Galliford Try Holdings PLC · LSE:GFRD

Galliford Try — H1 2018 Earnings Presentation

60 slides from Galliford Try's earnings presentation, Feb 14, 2018

  1. Slide 1: Half Year Results to 31 December 2017

    HALF YEAR RESULTS TO 31 DECEMBER 2017 14 February 2018 Peter Truscott, Chief Executive Graham Prothero, Finance Director Royal Birmingham Conservatoire

  2. Slide 2: Peter Truscott, Chief Executive

    Peter Truscott CHIEF EXECUTIVE

  3. Slide 3: Agenda

    AGENDA Half year results to 31 December 2017  Group highlights  Impact of Carillion  Financial review  Strategic and operating review  Outlook  Q&A  Appendices Half year results to 31 December 2017

  4. Slide 4: Group Highlights

    GROUP HIGHLIGHTS Half year results to 31 December 2017 Great Eastern Quays, East London

  5. Slide 5: Group Highlights

    GROUP HIGHLIGHTS 5 Strong first half performance  Excellent progress against strategic PBT1 up 29% EPS1 up 31% objectives in all three businesses 100 100 80 80  Linden Homes margin up from 18.2% to 60 60 18.5%, Partnerships & Regeneration 40 £81.3m 40 80.8p £63.0m 61.9p margin up from 3.4% to 4.8%

  6. Slide 6: Impact of Carillion

    IMPACT OF CARILLION 6  Group continues to operate well within its financial covenants  Aberdeen Western Peripheral Route (AWPR) over-run costs, compounded by the compulsory liquidation of Carillion, have increased the Group’s total cash commitments on the project by in excess of £150m  This conti

  7. Slide 7: Response

    RESPONSE 7 Equity capital raise  Fully underwritten standby equity capital raise of £150m Dividend  Planned increase in dividend cover to 2.0x pre-exceptional earnings brought forward and effective immediately Use of proceeds 1 2 Demonstrate continued financial strength to Ensure the Group has acc

  8. Slide 8: Graham Prothero, Finance Director

    Graham Prothero FINANCE DIRECTOR

  9. Slide 9: Financial Review

    FINANCIAL REVIEW Camomile Lawn, Totnes

  10. Slide 10: Group financial highlights

    FINANCIAL REVIEW 10 Group financial highlights FY to £m HY18 HY17 Var 30 June 2017 Revenue1 1,495.0 1,307.6 +14% 2,820.2 Profit from operations before 94.7 74.7 +27% 171.2 exceptional items2 Profit before exceptional items 81.3 63.0 +29% 147.6 and tax Profit before tax 56.3 63.0 -11% 58.7 Earnings p

  11. Slide 11: Linden Homes

    FINANCIAL REVIEW 11 Linden Homes REVENUE/OPERATING PROFIT Profit up 9% Linden Homes margin Units: 1,587 (HY17: 1,491) 25% 23.8% 23.5% Revenue: £436.8m (HY17: £407.6m) 23.0% 23.0% Operating £80.9m (HY17: £74.3m) 6.3% 5.3% 4.8% 4.5% profit: 20% SALES MIX (UNITS) Units up 6% 15% Private: 1,170 (HY17: 1

  12. Slide 12: Construction

    FINANCIAL REVIEW 12 Construction REVENUE/OPERATING PROFIT Profit up 167% Construction margin Revenue: £823.6m (HY17: £742.0m) 4.9% 4.9% 5% 4.5% Pre-exceptional 4.4% £7.2m (HY17: £2.7m) operating profit: 4% Exceptional £25.0m (HY17: £Nil) charge: 3% 3.8% 4.0% CASH Down £66.3m 4.1% 4.4% Total: £44.5m

  13. Slide 13: Partnerships & Regeneration

    FINANCIAL REVIEW 13 Partnerships & Regeneration REVENUE/OPERATING PROFIT Mixed-tenure up 61% Partnerships & Regeneration margin Contracting: £167.9m (HY17: £109.7m) Mixed-tenure: £55.6m (HY17: £34.6m) 12% 10.8% 10.5% Operating £10.8m (HY17: £4.9m) 10% 9.3% profit: 8.8% 6.0% UNITS DELIVERED ASP up 17

  14. Slide 14: Segmental analysis

    FINANCIAL REVIEW 14 Segmental analysis HY18 Profit/(Loss) 1 Revenue includes share from Operating of joint ventures 2 Pre-exceptional £m Revenue1 Operations2,3 Margin2 3 Profit/loss from Linden Homes 436.8 80.9 18.5% operations stated before finance costs, Partnerships & Regeneration 223.5 10.8 4.8%

  15. Slide 15: Cash management

    FINANCIAL REVIEW 15 Cash management  Bank facilities of £450m secure out to 2022; debt private placement of £100m to 2027  Continue to operate well within banking covenants  Net debt at 31 December 2017 of £85m (HY17: £114m, FY17: net cash of £7m)  Gearing at 31 December of 15%, well below our t

  16. Slide 16: Cash management

    FINANCIAL REVIEW 16 Cash management £m 80 51.1 60 40 20 7.2 0 -20 (71.2) (3.6) (3.7) -40 -60 -80 (52.6) (12.1) (84.9) -100 -120 Opening Cash from Working Interest Tax Dividend Other Closing net cash operating capital net debt 1 July 2017 activities movements 31 Dec 2017 Half year results to 31 Decem

  17. Slide 17: Balance sheet highlights

    FINANCIAL REVIEW 17 Balance sheet highlights December June December £m 2017 2017 2016 Net asset value 567.0 575.5 598.1 Tangible net assets 389.6 396.4 447.5 Net (debt)/cash (84.9) 7.2 (113.8) Gearing % 15% - 19% Net pension deficit 2.7 3.2 10.6 Half year results to 31 December 2017

  18. Slide 18: Segmental balance sheet

    FINANCIAL REVIEW 18 Segmental balance sheet Linden Partnerships & PPP Net assets £m Homes Regeneration Construction Investments Central Total 31 December 2017 Goodwill & intangible assets 52.5 35.1 83.3 - 6.5 177.4 Working capital employed 660.2 70.0 (66.2) 23.7 (213.2) 474.5 Net cash/(debt) (560.6)

  19. Slide 19: Dividend

    FINANCIAL REVIEW 19 Dividend  Planned increase in cover to 2.0x Cover 1.7x 1.6x 1.6x now effective from current year 100 96p  Full year dividend expected to be 90 82p based on pre-exceptional 80 earnings 68p 70 64p  Interim dividend declared of 60 Pence 28.0p per share 56p 50 46p 40 30 20 32p 28p

  20. Slide 20: Peter Truscott, Chief Executive

    Peter Truscott CHIEF EXECUTIVE

  21. Slide 21: Linden Homes

    LINDEN HOMES Strategic and operating review Meadow Gardens, Essex

  22. Slide 22: Linden Homes: Strategic and operating review

    LINDEN HOMES 22 Strategic and operating review  Strong first half reflecting volume growth and ongoing operating efficiencies  Strong improvement in operating margin, up 0.3% pts to 18.5% (HY17: 18.2%) • No land sales in the period • Further progress in standardisation towards target of 80% by 202

  23. Slide 23: Linden Homes: Strategic and operating review

    LINDEN HOMES 23 Strategic and operating review Gross margin of landbank ASP in landbank % 25 £k 350 300 20 250 23.1% 23.5% 24.0% £314k £305k £296k 200 15 150 HY17 FY17 HY18 HY17 FY17 HY18 Cost per plot Plot cost as % of ASP £k 80 % 30 70 20 £73k 23% 23% 24% 60 £71k £70k 10 50 0 HY17 FY17 HY18 HY17 F

  24. Slide 24: Linden Homes: Outlook

    LINDEN HOMES 24 Outlook  Consumer confidence broadly positive despite political uncertainty  Pricing stable across core traditional housing sites  Modest material and subcontractor price pressures  Well positioned to deliver and improve operating margin through: • Continued operating and product

  25. Slide 25: Construction

    CONSTRUCTION Strategic and operating review East Midlands Airport

  26. Slide 26: Construction: Strategic and operating review

    CONSTRUCTION 26 Strategic and operating review  Underlying business benefiting from progress against strategic objectives: • Rigorous project selection • No fixed-price, all-risk major projects  Order book continues to be focused on public and regulated sector and frameworks  AWPR: • Key Carillio

  27. Slide 27: Construction: Order book

    CONSTRUCTION 27 Strategic and operating review Order book Building By client type Education 100% Health 12% 10% 13% 15% £2.5bn Commercial 16% 16% 13% Other Public Sector 12% 75% Defence Facilities Management 50% 72% 74% 74% 73% Infrastructure 25% Water £1.0bn Roads 0% Rail & Aviation FY15 FY16 FY17

  28. Slide 28: Construction: Outlook

    CONSTRUCTION 28 Outlook  Underlying performance continues to improve through focus on risk management and careful contract selection  Benefiting from participation on multiple frameworks and high quality £3.5bn order book  99% of revenue secured for FY 2018 and 61% secured for FY 2019 (H1 2017: 9

  29. Slide 29: Partnerships & Regeneration

    PARTNERSHIPS & REGENERATION Strategic and operating review Brunswick Regeneration, Greater Manchester

  30. Slide 30: Partnerships & Regeneration: Strategic and operating review

    PARTNERSHIPS & REGENERATION 30 Strategic and operating review  Very strong first half performance with accelerated growth and margin improvement Key Current  Continue to grow proportion of mixed-tenure North East revenue H119  Expansion of operating platforms Yorkshire  Successful integration of

  31. Slide 31: Partnerships & Regeneration: Outlook

    PARTNERSHIPS & REGENERATION 31 Outlook  Good visibility of future work and increased opportunities in all areas  Secured regeneration opportunities contributing to plan - London, Manchester, Southampton, Gateshead and Bristol  Renewed demand in market for Extra Care and retirement villages  Poli

  32. Slide 32: Outlook

    OUTLOOK Royal Birmingham Conservatoire

  33. Slide 33: Summary Outlook

    SUMMARY 33 Outlook  Government commitment to the housing market, good mortgage availability and low interest rates  Linden Homes well positioned following strong first half performance, and expect further margin improvement in line with strategy  Partnerships & Regeneration delivering and strongl

  34. Slide 34: Q&A Half year results

    (a GallifordTry Q&A Half year results

  35. Slide 35: Appendices

    APPENDICES M49 Avonmouth Junction

  36. Slide 36: Appendices contents

    APPENDICES 36 1. Group 2.6 Strategic use of joint ventures (HY18 and HY17) 1.1 Investment in Linden Homes and Partnerships & Regeneration 2.7 Landbank valuation 1.2 Cash flow summary 2.8 Landbank analysis 1.3 Net finance costs 2.9 Movement in landbank 1.4 Completed housing units 2.10 Forecast outlet

  37. Slide 37: Investment in Linden Homes and Partnerships & Regeneration

    APPENDICES 37 1.1 Investment in Linden Homes and Partnerships & Regeneration December June December £m 2017 2017 2016 Amounts invested in joint ventures 258.9 248.6 232.4 Land 510.6 456.6 553.6 Work in progress 287.2 266.0 293.7 Total invested in housebuilding developments 1,056.7 971.2 1,079.7 & jo

  38. Slide 38: Cash flow summary

    APPENDICES 38 1.2 Cash flow summary – half year to 31 December 2017 £m HY18 HY17 Cash from operating activities 51.1 65.6 Working capital movements (71.2) (104.1) Net cash used in operations (20.1) (38.5) Interest, tax and dividends (59.9) (59.0) Other (12.1) (7.6) Net cash outflow (92.1) (105.1) Op

  39. Slide 39: Net finance costs

    APPENDICES 39 1.3 Net finance costs – half year to 31 December 2017 £m HY18 HY17 Net interest payable on borrowings (8.9) (7.8) Interest receivable from joint ventures 4.7 1.7 Unwind of discount on payables (0.3) (0.5) Other 0.1 0.1 TOTAL (4.4) (6.5) Half year results to 31 December 2017

  40. Slide 40: Completed housing units

    APPENDICES 40 1.4 Completed housing units Linden Linden Partnerships Partnerships Homes Homes & Regen & Regen TOTAL TOTAL net of net of net of partner partner partner Units Incl JVs share Incl JVs share Incl JVs share Private 1,170 996 239 174 1,409 1,170 Affordable 417 350 92 78 509 428 TOTAL 1,587

  41. Slide 41: Forecast land creditors' payment profile

    APPENDICES 41 1.5 Forecast land creditors’ payment profile £m 250 5.8 2.6 200 188.8 91.5 150 100 88.9 50 0 FY18 FY19 FY20 Beyond Total Half year results to 31 December 2017

  42. Slide 42: Linden Homes revenue analysis, regional

    APPENDICES 42 2.1 Linden Homes – revenue analysis, regional at 31 December 2017 Regions updated to TOTAL reflect operating Units 1,587 structure Revenue £436.8m from 1 July 2016 EAST DIVISION Units 717 (45%) Revenue £211.7m (48%) WEST DIVISION Units 870 (55%) Revenue £225.1m (52%) Half year results

  43. Slide 43: Linden Homes sales reserved, contracted and completed

    APPENDICES 43 2.2 Linden Homes – analysis of sales reserved, contracted, and completed £m Feb 18 Dec 17 Feb 17 Private 684.2 576.6 684.1 Affordable 194.9 185.2 163.0 Land sales - - 10.3 TOTAL 879.1 761.8 857.4 For completion in FY18 740.3 634.2 699.4 For completion post FY18 138.8 127.6 158.0 TOTAL

  44. Slide 44: Linden Homes sales by buyer type

    APPENDICES 44 2.3 Linden Homes – sales, completions by buyer type HY18 HY17 FY17 3% 9% 9% 10% 8% 9% 26% 22% 61% 61% 23% 59% Private Affordable Private with part exchange Private - Investor Based on 1,587 completions (FY17: 1,491) Half year results to 31 December 2017

  45. Slide 45: Linden Homes trading overview

    APPENDICES 45 2.4 Linden Homes – trading overview HY18 HY17 FY17 Revenue (£m) 437 408 937 Land cost 25.2% 23.4% 23.9% Build cost 51.8% 53.1% 53.1% Gross margin 23.0% 23.5% 23.0% Overheads 4.5% 5.3% 4.8% Operating margin 18.5% 18.2% 18.2% Half year results to 31 December 2017

  46. Slide 46: Linden Homes private sales incentives

    APPENDICES 46 2.5 Linden Homes – private sales, analysis of incentives on reservations Proportion of units H118 H217 H117 No incentives 33% 32% 33% Incentives Part exchange 14% 13% 13% Assisted move 3% 2% 3% Help to Buy 46% 50% 44% Investor sales 4% 3% 7% TOTAL 100% 100% 100% Half year results to 31

  47. Slide 47: Linden Homes strategic use of JVs (HY18)

    APPENDICES 47 2.6 Linden Homes – strategic use of Joint Ventures (JVs) (HY18) Revenue Completions (Units) (Linden Homes only) ASP Net of Gross JV partner £m £000 Direct - private 821 821 298 362 - affordable 283 283 35 123 Other income, including land sales 21 - JOs1 - private 36 18 4 175 - affordab

  48. Slide 48: Linden Homes strategic use of JVs (HY17)

    APPENDICES 48 2.6 Linden Homes – strategic use of Joint Ventures (JVs) (HY17) Revenue Completions (Units) (Linden Homes only) ASP Net of Gross JV partner £m £000 Direct - private 881 881 285 323 - affordable 265 265 29 111 Other income, including land sales 29 - JOs1 - private 88 44 12 269 - afforda

  49. Slide 49: Linden Homes landbank valuation

    APPENDICES 49 2.7 Linden Homes - landbank valuation1 December 2017 December 2016 June 2017 East West East West East West Cost per plot £k Division Division Division Division Division Division Opening landbank 78 66 79 69 79 69 Closing landbank 74 66 80 68 78 66 Weighted ASP 291 301 305 322 309 302 i

  50. Slide 50: Landbank analysis

    APPENDICES 50 2.8 Landbank analysis1 By business By sector Product mix2 Product mix2 20% 21% 11% 35% 65% 80% 79% 89% Linden Homes 11,540 Private 11,420 Houses 8,300 Houses 1,370 Partnerships 2,850 Affordable 2,970 Apartments 1,000 Apartments 750 14,390 14,390 9,300 2,120 1 Current at 12 February 201

  51. Slide 51: Linden Homes movement in landbank

    APPENDICES 51 2.9 Linden Homes - movement in landbank Total Landbank Owned Controlled At 30 June 2017 10,650 8,791 1,859 Legal completions (1,346) (1,346) - Land acquired 2,523 1,892 631 Transfers - 801 (801) Aborted (195) - (195) Transferred to Partnerships & (109) - (109) Regeneration Planning cha

  52. Slide 52: Linden Homes forecast outlets and revenue

    APPENDICES 52 2.10 Linden Homes - forecast outlets and revenue Number of sales outlets1 Revenue by period % 120 100% 3 32 90 75% Not yet acquired 60 50% 100 100 100 97 Owned or controlled 98 85 90 80 83 68 30 25% 0 0% FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 1 Average for the year Half year

  53. Slide 53: Construction segmental analysis

    APPENDICES 53 3.1 Construction – segmental analysis HY18 FY17 £m Profit Revenue1 from Operations2 Margin2 Margin2 Building 504.1 3.0 0.6% (1.2)% Infrastructure 319.5 4.2 1.3% 2.0% TOTAL 823.6 7.2 0.9% 0.0% HY17 Profit £m Revenue1 from Operations Margin Building 492.2 1.5 0.3% Infrastructure 249.8 1.

  54. Slide 54: Construction order book

    APPENDICES 54 3.2 Construction - order book £2.5bn £1.0bn Building £m Infrastructure £m Education 1,053 Water 314 Health 240 Roads 306 Commercial 341 Rail & Aviation 225 Other Public Sector 222 Other Civil Engineering 133 Defence 158 Facilities Management 467 Half year results to 31 December 2017

  55. Slide 55: Construction contract awards

    APPENDICES 55 3.3 Construction - contract awards Building  Won contracts and positions on frameworks worth over £400m including being appointed to: • All six lots of the business bid on the new Education and Skills Funding Agency’s school building framework, worth up to £3.1bn • £750m North Eastern

  56. Slide 56: Partnerships & Regeneration units delivered

    APPENDICES 56 4.1 Partnerships & Regeneration – units delivered 1800 1,674 1600 1400 1,215 1200 1,046 987 1000 1,343 800 1,050 800 600 730 400 200 331 246 257 165 0 HY15 HY16 HY17 HY18 Private mixed tenure units Contracting - equivalent units Half year results to 31 December 2017

  57. Slide 57: Partnerships & Regeneration business model

    APPENDICES 57 4.2 Partnerships & Regeneration – business model  Contractor/developer hybrid perfectly aligned to market  Attractive financial characteristics with strong blended margin and returns • Good margin and strong cash generation in contracting • Further investment in mixed-tenure developm

  58. Slide 58: Partnerships & Regeneration contract awards

    APPENDICES 58 4.3 Partnerships & Regeneration - contract awards  New joint venture with Registered Provider Trafford Housing Trust to deliver a £100m 600-home regeneration scheme in Partington, Greater Manchester  Extension of three sites to its existing joint venture with Gateshead council  Deve

  59. Slide 59: Disclaimer

    DISCLAIMER 59 IMPORTANT: Please read the following before continuing. The following applies to this document or the Financial Advisor and no statement in this presentation should be interpreted to mean in connection with the half year results of Galliford Try plc (the “Company”) and its subsidiaries

  60. Slide 60: Slide 60

Galliford Try Holdings — H1 2018 Earnings Presentation on 6ix