Bellway P.l.c. · LSE:BWY
Bellway P.l.c — H1 2014 Earnings Presentation
90 slides from Bellway P.l.c's earnings presentation, Mar 26, 2014
Slide 1: Results Presentation Half year ended 31 January 2014
Results Presentation Half year ended 31 January 2014
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 26 March 2014 - Page 2 -
Slide 3: Strategic update
Strategic update Ted Ayres Chief Executive Results presentation 26 March 2014 - Page 3 -
Slide 4: Building shareholder value through…
Building shareholder value through… Volume growth due to operational and balance Growth in net asset value sheet capacity A strong focus on return Progressive dividend policy on capital Results presentation 26 March 2014 - Page 4 -
Slide 5: Notes
Notes Results presentation 26 March 2014 - Page 5 -
Slide 6: Operational and balance sheet capacity
Operational and balance sheet capacity Balance sheet capacity Operational capacity - Two new divisions opened on 1 - Low net bank debt of only £16.4m - August 2013 - - Structure of 15 divisions - - Bank facilities of £300m - - Capacity to deliver in excess of 8,000 - Low exposure to underperforming
Slide 7: Notes
Notes Results presentation 26 March 2014 - Page 7 -
Slide 8: A strong focus on ROCE
A strong focus on ROCE Land acquisitions Operational efficiency - Focus on acquiring land - Strong management of land bank deliverable in short to medium and work in progress - term - - Accelerate trading from impaired - Minimum risk adjusted hurdle land - rates of at least 15% to 20% - - Ongoing co
Slide 9: Notes
Notes Results presentation 26 March 2014 - Page 9 -
Slide 10: Delivering strategy
Delivering strategy + 25.0% + 13.1% + 280bps + 3.2% No. of homes sold Average selling price Operating margin Land bank plots * 2013 2,597 2013 £187,426 2013 12.8% 2013 32,991 2014 3,245 2014 £212,071 2014 15.6% 2014 34,057 2,000 2,500 3,000 3,500 £175,000 £195,000 £215,000 12% 14% 16% 31,500 32,500
Slide 11: Notes
Notes Results presentation 26 March 2014 - Page 11 -
Slide 12: Finance review
Finance review Keith Adey Finance Director Results presentation 26 March 2014 - Page 12 -
Slide 13: Notes
Notes Results presentation 26 March 2014 - Page 13 -
Slide 14: Group results
Group results For the six months ended 31 January 2014 2013 Mvt Revenue £701.1m £502.5m 39.5% Gross profit £138.6m 19.8% £89.7m 17.9% 54.5% Administrative expenses (£29.4m) (4.2%) (£25.3m) (5.1%) 16.2% Operating profit £109.2m 15.6% £64.4m 12.8% 69.6% Net finance expense (£5.4m) (£4.5m) 20.0% Profit
Slide 15: Notes
Notes Results presentation 26 March 2014 - Page 15 -
Slide 16: Revenue
Revenue For the six months ended 31 January 2014 2013 Mvt Homes sold 3,245 2,597 25.0% Average selling price £212,071 £187,426 13.1% Housing revenue £688.2m £486.7m 41.4% Non housing revenue £12.9m £15.8m (18.4%) Total revenue £701.1m £502.5m 39.5% Results presentation 26 March 2014 - Page 16 -
Slide 17: Notes
Notes Results presentation 26 March 2014 - Page 17 -
Slide 18: Housing revenue: social mix
Housing revenue: social mix For the six months ended 31 January 2014 2013 Mvt Private housing Homes sold 2,891 2,202 31.3% Average selling price £224,901 £199,140 12.9% Social housing Homes sold 354 395 (10.4%) Average selling price £107,298 £122,131 (12.1%) Results presentation 26 March 2014 - Page
Slide 19: Notes
Notes Results presentation 26 March 2014 - Page 19 -
Slide 20: Housing revenue: geographic mix
Housing revenue: geographic mix For the six months ended 31 January 2014 2013 Mvt Completion analysis 2014 2013 North 55% 51% 19% 16% Homes sold 1,474 1,278 15.3% 36% 35% Average selling price £177,526 £160,500 10.6% 45% 49% South (inc. London) Revenue analysis Homes sold 1,771 1,319 34.3% 2014 2013
Slide 21: Notes
Notes Results presentation 26 March 2014 - Page 21 -
Slide 22: Operating performance
Operating performance For the six months ended 31 January 2014 2013 2013 2013 Completions by land type H1 H1 H2 FY 2014 c. 17% Gross profit £138.6m £89.7m £113.6m £203.3m 19.8% 17.9% 18.7% 18.3% c. 19% Admin. expenses £29.4m £25.3m £26.9m £52.2m c. 64% 4.2% 5.1% 4.4% 4.7% Operating profit £109.2m £6
Slide 23: Notes
Notes Results presentation 26 March 2014 - Page 23 -
Slide 24: Finance expense
Finance expense For the six months ended 31 January 2014 2013 Mvt Land creditors / debtors – IAS 39 £2.9m £1.8m 61.1% Net bank interest payable inc. fees £1.4m £1.8m (22.2%) Preference dividend £1.0m £1.0m - Pension cost £0.2m £0.2m - Other interest (£0.1m) (£0.3m) (66.7%) Net finance expense £5.4m
Slide 25: Notes
Notes Results presentation 26 March 2014 - Page 25 -
Slide 26: Earnings and dividend
Earnings and dividend For the six months ended 31 January 2014 2013 Mvt Profit before taxation £103.8m £59.9m 73.3% Taxation (£23.1m) (£13.9m) 66.2% Effective tax rate 22.3% 23.2% Profit after taxation £80.7m £46.0m 75.4% Earnings per share 66.3p 37.9p 74.9% Dividend 16.0p 9.0p 77.8% Dividend cover
Slide 27: Notes
Notes Results presentation 26 March 2014 - Page 27 -
Slide 28: Balance sheet
Balance sheet As at 31 January 31 July 2014 2013 Assets Fixed assets £18.6m £19.0m Inventory £1,639.5m £1,513.5m Shared equity £33.5m £34.5m Debtors £77.4m £60.4m £1,769.0m £1,627.4m Liabilities Pension deficit (£9.9m) (£9.0m) Creditors (£246.8m) (£227.8m) Land creditors (£201.8m) (£146.0m) (£458.5m
Slide 29: Notes
Notes Results presentation 26 March 2014 - Page 29 -
Slide 30: Inventory
Inventory As at 31 January 31 July 2014 2013 Owned and controlled land £1,026.8m £907.3m Made up of:- DPP: land with detailed £841.1m £782.5m planning permission Pipeline and strategic £185.7m £124.8m land Work in progress £544.2m £535.0m Showhomes £57.0m £52.8m Part exchange stock £11.5m £18.4m Tot
Slide 31: Notes
Notes Results presentation 26 March 2014 - Page 31 -
Slide 32: Land with detailed planning permission
Land with detailed planning permission Average Average Plots Cost selling plot cost price Brought forward 1 August 2013 18,991 £782.5m £41.2k c. £197k Sold (3,245) (£174.0m) £53.6k £212k 15,746 £608.5m £38.6k c. £194k Net purchases 3,911 £232.6m £59.5k c. £225k Carried forward 31 January 2014 19,657
Slide 33: Notes
Notes Results presentation 26 March 2014 - Page 33 -
Slide 34: Analysis of plots with DPP
Analysis of plots with DPP 100% Sales accelerated from 90% impaired sites 80% 70% 65% 59% Almost £1.4bn spent on land 73% 60% since downturn 50% 40% 73% of land bank with DPP now at gross margin of 30% 24% 23% around 22% 20% 18% 10% 17% Average gross margin of all 9% 12% 0% land with DPP is around J
Slide 35: Notes
Notes Results presentation 26 March 2014 - Page 35 -
Slide 36: Shared equity
Shared equity As at 31 January 31 July 2014 2013 Number of assets owned 2,778 2,843 Book value (BV) £33.5m £34.5m Original loan (OL) £73.0m £74.9m BV / OL 46% 46% Cumulative redemptions to date (units) 383 310 Cumulative redemption proceeds as % of OL 79% 76% Book value / Net asset value 2.6% 2.8% R
Slide 37: Notes
Notes Results presentation 26 March 2014 - Page 37 -
Slide 38: Cash flow
Cash flow For the six months ended 31 January £33.2m 400 350.3 (67.9) Average cash of £42.4m in H1 350 300 (9.2) (240.0) Peak debt of £16.4m 250 200 £m 150 100 50 (18.9) 0.7 (25.6) (16.4) - (50) (5.8) Opening Cash from Change in Investment in Land Interest and Investing & Dividend Closing net bank d
Slide 39: Notes
Notes Results presentation 26 March 2014 - Page 39 -
Slide 40: Capital structure
Capital structure As at 31 January 31 July 2014 2013 31 January 31 January Net bank borrowings £16.4m £5.8m 2014 2013 Capital Preference debt £20.0m £20.0m 1.1 0.8 turn Net debt £36.4m £25.8m Equity £1,274.1m £1,218.8m 31 January 31 January 2014 2013 Capital employed £1,310.5m £1,244.6m Return on 12
Slide 41: Notes
Notes Results presentation 26 March 2014 - Page 41 -
Slide 42: Value creation
Value creation As at 31 January 31 January Pre write downs Post write downs 2014 2013 1,200 Dividend 16.0p 9.0p 1,100 31 January 31 July 1,000 2014 2013 Pence 900 NAV 1,046p 1,001p 800 31 January 31 January 700 2014 2013 Jul 07 Jul 08 Jul 09 Jul 10 Jul 11 Jul 12 Jul 13 Jan 14 Net asset value per sha
Slide 43: Notes
Notes Results presentation 26 March 2014 - Page 43 -
Slide 44: Operating review
Operating review Ted Ayres Chief Executive Results presentation 26 March 2014 - Page 44 -
Slide 45: Notes
Notes Results presentation 26 March 2014 - Page 45 -
Slide 46: Volume growth
Volume growth Volume Average outlets increased by 4% 3,500 Opened 42 new outlets during the 25.0% period 3,250 Average outlets for the full year could 3,000 increase by 5% from 218 last year 2,750 5.8% 5.3% Average active outlets 2,500 3,245 3.8% 11.6% Jan 2013 2,250 2,597 2,455 Jan 2014 2,332 2,000
Slide 47: Notes
Notes Results presentation 26 March 2014 - Page 47 -
Slide 48: National coverage
National coverage 15 divisional offices Invest in primary locations and areas Existing offices where there is a significant urban New offices population North has performed well bolstered by strong performance in Scotland and West Midlands South is robust with outperformance in Essex and North Londo
Slide 49: Notes
Notes Results presentation 26 March 2014 - Page 49 -
Slide 50: Two new divisions
Two new divisions New offices in Manchester and Thames Valley Two new divisions have contributed 62 legal completions Land expenditure and overheads tightly controlled to ensure growth is sustainable Rate of output will increase as more sales outlets are brought to the market Opportunity for further
Slide 51: Notes
Notes Results presentation 26 March 2014 - Page 51 -
Slide 52: Strong presence in London
Strong presence in London Net pricing gains on recently released developments Focus on affordable, high rise apartments outside zone 1 Over half of apartments sold are within London Strong balance sheet enables consideration of the majority of London land opportunities Outsourcing to contractors pro
Slide 53: Notes
Notes Results presentation 26 March 2014 - Page 53 -
Slide 54: Completion analysis
Completion analysis For the six months ended 31 January 2014 2013 102, 3% 175, 5% 428, 16% 395, 15% 354, 11% 940, 29% 140, 5% 340, 11% 401, 15% 177, 7% 324, 10% 119, 5% 6% 0, 0% 26, 1% 0% 8, 0% 1002, 31% 911, 36% Second time buyers Other buyers Deposit assisted Other second time buyers Unassisted fi
Slide 55: Notes
Notes Results presentation 26 March 2014 - Page 55 -
Slide 56: Strong cost control
Strong cost control Cost pressures Upward cost pressures throughout supply chain Material contracts fixed for periods of 12 months or more Increases of 5% to 10% from brick and block suppliers Divisional teams managing sub-contract pressures Savings Increasing trade rebates Site overhead savings mit
Slide 57: Notes
Notes Results presentation 26 March 2014 - Page 57 -
Slide 58: Standard house types
Standard house types Now being constructed on a site in Leeds Construction will commence soon on a site in Northampton Further customer feedback will be sought Will assist in maintaining strict build cost control in the future Results presentation 26 March 2014 - Page 58 -
Slide 59: Notes
Notes Results presentation 26 March 2014 - Page 59 -
Slide 60: Land bank
Land bank As at 31 January 31 July 2014 2013 Owned and controlled plots 34,057 32,991 Made up of:- DPP: plots with detailed planning permission 19,657 18,991 Pipeline: plots pending an implementable DPP 14,400 14,000 Strategic plots > 4,300 > 4,400 Strategic plots are only those long term plots whic
Slide 61: Notes
Notes Results presentation 26 March 2014 - Page 61 -
Slide 62: Land buying
Land buying £240m expended on land 64% of expenditure in south Increased competition matched by increased availability Increased pricing pressure in south but minimum hurdle rates being met or exceeded Help to Buy considered as part of land buying process Results presentation 26 March 2014 - Page 62
Slide 63: Notes
Notes Results presentation 26 March 2014 - Page 63 -
Slide 64: Land buying: planning environment
Land buying: planning environment As at 31 January 31 July 2014 2013 Brought forward at 1 August 18,991 17,636 Already controlled: DPP obtained in the period 2,847 4,252 Bought with benefit of DPP 1,064 2,755 Total additions 3,911 7,007 Sold (3,245) (5,652) Plots with implementable DPP 19,657 18,991
Slide 65: Notes
Notes Results presentation 26 March 2014 - Page 65 -
Slide 66: Drayton Village
Drayton Village Case study Site added to controlled pipeline section of land bank in June 2013 Site acquired with outline planning permission Fully serviced Vendor responsible for discharging planning conditions DPP received in October 2013 Site transferred to land with DPP Expect margin of c.23% Dr
Slide 67: Notes
Notes Results presentation 26 March 2014 - Page 67 -
Slide 68: Current trading and outlook
Current trading and outlook Ted Ayres Chief Executive Results presentation 26 March 2014 - Page 68 -
Slide 69: Notes
Notes Results presentation 26 March 2014 - Page 69 -
Slide 70: Market place
Market place Reservations in first 6 months average 137 per week – up 41% Reservations since 1 February averaged 138 per week – up 4% Help to Buy accounted for around 32% of reservations in the first six months Extension of Help to Buy gives greater clarity over future outlook Positive impact on sal
Slide 71: Notes
Notes Results presentation 26 March 2014 - Page 71 -
Slide 72: Order book
Order book Order book at 9 March – 3,944 homes – £829.5m – Value up 63.5% compared to last year Results presentation 26 March 2014 - Page 72 -
Slide 73: Notes
Notes Results presentation 26 March 2014 - Page 73 -
Slide 74: Summary
Summary Supply constraints are the most significant challenge to the Group Volume growth of up to 20% by July 2014 Further sustainable growth through investment in attractive land opportunities Capacity for expansion has helped deliver a 74.9% increase in earnings per share Strategy for growth is co
Slide 75: Notes
Notes Results presentation 26 March 2014 - Page 75 -
Slide 76: Questions and answers
Questions and answers Copper Beeches, Wantage Results presentation 26 March 2014 - Page 76 -
Slide 77: Notes
Notes Results presentation 26 March 2014 - Page 77 -
Slide 78: Appendices
Appendices 1. Land creditor payments 2. Land buying 3. A wide product mix 4. Sales mix 5. Order book at 31 January 6. Land bank glossary Results presentation 26 March 2014 - Page 78 -
Slide 79: Notes
Notes Results presentation 26 March 2014 - Page 79 -
Slide 80: Appendix 1 - Land creditor payments
Appendix 1 - Land creditor payments 201.8 115.0 200 150 Land creditors represent only £m 100 44.9 20% of land book value 50 41.9 £115.0m of committed land expenditure within next six months - Balance at H2 H1 Thereafter 31 January 2013/2014 2014/2015 2014 Due date Results presentation 26 March 2014
Slide 81: Notes
Notes Results presentation 26 March 2014 - Page 81 -
Slide 82: Appendix 2 – Land buying
Appendix 2 – Land buying Cumulative land expenditure since downturn (£m) 1,400 1,200 Almost £1.4bn expended on 1,000 higher margin land since downturn. 800 1,396 600 1,156 Average gross margin on new land acquisitions is 400 856 c.22%. 551 200 301 93 0 Jul-09 Jul-10 Jul-11 Jul-12 July 13 Jan 14 Resu
Slide 83: Notes
Notes Results presentation 26 March 2014 - Page 83 -
Slide 84: Appendix 3 - A wide product mix
Appendix 3 - A wide product mix For the six months ended 31 January 2014 2013 Apartments 2014 Size 31% Av. Sq. feet / home 983 984 ASP / square foot £216 £192 69% 2013 Focus on higher value, two 30% storey family housing Expertise in delivery of high rise London apartments 70% Houses Apartments Resu
Slide 85: Notes
Notes Results presentation 26 March 2014 - Page 85 -
Slide 86: Appendix 4 - Sales mix
Appendix 4 - Sales mix For the six months ended 31 January Product mix analysis 2014 2013 16% 15% 15% 15% 8% London flats represent 16% of 9% completions Focus on traditional two storey family housing 60% 62% Non-London flats 3 + bed 1 & 2 bed London flats Selling price analysis 2014 2013 9% 12% 35%
Slide 87: Notes
Notes Results presentation 26 March 2014 - Page 87 -
Slide 88: Appendix 5 – Order book at 31 January
Appendix 5 – Order book at 31 January As at 31 January 2014 31 January 2013 Movement Private Social Total Private Social Total Private Social Total % % % At 1 August 2,503 1,022 3,525 1,499 1,034 2,533 67.0% (1.2%) 39.2% Reservations 3,338 218 3,556 2,181 350 2,531 53.0% (37.7%) 40.5% Completions (2
Slide 89: Notes
Notes Results presentation 26 March 2014 - Page 89 -
Slide 90: Appendix 6 – Land bank glossary
Appendix 6 – 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