Bellway P.l.c. · LSE:BWY
Bellway P.l.c — FY2016 Earnings Presentation
94 slides from Bellway P.l.c's earnings presentation, Oct 18, 2016
Slide 1: Results Presentation Year ended 31 July 2016
Results Presentation Year ended 31 July 2016
Slide 2: Agenda
Agenda 1. Highlights 2. Finance review 3. Strategic update 4. Operating review 5. Current trading and outlook 6. Questions and answers 7. Appendices Results presentation 18 October 2016 - Page 2 -
Slide 3: Highlights
Highlights Ted Ayres Chief Executive Results presentation 18 October 2016 - Page 3 -
Slide 4: A record year
A record year Volume Operational highlights Return on capital + 12.5% + 430 bps * Strong order book of 4,644 homes. 19 divisions with a capacity of 11,000 homes. EPS up 42.0% to Sold interest in Barking Riverside 328.7p for consideration with a fair value of £43.5 million. Total dividend Net asset v
Slide 5: Notes
Notes Results presentation 18 October 2016 - Page 5 -
Slide 6: Finance review
Finance review Keith Adey Finance Director Results presentation 18 October 2016 - Page 6 -
Slide 7: Notes
Notes Results presentation 18 October 2016 - Page 7 -
Slide 8: Operating result
Operating result For the year ended 31 July 2016 2015 Mvt* Exceptional Total Pre-exceptional Total item Homes sold 8,721 7,752 - 7,752 12.5% Average selling price £252,793 £223,821 - £223,821 12.9% Housing revenue £2,204.6m £1,735.1m - £1,735.1m 27.1% Other revenue £36.1m £30.3m - £30.3m 19.1% Total
Slide 9: Notes
Notes Results presentation 18 October 2016 - Page 9 -
Slide 10: Housing revenue: social mix
Housing revenue: social mix For the year ended 31 July Homes sold Average selling price (‘ASP’) 2016 2015 + 10.6% + 12.9% + 1.4% 2016 2015 2016 2015 2016 2015 Private Social Private Social Total Social housing completions expected to be Growth in private ASP is influenced by c.20% for FY17. investme
Slide 11: Notes
Notes Results presentation 18 October 2016 - Page 11 -
Slide 12: Housing revenue: geographic mix
Housing revenue: geographic mix For the year ended 31 July 2016 2015 Mvt Completion analysis 2016 2015 North 52% 52% Homes sold 4,187 3,696 13.3% Average selling price £204,155 £190,871 7.0% South (inc. London) Revenue analysis Homes sold 4,534 4,056 11.8% 2016 2015 61% 59% Average selling price £29
Slide 13: Notes
Notes Results presentation 18 October 2016 - Page 13 -
Slide 14: Operating performance
Operating performance Operating profit bridge 2016 2015* Mvt £574.8m £427.9m 34.3% Gross profit 25.7% 24.2% 150 bps Administrative (£82.8m) (£67.5m) 22.7% expenses (3.7%) (3.8%) 10 bps * Operating £492.0m £360.4m 36.5% profit 22.0% 20.4% 160 bps Gross margin improvement driven by good quality land i
Slide 15: Notes
Notes Results presentation 18 October 2016 - Page 15 -
Slide 16: Earnings growth
Earnings growth For the year ended 31 July 2016 2015 Mvt Pre- Pre- Exceptional Total Exceptional Total exceptional exceptional Operating profit £492.0m - £492.0m £360.4m £6.9m £367.3m 34.0% Profit on sale of Barking - £17.3m £17.3m - - - - Net finance expense (£11.1m) - (£11.1m) (£13.1m) - (£13.1m)
Slide 17: Notes
Notes Results presentation 18 October 2016 - Page 17 -
Slide 18: Balance sheet
Balance sheet As at 31 July 2016 2015 Mvt Assets Fixed assets and investment in joint ventures £19.4m £45.4m (£26.0m) Inventory £2,548.3m £2,135.3m £413.0m Debtors £94.1m £67.2m £26.9m £2,661.8m £2,247.9m £413.9m Liabilities Pension deficit (£8.0m) (£7.5m) (£0.5m) Net cash / (bank debt) £26.5m (£38.
Slide 19: Notes
Notes Results presentation 18 October 2016 - Page 19 -
Slide 20: Inventory
Inventory As at 31 July 2016 2015 Mvt Total land £1,625.6m £1,296.9m £328.7m Made up of:- DPP: land with detailed planning permission £1,373.1m £1,040.9m £332.2m Pipeline and strategic land £252.5m £256.0m (£3.5m) Work in progress £836.1m £763.7m £72.4m Showhomes £70.3m £57.5m £12.8m Part exchange s
Slide 21: Notes
Notes Results presentation 18 October 2016 - Page 21 -
Slide 22: 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 (8,721) (£448.6m) £51.4k Net purchases 12,189 £780.8m £64.1k Carried forward 31 July 2016 24,879 £1,373.1m £55.2k Results presentation 18 October 2016 - Page 22 -
Slide 23: Notes
Notes Results presentation 18 October 2016 - Page 23 -
Slide 24: Capital employed
Capital employed As at 31 July Land creditor payment profile 2016 2015 NAV £1,867.0m £1,575.9m Net bank debt - £38.5m Capital employed £1,867.0m £1,614.4m Land creditors £304.2m £192.6m Pension deficit £8.0m £7.5m Joint venture finance - - £221.2m Goodwill - - Adjusted capital £2,179.2m £1,814.5m em
Slide 25: Notes
Notes Results presentation 18 October 2016 - Page 25 -
Slide 26: Further growth in return on capital employed
Further growth in return on capital employed Virtually no impaired land 2016 2015 remaining from 2008. Capital turn 1.3 1.2 Disposed of underperforming and capital intensive assets 2016 2015 such as shared equity portfolio RoCE 28.2% 23.9%* and Barking Riverside. Focus on sales rate. 2016 2015 Adjus
Slide 27: Notes
Notes Results presentation 18 October 2016 - Page 27 -
Slide 28: Strong cash generation
Strong cash generation For the year ended 31 July £249.4m cash generated from operations Net cash and land creditors represent only 14.9% of NAV Average net debt of £103m Peak net debt of £650.5m £174m generated before increasing investment in land and WIP Results presentation 18 October 2016 - Page
Slide 29: Notes
Notes Results presentation 18 October 2016 - Page 29 -
Slide 30: Investing for growth
Investing for growth Reinvestment in land and WIP has had a compounding effect on earnings growth. Since the pre-global financial crisis peak in 2007:- – Revenue has grown by 65%. – Profit after tax is 2.4 times ahead. Results presentation 18 October 2016 - Page 30 -
Slide 31: Notes
Notes Results presentation 18 October 2016 - Page 31 -
Slide 32: Dividend
Dividend 2016 2015 Mvt Compounding effect of Interim dividend 34.0p 25.0p 36.0% reinvesting is leading to ongoing growth in the dividend. Proposed final dividend 74.0p 52.0p 42.3% 260% growth in dividend in just Total dividend 108.0p 77.0p 40.3% three years. Dividend per share (p) Expect to maintain
Slide 33: Notes
Notes Results presentation 18 October 2016 - Page 33 -
Slide 34: Value creation
Value creation As at 31 July >70% return over 3 years 2016 2015 Mvt + 70.4% NAV 1,522p 1,286p 18.4% 2016 2015 Mvt RoE 23.5% 19.4% 410 bps NAV at July 13 NAV growth Cumulative dividend paid Strategy for growth is delivering substantial value for shareholders Results presentation 18 October 2016 - Pag
Slide 35: Notes
Notes Results presentation 18 October 2016 - Page 35 -
Slide 36: Strategic update
Strategic update Ted Ayres Chief Executive Results presentation 18 October 2016 - Page 36 -
Slide 37: Notes
Notes Results presentation 18 October 2016 - Page 37 -
Slide 38: Post EU Referendum
Post EU Referendum Recent trading provides reassurance Reservations ~ Website visitors ~ Actions + 13% + 17% Avoiding larger site acquisitions. Additional scrutiny over planned overhead Site visitors ~ Cancellation rate ~ expenditure. No change No change Review of work in progress and significant co
Slide 39: Notes
Notes Results presentation 18 October 2016 - Page 39 -
Slide 40: Mortgage market supports growth
Mortgage market supports growth MMR FPC Basel 3 Mortgage rates FPC No 95% LTV lending during this period Long term sustainability in mortgage market Help to Buy Committed to 2021 in England. Competitive advantage over Source: Bank of England, Halifax second hand market. Results presentation 18 Octob
Slide 41: Notes
Notes Results presentation 18 October 2016 - Page 41 -
Slide 42: Long term growth strategy
Long term growth strategy Buying* is cheaper than renting Supply and demand – Great Britain Rental £1,350 pm 85% LTV £1,316 pm £1,181 pm 75% LTV (25% Help to Buy) £856 pm 55% LTV (40% Help to Buy) Comparison of purchase versus rental costs for a typical Bellway London apartment with a price of £377,
Slide 43: Notes
Notes Results presentation 18 October 2016 - Page 43 -
Slide 44: Capacity for growth
Capacity for growth New divisions opened in South Midlands and Durham. 19 divisions with capacity of Existing offices 11,000 homes per annum. New offices Ability for future divisional expansion. Strong balance sheet allows opportunistic investment. Experience in London with limited exposure to slowe
Slide 45: Notes
Notes Results presentation 18 October 2016 - Page 45 -
Slide 46: Operating review
Operating review Ted Ayres Chief Executive Results presentation 18 October 2016 - Page 46 -
Slide 47: Notes
Notes Results presentation 18 October 2016 - Page 47 -
Slide 48: Trading review
Trading review Weekly sales rate by period Improvement in sales rate driven by new site openings. 2016 2015 Mvt Strong H1 performance with H1 156 139 12.2% divisions such as West Midlands H2 182 167 9.0% and North East performing well. Sales rate in early weeks of H2 Full year 169 153 10.5% boosted
Slide 49: Notes
Notes Results presentation 18 October 2016 - Page 49 -
Slide 50: Sales outlets
Sales outlets Average active outlets Ended year with 218 outlets, lower than expected due to faster selling rate. Expect new outlets in coming months will maintain sales rate. Targeting to open 100 outlets (2016 – 82) and close 85 this year. Expect to end year with >5% more outlets. Results presenta
Slide 51: Notes
Notes Results presentation 18 October 2016 - Page 51 -
Slide 52: London presence
London presence Location of sites Sites Zone 1 2 Zone 2 11 Zones 3 – 6 17 London land bank Plots Under £250 psf 280 Under £500 psf 1,099 London represents 23% of invested capital. Under £800 psf 1,116 Under £1,000 psf 489 ASP of £377k is affordable and demand is resilient. Over £1,000 psf 49 Help to
Slide 53: Notes
Notes Results presentation 18 October 2016 - Page 53 -
Slide 54: Nine Elms
Nine Elms Largest development with £108 million invested in land and WIP. 510 homes of which more than 240 have already been sold. Contracted sales provide substantial forward funding. Private homes will be released for sale in January 2017. Strong demand and some assistance from Help to Buy. Very h
Slide 55: Notes
Notes Results presentation 18 October 2016 - Page 55 -
Slide 56: Production
Production Significant investment to Units in production meet forecast growth plans. Large number of plots are in early stages of production:- – Relating to apartment schemes in London due to complete beyond FY17. Build releases approved by Regional Chairmen on weekly basis. Flexibility to stop buil
Slide 57: Notes
Notes Results presentation 18 October 2016 - Page 57 -
Slide 58: Construction costs
Construction costs Materials Sub-contract No major cost increases Continued pressure in from national suppliers. London and South East but at a manageable level. Low direct exposure to exchange rate fluctuations. Low availability for certain trades. Expecting timber costs to increase by up to 10%. N
Slide 59: Notes
Notes Results presentation 18 October 2016 - Page 59 -
Slide 60: Land procurement
Land procurement Cash land spend (£m) Wide geographic presence. Average intake margin >23%. 3 new regional strategic 2016 Contracted plots 2015 land directors. Strategic land is an additional source of supply given the growth of Total 9,555 Total 9,128 the Group. North South Results presentation 18
Slide 61: Notes
Notes Results presentation 18 October 2016 - Page 61 -
Slide 62: Land bank
Land bank As at 31 July 2016 2015 Owned and controlled plots ^ 34,979 36,211 Made up of:- DPP: plots with detailed planning permission 24,879 21,411 Pipeline: plots pending an implementable DPP 10,100 14,800 Strategic plots ^ > 6,300 > 6,000 Strategic plots are only those long term plots which curre
Slide 63: Notes
Notes Results presentation 18 October 2016 - Page 63 -
Slide 64: Planning environment
Planning environment As at 31 July Housing and Planning Act 2016 requires Councils to accelerate:- Brought forward at 1 August 21,411 – issuance of planning Already controlled: DPP obtained in the period 7,265 permissions; Bought with benefit of DPP 4,924 – agreement of pre- Total additions 12,189 c
Slide 65: Notes
Notes Results presentation 18 October 2016 - Page 65 -
Slide 66: Current trading and outlook
Current trading and outlook Ted Ayres Chief Executive Results presentation 18 October 2016 - Page 66 -
Slide 67: Notes
Notes Results presentation 18 October 2016 - Page 67 -
Slide 68: Current trading and order book
Current trading and order book Current order book Units 6.1% Sales up 9% to 162 per week in first 9 weeks. Positively affected by investor deal for 51 units at Nine Elms. Value (£m) Increase in social reservations +12.2% reflecting next year’s planned growth. Private Social Results presentation 18 O
Slide 69: Notes
Notes Results presentation 18 October 2016 - Page 69 -
Slide 70: Outlook
Outlook Strong forward sales position. Volume growth will moderate in year ahead. Rate of growth will depend upon outcome of autumn and spring selling seasons. Maintain caution with regards to investment. Proceeding with land acquisitions providing returns are strong. Sustainable, long term returns
Slide 71: Notes
Notes Results presentation 18 October 2016 - Page 71 -
Slide 72: Questions and answers
Questions and answers The Croft, Ash, Aldershot Results presentation 18 October 2016 - Page 72 -
Slide 73: Notes
Notes Results presentation 18 October 2016 - Page 73 -
Slide 74: Appendices
Appendices 1. Guidance 2. Geographic analysis 3. ASP analysis 4. Product analysis 5. Completion analysis 6. Net finance expense 7. Land supply 8. Strategic land 9. Land bank glossary 10. Order book at 31 July Results presentation 18 October 2016 - Page 74 -
Slide 75: Notes
Notes Results presentation 18 October 2016 - Page 75 -
Slide 76: Appendix 1 – Guidance
Appendix 1 – Guidance 31 July 2017 ASP Around £260k Volume growth Modest growth Operating margin Similar to FY16 Average bank debt £100m - £150m Social completions c. 20% Dividend 3 x cover Results presentation 18 October 2016 - Page 76 -
Slide 77: Notes
Notes Results presentation 18 October 2016 - Page 77 -
Slide 78: Appendix 2 – Geographic analysis
Appendix 2 – Geographic analysis Unit completions For the year ended 31 July Private Social Total 2016 2015 2016 2015 2016 2015 No. No. No. No. No. No. North 3,651 3,070 536 626 4,187 3,696 South 3,694 3,108 840 948 4,534 4,056 Existing offices Total 7,345 6,178 1,376 1,574 8,721 7,752 New offices A
Slide 79: Notes
Notes Results presentation 18 October 2016 - Page 79 -
Slide 80: Appendix 3 – ASP analysis
Appendix 3 – ASP analysis For the year ended 31 July ASP / square foot (£) 2016 2015 Mvt Private Social Total Private Social Total Private Social Total North 199 119 191 188 115 179 5.9% 3.5% 6.7% South - made up of:- 342 162 314 305 163 276 12.1% (0.6%) 13.8% London 488 223 477 392 218 366 24.5% 2.
Slide 81: Notes
Notes Results presentation 18 October 2016 - Page 81 -
Slide 82: Appendix 4 – Product analysis
Appendix 4 – Product analysis For the year ended 31 July Product mix analysis Selling price analysis 2016 2015 2016 2015 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 £300,001+ Flats Hous
Slide 83: Notes
Notes Results presentation 18 October 2016 - Page 83 -
Slide 84: Appendix 5 – Completion analysis
Appendix 5 – Completion analysis For the year ended 31 July 2016 2015 386 , 5% 1,574 , 20% 2,315 , 30% 35 , 0% 642 , 8% 2,063 , 27% 737 , 10% Second time buyers Deposit assisted and first time Other buyers buyers Other second time buyers Unassisted first time buyers Housing Association Part exchange
Slide 85: Notes
Notes Results presentation 18 October 2016 - Page 85 -
Slide 86: Appendix 6 - Net finance expense
Appendix 6 - Net finance expense For the year ended 31 July 2016 2015 Mvt Net bank interest payable inc. fees £4.3m £6.5m (33.8%) Non bank interest: £6.8m £6.6m 3.0% Made up of:- Land creditors / debtors – IAS 39 £7.1m £6.6m 7.6% Pension cost £0.2m £0.3m (33.3%) Other interest (£0.5m) (£0.3m) 66.7%
Slide 87: Notes
Notes Results presentation 18 October 2016 - Page 87 -
Slide 88: Appendix 7 – Land supply
Appendix 7 – Land supply As at 31 July Owned and controlled land (plots) Land with DPP Pipeline Wide geographic presence enables Bellway to benefit from growth opportunities in north, south and London markets. Pipeline reduced by 2,100 plots due to disposal of Barking Riverside. Quality land bank. N
Slide 89: Notes
Notes Results presentation 18 October 2016 - Page 89 -
Slide 90: Appendix 8 – Strategic land
Appendix 8 – Strategic land As at 31 July Strategic land by category 2016 2015 6,300 plots with a positive planning status. Appointed three new regional strategic land directors. Allocation only Application only Both allocation and application Results presentation 18 October 2016 - Page 90 -
Slide 91: Notes
Notes Results presentation 18 October 2016 - Page 91 -
Slide 92: Appendix 9 – Land bank glossary
Appendix 9 – 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 developmen
Slide 93: Notes
Notes Results presentation 18 October 2016 - Page 93 -
Slide 94: Appendix 10 – Order book at 31 July
Appendix 10 – Order book at 31 July As at 31 July 2016 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 7,035 1,762 8,797 6,319 1,638 7,957 11.3% 7.6% 10.5% Completions (7,345) (1,376) (8,72