Crest Nicholson Holdings Plc · LSE:CRST
Crest Nicholson — H1 2016 Earnings Presentation
32 slides from Crest Nicholson's earnings presentation, Jun 14, 2016
Slide 1: Interim Results for 2016
Crest Nicholson Holdings plc Interim Results for 2016 14th June 2016
Slide 2: Agenda
Agenda • Performance highlights and Operations Stephen Stone • Financial Results Patrick Bergin • Summary Stephen Stone • Q&A 1
Slide 3: Performance highlights (1)
Performance highlights (1) • Strong operational and financial performance for the first half • Housing market continues to thrive, particularly at lower price points where Templates Help to Buy applies • The business is growing volumes and earnings whilst retaining a strong balance sheet • Significa
Slide 4: Performance highlights (2)
Performance highlights (2) Turnover of £408.1m (2015: £333.2m) +22% Operating profit of £77.8m (2015: £63.6m) +22% Profit before tax of £72.6m (2015: £58.3m) +25% Earnings per share of 23.3p (2015: 18.6p) +25% Dividend per share of 9.1p (2015: 6.4p) +42% Operating profit margin of 19.1% (2015: 19.1%
Slide 5: Performance highlights (3)
Performance highlights (3) Open-market ASP# of £349k (2015: £309k) (Legal Completions) +13% Unit completions of 1,206 units (2015: 1,124) +7% Sales per Outlet Week* at 1.06 (2015: 1.02) +4% Sales per Outlet Week** at 0.87 (2015: 0.93) -7% Forward sales at mid-June of £520.8m (2015: £436.4m) +19% GDV
Slide 6: Current market dynamics
Current market dynamics Fundamentals of the market remain encouraging… • Employment & mortgage access remain strong, underpinning demand • Land availability continues to be good, supporting re- Templates investment at or above our hurdle rates • Sales and cost inflation both showing signs of moderat
Slide 7: Sales Rates and Revenues (excl. PRS)
Sales Rates and Revenues (excl. PRS) Advent of Help to Buy • Sales rates since introduction of Help to Buy at consistently strong level • Policy of moving up ASP curve successful in driving top-line growth • Migration out of central London will see ASPs settle at or about this new level 6
Slide 8: Demand - Affordability & Mortgages
Demand - Affordability & Mortgages • Real house prices close to trend but below previous peaks • Low interest rates continue to aid affordability; squeeze on spreads Templates • Rising proportion of longer-length mortgages aiding affordability Mortgage Terms Source: CML Economics Trends in Mortgage
Slide 9: Supply – Planning and Skills
Supply – Planning and Skills Templates Source: HBF/Glenigan • Planning slowly getting better, but tendency to favour larger sites in Local Plans • Progress towards having Local Plans in place for April 2017 rather slow, only 30% completed, but most LA’s are underway • Housebuilding industry ‘repleni
Slide 10: Land markets and acquisitions
Land markets and acquisitions Different markets exhibiting different levels of price tension Urban schemes under higher demand from wider group of purchasers Sites acquired to date Trend for • 10 locations consenting larger sites will favour • 1,147 plots larger operators • £472m GDV Terms agreed &
Slide 11: Outlets
Outlets • Outlet numbers level with prior year but projected to grow c.5% by year-end • Delays in early 2015 planning (pre-General Election) unhelpful but now resolved • Good growth in Chiltern division with 9 sites acquired in their first 20 months of operation; London launching in Peckham and Lowe
Slide 12: Strategic land continues to progress
Strategic land continues to progress • A number of strategic sites are significantly advanced; would expect to see increased pull- through in 2017 • 8 planning applications either submitted or being submitted in next 6 months • After a successful defence of a Judicial challenge to the planning conse
Slide 13: Maintaining our land pipeline
Maintaining our land pipeline Apr 2016 Apr 2015 Change % Units GDV £m Units GDV £m Units GDV £m Short-term housing 15,377 5,143 15,857 4,717 (3%) 9% Short-term commercial - 248 - 231 7% Total short-term 15,377 5,391 15,857 4,948 (3%) 9% Strategic land 17,820 5,191 18,153 5,139 (2%) 1% Total under co
Slide 14: Financial results
NICHOLSON Financial results
Slide 15: Key metrics (1)
Key metrics (1) HY 2016 HY 2015 Inc/(Dec) % Outlets (full year equivalents) 44 44 - Sales per Outlet Week (OM inc-PRS) 1.06 1.02 +4% Sales per Outlet Week (OM ex-PRS) 0.87 0.93 -7% Legal completions Open market (ex-PRS) 909 834 +9% PRS 173 - Affordable 124 290 -57% Total 1,206 1,124 +7% • Number of
Slide 16: Key metrics (2)
Key metrics (2) ASPs HY 2016 HY 2015 Inc/(Dec) % Legal completions OM ex-PRS 372 309 +20% OM inc. PRS on OM basis# 349 309 +13% Affordable* 187 128 +46% OM Reservations in H1 OM ex-PRS 387 312 +24% OM inc. PRS 345 306 +13% Forward sales OM ex-PRS 383 315 +22% OM inc. PRS 307 267 +15% Affordable* 130
Slide 17: Income statement
Income statement Income statement (£m, Change HY 2016 HY 2015 % increase unless stated) on 2015 Revenue 408.1 333.2 74.9 22% Cost of sales (297.7) (241.4) (56.3) Gross profit 110.4 91.8 18.6 20% % gross profit margin 27.1% 27.6% (50bps) Administrative expenses (32.6) (28.2) (4.4) Operating profit 77
Slide 18: Strong underlying margins
Strong underlying margins Fair Value Gross Margins Historic cost 28.6% 28.6% 27.5% 27.5% 27.4% 26.9% 27.1% • Underlying gross margin % levelling off; headline rate lower as contribution from fair valuation provision diminishes as expected • Margins tighter in higher-priced central London market,
Slide 19: Build costs
Build costs European Production 2005-2015 Source: BIS Source: Eurostat • Material prices showing modest increase in most recent quarter, but still below recent peaks • Lacklustre construction activity in Europe highlights criticality of UK market • Cost inflation of 4-5%, being accommodated within s
Slide 20: Balance sheet
Balance sheet Balance sheet (£m, unless stated) 30th April 31st October 30th April Change on Change on 2016 2015 2015 Oct’15 Apr’15 Non-current Assets 115.9 110.3 84.2 5.6 31.7 Inventory 940.5 904.5 850.1 36.0 90.4 Trade & other receivables/assets 61.6 50.2 54.2 11.4 7.4 Cash and cash equivalents 14
Slide 21: Cash flow
Cash flow Cash flow (£m, unless stated) HY2016 HY2015 Change Operating profit before changes in working capital and provisions 81.3 66.5 14.8 Increase in trade and other receivables (25.1) (3.8) (21.3) Increase in inventories (36.0) (36.0) - Increase/(decrease) in trade and other payables 28.1 (41.2
Slide 22: Forward sales
Forward sales YTD YTD FY15 FY14 FY16 FY15 Units – all years 2,336 2,102 1,680 1,499 % change on prior period +11% +12% GDV (£m) – all years 520.8 436.4 328.9 249.4 % change on prior period +19% +32% % of FY2016/15 target 75% 79% 25% 24% • Strong growth in forward sales; GDV increase ahead of units r
Slide 23: Summary
NICHOLSON Summary
Slide 24: Summary
Summary • Crest Nicholson is continuing to grow volumes and earnings, and is on track to hit our targets of £1bn turnover in 2016 and £1.4bn turnover and 4,000 units in 2019 Templates • The housing market continues to be robust across the country, albeit sales of higher-priced Central London units a
Slide 25: Crest Nicholson
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Slide 26: If a week’s a long time in politics…
If a week’s a long time in politics… Stock Market reaction somewhat disconnected from Housing • Unquestionably Market statistics – albeit limited post-vote data. Volumes rather some nervousness, than Price bearing initial brunt of uncertainty. Website driving cancellations conversions down 5.5% on p
Slide 27: Fundamentals unchanged
Fundamentals unchanged • 95% employment levels – close to ‘full employment’ • Mortgage access remains strong, with no sign of retrenching • Key lenders confirming appetite for business remains strong, underpinned by Help to Buy regime Templates • Interest rate expectations are for reductions rather
Slide 28: Confidence key – all other factors in place
Confidence key – all other factors in place Templates House price variation in previous periods of uncertainty has been in a fairly narrow band 24
Slide 29: Southern focus provides resilience
Southern focus provides resilience Inner London market disconnected from ‘Real’ London – scope to re-connect Templates somewhat without driving wider market pricing down 25
Slide 30: Pricing resilience by region
Pricing resilience by region Crest Nicholson areas of Templates operation Prices fall everywhere by similar amounts but rise more strongly in areas of economic resilience Strong correlation with Crest Nicholson areas of operation 26
Slide 31: Strong land pipeline enables pause
Strong land pipeline enables pause • Virtually all of FY17 and over 80% of FY18 land is in hand; modest impact on FY19 target if short pause on land acquisitions • Two-fold purpose of pause on land buying: • Conserve cash in event of less buoyant market Templates • Seek to negotiate lower land price
Slide 32: Disclaimer
Disclaimer You should note that the financial projections and other statements regarding Crest Nicholson's intentions, beliefs or current expectations referred to in this document are forward looking and do not relate solely to historical or current facts. These statements are provided on a confiden
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