Taylor Wimpey Plc · LSE:TW.
Taylor Wimpey — FY2020 Earnings Presentation
62 slides from Taylor Wimpey's earnings presentation, Mar 2, 2021
Slide 1: Full Year Results Presentation for the year ended 31 December 2020
Full Year Results Presentation for the year ended 31 December 2020 2 March 2021
Slide 2: Disclaimer
Disclaimer For the purposes of this notice, this “presentation” shall include these slides and any question-and-answer session that follows oral briefings by representatives of Taylor Wimpey plc. This presentation is for information purposes only and is not intended to, and does not constitute or fo
Slide 3: Agenda
Agenda Introduction, 2020 UK operational Financial review Outlook priorities and key overview Chris Carney Pete Redfern areas Jennie Daly Pete Redfern 3 Results Presentation for the year ended 31 December 2020
Slide 4: Introduction, priorities and key areas
Introduction, priorities and key areas Pete Redfern Chief Executive
Slide 5: 2020 overview
2020 overview 2020 highlights ● Supported all stakeholders through the Q2 shutdown Group ● Adapted to COVID-secure completions Revenue Operating profit* operations ● Assertive re-entry into the 9,799 £2,790.2 million £300.3 million land market Strengthened for 2021+ ● Rationalisation of organisation
Slide 6: Medium to long term structural backdrop remains favourable
Medium to long term structural backdrop remains favourable Political environment Housing market Land market Housing remains a priority for the Current conditions positive: Current conditions normalising: Government: − High LTV mortgages returning − Competition has returned in most areas • Healthy co
Slide 7: Priorities for 2021
Priorities for 2021 Margin delivery – optimisation of selling price and an enhanced cost mindset Bringing through new land acquisitions for volume growth in 2023/24 v Delivering customer service and consistently great build quality Building on our strengths in Social and Governance areas and new Env
Slide 8: Land acquisitions underpin medium term growth
Land acquisitions underpin medium term growth ● Short term landbank c.77k plots as at 31 Dec 2020 (2019: c.76k plots, 31 Jan 2021: c.79k plots) ● Strategic land pipeline was c.139k potential plots as at 31 Dec 2020 (2019: c.140k plots) ● Acquired 7,644 plots in the short term land market during 2020
Slide 9: Land progression into early 2021
Land progression into early 2021 UK approved land acquisitions since re-entering the land market (plots) 31 December 2020 31 January 2021 26 February 2021 Acquired / unconditionally exchanged 6,074 10,416 11,512 Conditionally exchanged 5,267 4,869 8,718 Not exchanged 11,091 8,249 10,373 Lost deals 1
Slide 10: ESG highlights 2020
ESG highlights 2020 • Sustainability Champion in each of our regional businesses to engage colleagues on waste and energy-efficiency Environmental • 97% construction waste recycled in 2020 • Our Home for Nature Toolkit, launched in 2019, includes practical ideas enhancing biodiversity on every site
Slide 11: New environmental strategy targets
New environmental strategy targets Science-based carbon Nature Resources and waste reduction target • Increase natural habitats by • By 2022, publish a ‘towards • We have achieved an 10% on new sites from zero waste’ strategy for our absolute reduction in 2023 sites emissions of 39% since • Include
Slide 12: Fire safety in high rise buildings
Fire safety in high rise buildings ● Following the tragic fire at Grenfell Tower, we quickly identified where action was needed to remove ACM cladding from high rise buildings ● We provided £40 million to cover cost of replacing ACM cladding and have completed work on 12 out of 19 affected buildings
Slide 13: 2020 UK operational overview
2020 UK operational overview Jennie Daly Group Operations Director
Slide 14: Market performance – to date
Market performance – to date H1 2021 (w/e 21 Feb 2021) H2 2020 H1 2020 H2 2019 H1 2019 Average outlets open 236 244 237 243 257 Private sales rate (net) 0.89 0.81 0.70 0.92 1.00 Private sales price £000 312 320 320 314 298 Cancellation rate (private) 17% 19% 21% 16% 14% ● 73 new outlets opened in 20
Slide 15: Positive sales momentum and forward indicators
Positive sales momentum and forward indicators Customer interest* TW shutdown 2021 national 2020 national 2020 national lockdown lockdown lockdown 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Week number 2018 2019 2020 2021 Appointments TW shutdown 2021 national 2020 national 2020 national loc
Slide 16: Procurement – driving cost and efficiency
Procurement – driving cost and efficiency Central Local In 2018 initiated a central procurement efficiency Since 2018, business unit procurement and and improvement programme focused on improving: commercial functions have implemented improved: • Sourcing and tendering processes • Cost management th
Slide 17: Engaging with the supply chain
Engaging with the supply chain 2020 2021 Central procurement activity focused on: Procurement priorities: • Brexit planning and mitigation • Cost efficiency and management, continuity and • Co-ordinating material supplies to support site security of supply, continued standardisation and remobilisati
Slide 18: New house types
New house types ● Meeting changing customer needs ● Changing regulation ● Business performance and efficiency 18 Results Presentation for the year ended 31 December 2020
Slide 19: Results
19 Results Presentation for the year ended 31 December 2020
Slide 20: Results
20 Results Presentation for the year ended 31 December 2020
Slide 21: Results
21 Results Presentation for the year ended 31 December 2020
Slide 22: Results
22 Results Presentation for the year ended 31 December 2020
Slide 23: Impact of operational improvements
Impact of operational improvements • Increased plotting of standard house types (86% in 2020 excl. apartments) House type • Focus on National Standard Sales Specification, reducing product complexity • Easier and more efficient adjustment to future regulatory changes range • Increased customer and b
Slide 24: Achieving operational excellence
Achieving operational excellence ● Build Quality ● Construction Quality Review (CQR) score of 4.45 (2019: 4.13) volume sector leading ● Reportable Items 0.24 (2019: 0.28) ● Remobilisation strategy enhanced smoothing of the build programme ● Customer ● 92% in 8-week ‘would you recommend’ score for su
Slide 25: Financial review
Financial review Chris Carney Group Finance Director
Slide 26: Summary Group results
Summary Group results £m (before exceptional items) FY 2020 FY 2019 Change Revenue 2,790.2 4,341.3 (35.7)% Gross profit 496.7 1,044.1 (52.4)% Gross profit margin % 17.8 24.1 (6.3)ppt Operating profit 300.3 850.5 (64.7)% Operating profit margin % 10.8 19.6 (8.8)ppt Profit before tax and exceptional i
Slide 27: UK performance summary
UK performance summary FY 2020 FY 2019 Change Legal completions – excl JVs 9,412 15,520 (39.4)% Private 7,564 12,043 (37.2)% Affordable 1,848 3,477 (46.9)% Average selling price – excl JVs 288 269 7.1% Private £000 323 305 5.9% Affordable £000 146 141 3.5% Legal completions – JVs 197 199 (1.0)% Shar
Slide 28: Margin recovery in 2021
Margin recovery in 2021 Impact on 2020 Illustrative movements in UK operating margin Annual income statement FY 2019 to FY 2020 change (ppt) ● The expected improvement in 2021 operating margin is Market inflation on selling prices 1.9%* 1.6 supported by: Market inflation on build cost 3.0% (1.7) ● T
Slide 29: Bridge to medium term operating margin target
Bridge to medium term operating margin target 0.6 22.8% 0.7 +1.4 1.0 0.3 21.4% 0.3 0.5 0.3 +1.8 0.4 19.6% 19.6 2019 Efficiency savings Price optimisation Landbank Higher volumes Operational Target from vs sales rate evolution improvements Range Targeted improvement - high organisational incl. CRM, n
Slide 30: Deepening customer engagement through digital technology
Deepening customer engagement through digital technology Marketing Sales centres Legal Email, SMS Leads follow up, Exchange Leads and conversion to Customer converting contracts, enquiries visit and service leads to visit progression, Website, reservation Aftercare completion telephone support Impro
Slide 31: Summary Group balance sheet
Summary Group balance sheet Group £m 31 Dec 2020 31 Dec 2019 Change Long term assets and JVs 141.8 115.3 26.5 Land 2,875.7 2,735.9 139.8 WIP 1,659.0 1,460.1 198.9 Debtors 215.4 204.7 10.7 Land creditors (675.9) (729.2) 53.3 Other creditors (731.2) (773.2) 42.0 Pensions and post retirement benefits (
Slide 32: Group cashflow
Group cashflow 900 300.3 (69.7) 800 (199.0) 510.1 (15.4) 719.4 700 600 (163.2) 545.7 (165.0) 500 £m (33.4) 400 (118.5) 300 (17.7) (19.8) 200 100 0 Opening net Operating Movement in Investment in Investment in Payments to Cash used in Tax and Exceptional Investment in Net proceeds Other Closing net c
Slide 33: Shareholder returns
Shareholder returns Resumption of ordinary dividend ● Resumption of Ordinary Dividend Policy, being 7.5% of net assets ● First payment will be the 2020 final ordinary dividend paid in May 2021, subject to shareholder approval at the AGM. This will be 4.14 pence per share which equates to a payment o
Slide 34: 2021 guidance
2021 guidance 85%-90% of 2019 volumes UK completions (excl. JVs) c.17% affordable Group operating profit margin (incl. JVs) 18.5%-19% Year end net cash c.£500 million Land New approvals on a replacement basis Net finance charges c.£25 million (c.£6 million cash) JV share of profit c.£5 million 34 Re
Slide 35: Outlook
Outlook Pete Redfern Chief Executive
Slide 36: Outlook
Outlook ● Current trading positive, giving confidence about housing market for 2021 ● Long order book gives additional confidence and ability to focus on price ● Cost inflation more benign, and cost control plans bearing fruit, although regulatory costs need careful management ● Housing market dynam
Slide 37: Investment case
Investment case Q & A Our culture and We maintained Added to our Driving growth On track to values have our focus on high-quality at the right time generate shone through sustainability landbank and in the cycle significant and in 2020 maintained reliable strong balance shareholder sheet returns 37
Slide 38: Future investor communications
Future investor communications ● 22 April 2021 AGM and trading update ● 4 August 2021 Half year results 2021 38 Results Presentation for the year ended 31 December 2020
Slide 39: Appendices
Appendices Full Year Results Presentation for the year ended 31 December 2020 Taylor Wimpey plc
Slide 40: Group financial metrics
Group financial metrics Return on net operating assets Cash conversion* 33.4 100 92.6 82.6 31.4 30 20 % 0 % 9.9 10 -54.9 0 -100 2018 2019 2020 2018 2019 2020 2018-2023 medium term target: Increase to 35% 2018-2023 medium term target: Convert 70-100% of operating profit into operating cash flow Opera
Slide 41: 2020 operational performance – our KPIs
2020 operational performance – our KPIs Customer FY 2020 FY 2019 FY 2018 Customer satisfaction – would you recommend 8-week score %* 92 89 90 Customer satisfaction – would you recommend 9-month score %** 78 77 76 Build quality Construction Quality Review – average score out of 6 4.45 4.13 3.93 Avera
Slide 42: 2020 operational performance – our KPIs
2020 operational performance – our KPIs Efficiency FY 2020 FY 2019 FY 2018 Net private sales rate per outlet per week 0.76 0.96 0.80 Private legal completions per outlet 31.5 48.2 41.8 Order book value £m 2,684 2,176 1,782 Order book volume – number of homes 10,685 9,725 8,304 Employee Employee turn
Slide 43: Sustainable, responsible business
Sustainable, responsible business Environmental Social Governance • New environment strategy to • Our Community • Strong culture of doing the right reduce impacts and improve Communications Plan ensures thing with health and safety as efficiency a consistent approach to our number one priority • Sci
Slide 44: Summary income statement
Summary income statement* Group £m FY 2020 FY 2019 Change H1 2020 Revenue 2,790.2 4,341.3 (35.7)% 754.6 Cost of sales (2,293.5) (3,297.2) (30.4)% (663.6) Gross profit 496.7 1,044.1 (52.4)% 91.0 Net operating expenses (204.3) (201.6) 1.3% (105.3) Profit / (loss) on ordinary activities 292.4 842.5 (65
Slide 45: Cash flow summary
Cash flow summary Group £m FY 2020 H2 2020 H1 2020 FY 2019 Profit on ordinary activities before finance costs 282.4 306.7 (24.3) 856.8 (Increase) / decrease in inventories (362.2) 61.6 (423.8) (21.7) Exceptional items charge / (credit) 10.0 - 10.0 (14.3) Other operating items* (95.2) (58.0) (37.2) (
Slide 46: Affordable housing volumes
Affordable housing volumes ● Continue to expect 2021 volumes to be 85-90% of 2019 levels but with affordable of c.17% ● Reduction in affordable proportion in 2021 influenced by site mix and a revision to the way we contract land sold to Housing Associations, with revenue and profit realised slightly
Slide 47: Group segmental analysis
Group segmental analysis FY 2020 FY 2019 Operating Operating Operating Operating profit profit margin RONOA profit profit margin RONOA £m % % £m % % UK 284.5 10.4 9.7 818.4 19.4 31.1 Spain 15.8 25.0 16.7 32.1 26.7 45.5 Group 300.3 10.8 9.9 850.5 19.6 31.4 47 Results Presentation for the year ended 3
Slide 48: Financing
Financing ● Net cash at 31 December 2020: £719.4 million (31 December 2019: £ 545.7 million) ● Adjusted gearing* including land creditors of -1.1% (2019: 5.5%) ● Average net cash during 2020: £399.3 million (2019: £157.0 million) ● Borrowings and facilities: ● £550 million Revolving Credit Facility
Slide 49: Finance charges
Finance charges £m FY 2020 FY 2019 Change Financial indebtedness 8.3 5.5 2.8 Foreign exchange loss - 1.1 (1.1) Unwind of land creditors and other 19.3 21.5 (2.2) items Pensions 1.4 3.2 (1.8) Interest on IFRS 16 leases 0.4 0.5 (0.1) Total 29.4 31.8 (2.4) 49 Results Presentation for the year ended 31
Slide 50: Tax
Tax Asset / (liability) Current tax £m Deferred tax £m Net tax £m As at 1 January 2020 (67.9) 29.8 (38.1) Income statement* (41.3) (6.1) (47.4) SOCI / SOCIE 0.2 9.4 9.6 Cash paid 107.7 - 107.7 Other (including foreign exchange) 0.2 0.6 0.8 As at 31 December 2020 (1.1) 33.7 32.6 ● Pre-exceptional und
Slide 51: Pension fund contributions
Pension fund contributions ● Triennial valuation of the Scheme at 31 December 2019 being negotiated; statutory deadline of 31 March 2021 for completion ● Funding update as at 31 December 2020 ● Technical provisions deficit of £125 million and funding level of 95% based on the 2016 valuation assumpti
Slide 52: Pensions
Pensions Movement in present value of defined benefit obligations Total UK £m FY 2020 FY 2019 FY 2018 FY 2017 Pre-IFRIC 14 (surplus) / deficit brought forward (100.5) (33.1) (23.9) 232.7 Employer contributions* (37.1) (47.1) (34.1) (23.1) Administration cost 2.5 1.8 1.9 3.0 Interest (income) / charg
Slide 53: UK completions mix
UK completions mix £201k – £251k – £301k – £451k – £601k – UK completions 2020 <£200k £250k £300k £450k £600k £1m >£1m Total Price band 27% 18% 17% 28% 7% 2% 1% 100% UK completions FY 2020 H2 2020 H1 2020 FY 2019 H2 2019 H1 2019 First time buyers 40% 43% 35% 36% 36% 35% Second time buyers 35% 34% 35
Slide 54: Help to Buy price caps
Help to Buy price caps First time buyers using Help to Buy as a % of total 2020 Homes England Region Help to Buy price cap** private completions % within price cap North East £ 186,100 28% 29% North West £ 224,400 50% 65% Yorkshire & The Humber £ 228,100 35% 58% East Midlands £ 261,900 44% 55% West
Slide 55: UK land commitments
UK land commitments 2020 2019 £m (at 31 December 2020) < 1 yr 1-2 yrs 2-5 yrs 5+ yrs total total Committed cash payments in respect of unconditional land contracts 346 166 151 27 690 740 Expected cash payments in respect of conditional land contracts 124 77 120 12 333 295 ● Included in unconditional
Slide 56: UK planning permissions
UK planning permissions 20,000 Sites with implementable planning permission 18,000 16,000 96.3% 14,000 12,000 10,000 8,000 6,000 4,000 2.4% 2,000 0.3% 1.0% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Started on site as at 31 December 2020 Permissions gained Completions * Start
Slide 57: UK land pipeline
UK land pipeline 31 Dec 2020 31 Dec 2019 Plots Owned Controlled Total Total Detailed planning 39,217 3,557 42,774 43,460 Outline planning 13,919 5,858 19,777 19,726 Resolution to grant 595 14,289 14,884 12,426 Short term 53,731 23,704 77,435 75,612 Short term with implementable 39,105 39,105 36,833
Slide 58: UK land portfolio ‒ net cost
UK land portfolio ‒ net cost 31 Dec 2020 31 Dec 2019 £m Owned Controlled Total Total Detailed planning 1,854 6 1,860 1,891 Outline planning 475 78 553 514 Resolution to grant 17 27 44 40 Sub-total 2,346 111 2,457 2,445 plots 53,731 23,704 77,435 75,612 Strategic 217 99 316 191 plots 36,968 101,676 1
Slide 59: UK landbank
UK landbank ● Land cost in short term owned landbank is 15.2% of ASP (2019: 14.9%), supported by strategic pipeline conversions ● Land cost as % of ASP on 2020 approvals 18.3% (2019: 16.2%) ● Potential revenue in the landbank was £54 billion (31 December 2019: £53 billion), comprising: ● Short term
Slide 60: UK sales performance
UK sales performance Private and affordable reservations H1 2021 (w/e excl. JV 21 Feb 2021) H2 2020 H1 2020 H2 2019 H1 2019 Average outlets open 236 244 237 243 257 Average sales rate (net) 0.98 0.90 0.76 1.37 1.24 Average selling price £000 295 302 308 253 269 H1 2021 (w/e As at 21 Feb 2021) 31 Dec
Slide 61: Spain financial summary
Spain financial summary FY 2020 FY 2019 Change Average number of active sites 20 21 (1) Legal completions 190 323 (41.2)% Average selling price £000 333 373 (10.7)% Average selling price €000 375 429 (12.6)% Revenue £m 63.3 120.4 (47.4)% Operating profit £m 15.8 32.1 (50.8)% Operating profit margin
Slide 62: 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