic land Land sales Review and 30 June 2019 conversion scope changes Movement in period Excludes land with less than 50% certainty of achieving planning permission Data inc
Slide 54: Quality of short term owned landbank
Quality of short term owned landbank Micro location – position within macro location Total: 345 sites in short term owned landbank A B C D Q1 – A 33 46 3 1 Macro location – city, broken down Q2 – B 70 138 11 0 by major suburb, town, Q3 – C 9 30 2 0 village or rural area Q4 - D 1 1 0 0 54
Slide 55: UK planning permissions
UK planning permissions Sites with implementable planning 20,000 permission 18,000 16,000 96.5% 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 3.2% 0.3% Permissions gained (rolling 12 months) Completions (Rolling
Slide 56: North Division - land
North Division - land Scotland, North Yorkshire North West North North and North and Division Division As at 30 June 2019 East Yorkshire Midlands H1 2019 FY 2018 Short term owned and controlled land portfolio plots 14,206 8,256 7,941 30,403 29,009 Land portfolio years 5.6 4.1 4.1 4.7 4.5 Cost per pl
Slide 57: Central and South West Division - land
Central and South West Division - land Central and Central and South West South West East and Wales and Division Division As at 30 June 2019 Central West H1 2019 FY 2018 Short term owned and controlled land portfolio plots 17,729 15,709 33,438 33,512 Land portfolio years 6.1 6.9 6.5 6.4 Cost per plo
Slide 58: London and South East Division - land
London and South East Division - land London and London and South East South East South East excl. London Division Division As at 30 June 2019 London market† market† H1 2019 FY 2018 Short term owned and controlled land portfolio plots 8,086 5,133 13,219 13,474 Land portfolio years 3.4 4.9 3.9 4.1 Co
Slide 59: Land disposals
Land disposals £m H1 2019 H1 2018 FY 2018 Proceeds UK 6.8 46.5 56.4 Spain - - 0.2 Total 6.8 46.5 56.6 Gross profit UK 4.2 13.7 17.6 Spain - - (1.6) Total 4.2 13.7 16.0 Land disposals are included in revenue and cost of sales 59
Slide 60: Real house prices
60 £0 £50,000 £100,000 £150,000 £200,000 £250,000 1987 1988 1989 1990 1991 1992 1993 1994 1995 Real house prices 1996 Source: Nationwide – Nominal house prices 1997 1998 1999 2000 2001 2002 Nominal prices 2003 2004 2005 2006 2007 Real prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 201
Slide 61: Interest rate
FTB mortgage payments as % of pay / interest rates 100% 16 90% 14 80% 12 70% % of take home pay 10 60% Interest rate 50% 8 40% 6 30% 4 20% 2 10% 0% - 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Interest rate London UK Source: Nationwide / Bank of En
Slide 62: Net private sales by price band
Net private sales by price band Net private £201k- £251k - £301k - £451k- £601k - sales <£200k £250k £300k £450k £600k £1m >£1m Total North 846 926 721 551 49 5 - 3,098 Central and South West 321 437 586 845 143 18 - 2,350 London and South East 34 116 172 535 177 133 37 1,204 Total 1,201 1,479 1,479
Slide 63: UK customer segmentation
UK customer segmentation Total reservations H1 2019 FY 2018 H2 2018 H1 2018 FY 2017 H2 2017 H1 2017 First time buyers 38% 34% 33% 35% 41% 40% 42% Second time buyers 37% 31% 30% 32% 39% 37% 40% Affordable 20% 30% 31% 29% 17% 20% 14% Investor 5% 5% 6% 4% 3% 3% 4% Total 100% 100% 100% 100% 100% 100% 10
Slide 64: H1 2019 market backdrop
H1 2019 market backdrop February July February July 2-year fixed rates 2018 2018 2019 2019 HTB equity loan 1.44% – 2.17% 1.61% – 2.17% 1.59% – 3.84% 1.54% - 3.78% 85% LTV (new 1.64% 1.74% 1.69% 1.63% build) 64
Slide 65: UK sales performance
UK sales performance H2 2019 (w/e 28 July 2019) H1 2019 H2 2018 H1 2018 Average outlets open 245 257 266 280 Average sales rate (net) 1.10 1.24 1.09 1.16 Average selling price £000 280 269 244 254 H2 2019 (w/e 28 30 June As at July 2019) 2019 31 Dec 2018 1 July 2018 Total order book value £m 2,516 2
Slide 66: UK market performance – affordable
UK market performance – affordable H2 2019 (w/e 28 31 Dec July 2019) H1 2019 H1 2018 Change 2018 Average outlets open 245 257 280 (8.2)% 273 Affordable order book 611 626 547 14.4% 605 £m Affordable order book 4,353 4,474 4,047 10.6% 4,452 units Affordable order book 140 140 135 3.7% 136 ASP £k Data
Slide 67: Spain financial summary
Spain financial summary H1 2019 H1 2018 Change FY 2018 Average number of active sites 20 20 - 21 Legal completions 109 130 (16.2)% 342 Average selling price £000 379 292 29.8% 304 Average selling price €000 434 332 30.7% 344 Revenue £m 41.1 37.8 8.7% 104.2 Operating profit* £m 8.1 9.5 (14.7)% 29.2 O
Slide 68: A reminder: Sites, outlets and factories
A reminder: Sites, outlets and factories, balancing sales and production ▪ Site – a single piece of land, generally getting outline planning as a single entity. TW size range 50-3,500 homes ▪ Outlet – a sales unit, with fully staffed customer presence. TW pa range historically 30-75 homes (incl. aff
Slide 69: 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