Bellway P.l.c. · LSE:BWY
Bellway P.l.c — FY2017 Earnings Presentation
82 slides from Bellway P.l.c's earnings presentation, Oct 17, 2017
Slide 1: Results Presentation Year ended 31 July 2017
Results Presentation Year ended 31 July 2017
Slide 2: Agenda
Agenda 1. Highlights 2. Strategic update 3. Finance review 4. Operating review 5. Current trading and outlook 6. Questions and answers 7. Appendices Results presentation 17 October 2017 - Page 2 -
Slide 3: Highlights
Highlights John Watson Executive Chairman Results presentation 17 October 2017 - Page 3 -
Slide 4: Further disciplined volume growth
Further disciplined volume growth Volume Operational highlights Return on capital + 10.6% (60 bps) Contracted to acquire 11,613 plots. Significant investment in WIP EPS up 12.7% to with 10,251 plots under 370.6p production. Total dividend Net asset value Order book of £1,361.5m at 1 + 13.0% + 17.3%
Slide 5: Notes
Notes Results presentation 17 October 2017 - Page 5 -
Slide 6: Strategic update
Strategic update John Watson Executive Chairman Results presentation 17 October 2017 - Page 6 -
Slide 7: Notes
Notes Results presentation 17 October 2017 - Page 7 -
Slide 8: Strategic update
Strategic update Supply and demand (England) Mortgage rates There remains a gap between supply and demand. Financing a new home is affordable. Planning environment is positive supporting the Many borrowers are able to access funds at availability of good quality, high return land. rates <2%. No 95%
Slide 9: Notes
Notes Results presentation 17 October 2017 - Page 9 -
Slide 10: Finance review
Finance review Keith Adey Finance Director Results presentation 17 October 2017 - Page 10 -
Slide 11: Notes
Notes Results presentation 17 October 2017 - Page 11 -
Slide 12: Operating result
Operating result For the year ended 31 July 2017 2016 Mvt Homes sold 9,644 8,721 10.6% Average selling price £260,354 £252,793 3.0% Housing revenue £2,510.9m £2,204.6m 13.9% Other revenue £47.7m £36.1m 32.1% Total revenue £2,558.6m £2,240.7m 14.2% Gross profit £661.6m 25.9% £574.8m 25.7% 20bps Admin
Slide 13: Notes
Notes Results presentation 17 October 2017 - Page 13 -
Slide 14: Further revenue growth
Further revenue growth For the year ended 31 July Homes sold (No.) 2017 2016 New divisions in South Midlands Private Social Total Private Social Total and County Durham achieved 327 North 3,897 758 4,655 3,651 536 4,187 completions. South 3,670 1,319 4,989 3,694 840 4,534 6 new divisions opened sinc
Slide 15: Notes
Notes Results presentation 17 October 2017 - Page 15 -
Slide 16: Operating performance
Operating performance 2017 2016 Mvt Operating profit bridge Gross profit £661.6m £574.8m £86.8m 25.9% 25.7% 20bps Administrative (£90.0m) (£82.8m) (£7.2m) expenses (3.6%) (3.7%) 10bps Operating profit £571.6m £492.0m £79.6m 22.3% 22.0% 30bps Good quality land, strong cost control and HPI contributed
Slide 17: Notes
Notes Results presentation 17 October 2017 - Page 17 -
Slide 18: Earnings growth
Earnings growth For the year ended 31 July 2017 2016 Mvt Pre- Total Exceptional Total exceptional Operating profit £571.6m £492.0m - £492.0m 16.2% Profit on sale of Barking - - £17.3m £17.3m - Net finance expense (£11.2m) (£11.1m) - (£11.1m) 0.9% Share of JV result £0.4m (£0.3m) - (£0.3m) 233% Profi
Slide 19: Notes
Notes Results presentation 17 October 2017 - Page 19 -
Slide 20: Balance sheet
Balance sheet As at 31 July 2017 2016 Mvt Assets Fixed assets and investment in joint ventures £45.6m £19.4m £26.2m Inventory £2,968.1m £2,548.3m £419.8m Land £1,838.2m £1,625.6m £212.6m WIP £1,129.9m £922.7m £207.2m Debtors £87.6m £94.1m (£6.5m) Net cash £16.0m £26.5m (£10.5m) £3,117.3m £2,688.3m £
Slide 21: Notes
Notes Results presentation 17 October 2017 - Page 21 -
Slide 22: Land bank
^ Land bank As at 31 July 2017 2016 Average Average Plots Cost Plots Cost plot cost plot cost Land with DPP Brought forward 1 August 24,879 £1,373.1m £55.2k 21,411 £1,040.9m £48.6k Net purchases 10,420 £685.1m £65.7k 12,189 £780.8m £64.1k Sold (9,644) (£512.1m) £53.1k (8,721) (£448.6m) £51.4k Carrie
Slide 23: Notes
Notes Results presentation 17 October 2017 - Page 23 -
Slide 24: Work in progress
Work in progress As at 31 July 2017 2016 Mvt Site construction £1,017.7m £836.1m £181.6m Showhomes £78.2m £70.3m £7.9m Part exchange stock £34.0m £16.3m £17.7m Total WIP £1,129.9m £922.7m £207.2m Units in production Significant increase in WIP to meet growth aspirations. Nine Elms has a gross invest
Slide 25: Notes
Notes Results presentation 17 October 2017 - Page 25 -
Slide 26: Capital employed
Capital employed As at 31 July 2017 2016 Land creditor payment profile NAV £2,191.3m £1,867.0m Net bank debt - - Capital employed £2,191.3m £1,867.0m Land creditors £366.8m £304.2m £255.0m Adjusted capital £2,558.1m £2,171.2m employed Results presentation 17 October 2017 - Page 26 -
Slide 27: Notes
Notes Results presentation 17 October 2017 - Page 27 -
Slide 28: A focus on return on capital employed
A focus on return on capital employed As at 31 July RoCE is diluted by lag 2017 2016 between investing and RoCE 27.6% 28.2% recognising a return when site sales commence. Ashberry brand improves 2017 2016 returns on larger sites. Adjusted RoCE 23.9% 24.5% A returns based approach to assessing land,
Slide 29: Notes
Notes Results presentation 17 October 2017 - Page 29 -
Slide 30: Strong cash generation
Strong cash generation For the year ended 31 July £256.5m cash generated from operations Gearing 16.0% Nil gearing. inclusive of land creditors. Average net Peak net bank bank debt debt of £335m. of £171m. £588.1m generated before increasing investment in land and WIP Results presentation 17 October
Slide 31: Notes
Notes Results presentation 17 October 2017 - Page 31 -
Slide 32: Investing for growth
Investing for growth Cash generation pre incremental Investing for growth land and WIP investment Total £2.7bn Average £245m Cash generated before net reinvestment in land and Investment in land and WIP (net of exceptionals) (LHS) WIP Revenue as a multiple of July 2007 (RHS) Average cash generated b
Slide 33: Notes
Notes Results presentation 17 October 2017 - Page 33 -
Slide 34: Dividend
Dividend For the year ended 31 July 2017 2016 Mvt Recognise importance of Interim dividend 37.5p 34.0p 10.3% paying a dividend to Proposed final dividend 84.5p 74.0p 14.2% shareholders whilst pursuing growth. Total dividend 122.0p 108.0p 13.0% Dividend per share (p) Expect to maintain dividend cover
Slide 35: Notes
Notes Results presentation 17 October 2017 - Page 35 -
Slide 36: Value creation
Value creation As at 31 July 82.8% return over 3 years 2017 2016 Mvt + 82.8% NAV 1,785p 1,522p 17.3% 2017 2016 Mvt RoE 22.6% 23.5% (90 bps) NAV at July 14 NAV growth Cumulative dividend paid Strategy for growth is delivering substantial growth for shareholders Results presentation 17 October 2017 -
Slide 37: Notes
Notes Results presentation 17 October 2017 - Page 37 -
Slide 38: Operating review
Operating review Jason Honeyman Chief Operating Officer Results presentation 17 October 2017 - Page 38 -
Slide 39: Notes
Notes Results presentation 17 October 2017 - Page 39 -
Slide 40: Trading review
Trading review Weekly reservation rate Reservations Cancellation rate + 10.7% 11% 2017 2016 Mvt No change H1 166 156 6.4% H2 209 182 14.8% Site visitors Website traffic Full year 187 169 10.7% + 10% + 13% Average active outlets Positive pricing Incentives environment remain low Results presentation
Slide 41: Notes
Notes Results presentation 17 October 2017 - Page 41 -
Slide 42: London
London London land bank Plots Under £250 psf 216 Under £500 psf 588 Under £800 psf 1,226 Under £1,000 psf 252 Over £1,000 psf 146 Total 2,428 London represented 10% of completions and 14% of housing revenue at an affordable ASP of £372k. Nine Elms contributed 137 completions and 72% of this site is
Slide 43: Notes
Notes Results presentation 17 October 2017 - Page 43 -
Slide 44: Strong operational focus
Strong operational focus Securing construction resource is the biggest constraint with regards to sector growth. Well organised and properly managed construction sites help maintain standards in respect of build quality, health and safety and customer care. 10 site managers awarded NHBC Health and S
Slide 45: Notes
Notes Results presentation 17 October 2017 - Page 45 -
Slide 46: Construction costs
Construction costs Subcontract Materials Lack of skilled labour is still an National deals cover majority of issue. items in our supply chain. Sector relies on overseas labour – Leverages Group-wide buying but no reduction in availability. power and secures prices for around 24 months in advance. Ad
Slide 47: Notes
Notes Results presentation 17 October 2017 - Page 47 -
Slide 48: Planning environment
Planning environment Positive planning environment evidenced by increase in number of planning permissions. Tendency for councils to grant planning permission on larger sites to meet five year housing supply. Average site contracted by Bellway was c.120 units providing a balance between operational
Slide 49: Notes
Notes Results presentation 17 October 2017 - Page 49 -
Slide 50: Land procurement
Land procurement Land spend and contracted land (£m) Continue to identify land opportunities where forecast gross margin and RoCE is above historical norm. Land spend Contracted land Contracted sites Contracted 97 sites with 43% in 2017 2016 north and 57% in south. 26 option agreements signed up to
Slide 51: Notes
Notes Results presentation 17 October 2017 - Page 51 -
Slide 52: Current trading and outlook
Current trading and outlook Jason Honeyman Chief Operating Officer Results presentation 17 October 2017 - Page 52 -
Slide 53: Notes
Notes Results presentation 17 October 2017 - Page 53 -
Slide 54: Current trading and order book
Current trading and order book Order book at 1 Oct 2017 (2016: 2 Oct) Units +7.1% Sales up 5.6% to 171 per week in first 9 weeks. Order book benefits from higher value reservations at sites such as Nine Elms. Value (£m) +17.4% 71% of order book is contracted giving comfort over outlook. Private Soci
Slide 55: Notes
Notes Results presentation 17 October 2017 - Page 55 -
Slide 56: Outlook
Outlook Volume growth of at least 5% in FY18. Beyond FY18 volume growth still provides greatest opportunity for earnings growth. New division to open in north of country in this financial year. Scope to increase divisional structure further. Further investment to generate additional value for shareh
Slide 57: Notes
Notes Results presentation 17 October 2017 - Page 57 -
Slide 58: Questions and answers
Questions and answers West End Quarter, Folkestone Results presentation 17 October 2017 - Page 58 -
Slide 59: Notes
Notes Results presentation 17 October 2017 - Page 59 -
Slide 60: Appendices
Appendices 1. Guidance 2. Housing revenue 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 17 October 2017 - Page 60 -
Slide 61: Notes
Notes Results presentation 17 October 2017 - Page 61 -
Slide 62: Appendix 1 – Guidance
Appendix 1 – Guidance 31 July 2018 ASP Around £280k Volume growth At least 5% Operating margin Around 22% Average bank debt £150m to £200m Social completions c. 20% Dividend 3x cover Results presentation 17 October 2017 - Page 62 -
Slide 63: Notes
Notes Results presentation 17 October 2017 - Page 63 -
Slide 64: Appendix 2 - Housing revenue
Appendix 2 - Housing revenue For the year ended 31 July Completion analysis Average selling price (‘ASP’) 2017 2016 52% 52% + 6.3% + 3.0% + 12.3% 2017 2016 2017 2016 2017 2016 Revenue analysis 2017 2016 Private Social Total 61% 61% Homes sold 2017 2016 North South (excl. London boroughs Private Soci
Slide 65: Notes
Notes Results presentation 17 October 2017 - Page 65 -
Slide 66: Appendix 3 – ASP analysis
Appendix 3 – ASP analysis For the year ended 31 July ASP / square foot (£) 2017 2016 Mvt Private Social Total Private Social Total Private Social Total North 211 119 199 199 119 191 6.0% -% 4.2% South - made up of:- 348 189 314 342 162 314 1.8% 16.7% -% London 533 268 471 488 223 477 9.2% 20.2% (1.3
Slide 67: Notes
Notes Results presentation 17 October 2017 - Page 67 -
Slide 68: Appendix 4 – Product analysis
Appendix 4 – Product analysis For the year ended 31 July Product mix analysis Selling price analysis 2017 2016 2017 2016 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 69: Notes
Notes Results presentation 17 October 2017 - Page 69 -
Slide 70: Appendix 5 – Completion analysis
Appendix 5 – Completion analysis For the year ended 31 July 2017 2016 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 – non London Investor Help to Buy – London Results presenta
Slide 71: Notes
Notes Results presentation 17 October 2017 - Page 71 -
Slide 72: Appendix 6 - Net finance expense
Appendix 6 - Net finance expense For the year ended 31 July 2017 2016 Mvt Net bank interest payable inc. fees £4.5m £4.3m 4.7% Non bank interest: £6.7m £6.8m (1.5%) Made up of:- Land creditors / debtors – IAS 39 £6.6m £7.1m (7.0%) Pension cost £0.2m £0.2m - Other interest (£0.1m) (£0.5m) (80.0%) Tot
Slide 73: Notes
Notes Results presentation 17 October 2017 - Page 73 -
Slide 74: 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. Quality land bank. North South Results presentation 17 October 2017 - Page 74 -
Slide 75: Notes
Notes Results presentation 17 October 2017 - Page 75 -
Slide 76: Appendix 8 – Strategic land
Appendix 8 – Strategic land As at 31 July Strategic land by category 2017 2016 6,900 plots with a positive planning status. The Group has further long term land holdings which do not yet have a positive planning status. Total 6,900 Total 6,300 Allocation only Application only Both allocation and app
Slide 77: Notes
Notes Results presentation 17 October 2017 - Page 77 -
Slide 78: 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 79: Notes
Notes Results presentation 17 October 2017 - Page 79 -
Slide 80: Appendix 10 – Order book at 31 July
Appendix 10 – Order book at 31 July As at 31 July 2017 2016 Movement Private Social Total Private Social Total Private Social Total % % % At 1 August 2,995 1,649 4,644 3,305 1,263 4,568 (9.4%) 30.6% 1.7% Reservations 7,698 2,051 9,749 7,035 1,762 8,797 9.4% 16.4% 10.8% Completions (7,567) (2,077) (9
Slide 81: Notes
Notes Results presentation 17 October 2017 - Page 81 -
Slide 82: 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, and securities in Bellway p.l.c. or any other invitation or inducement to engag