Slide 1: Building an Even Stronger Business: Half Year Results Presentation
BUILDING AN EVEN STRONGER BUSINESS Half Year Results Presentation 17 August 2022
Slide 2: Robust performance
Robust performance Industry-leading ROCE and margins • Good first half performance • 6,652 completions (2021: 7,406) • Robust demand • Average selling price up 4% • Average private sales rate up c.1% • Housing gross margin improved by 10 bps year on year (31.0% v 30.9%) • Profit before tax of £439.7
Slide 3: Building an even stronger business
Building an even stronger business Strong platform for success • On track for c.10% increase in active outlets across the year; 60 opened in H1; c.70 forecast to open in H2 • 8,829 plots brought into the business across 37 locations with industry-leading embedded margins • Enhancing vertical integra
Slide 4: Progress on five priorities
Building an even stronger business Progress on five priorities • Build quality: our ambition has grown from “build right, first time, every time” to becoming trusted to deliver 5 star homes consistently NHBC RIs improved 25% in last 18 months • Reinforcing trust: customers at the heart of our busi
Slide 5: Exacting standards
Exacting standards Driving improvement • “Build right, first time, every time” ethos with new standards more stringent than industry norms • RIs improved 25% over last 18 months • HBF build quality score up 4% over last two survey years • Extensive briefing, guidance and training • Good Practice Gui
Slide 6: Reinforcing trust
Reinforcing trust Customers at the centre of our business HBF 9 month score up 25%* HBF 8 week Customer Recommendation Score *over last two survey years H1 22 2021 2020 up 30% 2019 2018 2017 72.0% 74.0% 76.0% 78.0% 80.0% 82.0% 84.0% 86.0% 88.0% 90.0% 92.0% Benefits • Drive brand enhancement and mark
Slide 7: Sharpening the customer proposition
Sharpening the customer proposition
Slide 8: Land
Land Building on a great asset • 8,829 plots brought into the business across 37 locations throughout the UK • Since 1 January 2021: c.30,000 plots added across c.140 sites, 140% replacement rate • At 30 June 2022: 89,052 owned and under control plots (Dec 21: 88,043) • Discipline maintained: land c
Slide 9: Outlet network
Outlet network Rebuilding in a disciplined manner • On track to increase outlets by c.10% by the end of the year • Industry-wide planning issues continue • Covid-related backlog • Resource constrained local Planning Authorities • ‘Nutrient neutrality’ impacting c.1,500 Persimmon plots due to be deli
Slide 10: Creating attractive communities
Creating attractive communities
Slide 11: Placemaking in action
Placemaking in action Enhanced approach • Local and Group teams working together • New R21 range: design agenda • Plotting efficiency: potential 10% uplift Original Enhanced
Slide 12: Sustainable communities
Sustainable communities Embedded in our business • Set carbon reduction targets accredited by blue ribbon Science Based Targets initiative • Work ongoing to identify most cost-effective method of delivering Part L of the Building Regulations and Future Homes Standard • Developing a second zero carbo
Slide 13: Deeper vertical integration
Deeper vertical integration Timber frame Sustainability benefits: • Timber less carbon intensive Efficiency benefits: • All sourced from sustainable forests • c.20% faster than traditional build • Once frame and roof up work in and out at same time safely No block work reduces pressure for scarce br
Slide 14: Next generation factory
Next generation factory Capacity for 7,000 additional homes per year • Robotics: efficiency and consistency of quality • Ability to build to country-specific buildings regulations • Mid-2024 target for first deliveries
Slide 15: Deeper vertical integration
Deeper vertical integration
Slide 16: Deeper vertical integration: bricks
Deeper vertical integration Growth • Delivered 25m bricks to 199 sites in H1 22 • Expected to deliver 20% more bricks for FY 22 v FY 21 • 24/7 operation from June 2022
Slide 17: Deeper vertical integration: tiles
Deeper vertical integration Growth • Delivered c.6m tiles to 215 sites in H1 22 • Expected to deliver 40% more tiles for FY 22 v FY 21 • Ridge tile line introduced in May 2022 - Group now fully self-sufficient
Slide 18: Operational excellence
Operational excellence Continuous improvement - critical enablers EU per up c.10% site output year on year Experienced teams • New management structure working well • Investing in our people • Site management development pathways; sales advisor excellence programme • Invested in apprentice academy i
Slide 19: Jason Windsor, Group Chief Financial Officer
Jason Windsor Group Chief Financial Officer
Slide 20: Key highlights
Key highlights Strong margins and returns despite lower volumes
Slide 21: H1 operating profit
H1 operating profit • Strong profit margins maintained • Benefits of strong customer demand in average house sales price • Excellent control over the cost base in the face of economic headwinds
Slide 22: New housing revenue
New housing revenue Reflecting strength of current demand in UK housing market • Customer demand strong throughout the period • 4% increase in average selling price • Sales price growth across all brands
Slide 23: Maintaining industry-leading margins
Maintaining industry-leading margins 31.0% gross margin - 10 bps year on year improvement • Industry-leading gross margin supported by embedded quality of land holdings • Build cost inflation mitigated by supportive pricing environment, and efficiency • Vertical integration providing security over s
Slide 24: High quality land investment
High quality land investment Land replacement rate of 133% in H1 • Disciplined approach to land replacement - hurdle rate maintained • £416m of land spend in H1 • Excellent coverage across the whole of the UK • Over 72,000 plots owned - c.5 years supply secured • Exciting new land opportunities iden
Slide 25: High quality returns underpinned by land portfolio
High quality returns underpinned by land portfolio Industry leading embedded returns of c.33% 60.00% 50.00% 40%gm* 33%gm* 40.00% Gross margin % 26%gm* 30.00% 24% of plots 20.00% 52% of plots 24% of plots 10.00% 0.00% Owned plots - 72,036 * Estimated weighted average gross margin - based on assumed r
Slide 26: Effective deployment of capital
Effective deployment of capital Building a strong platform for the future • Significant working capital investment to support growth • £66m cash absorption in H1 before returns to shareholders
Slide 27: Financial strength and strong returns
Financial strength and strong returns Invested land and WIP increased by £477m • £477m growth in land and WIP during the first half • Net asset value per share 1132p • Excellent ROCE maintained after substantial investment for the future of the business
Slide 28: Dean Finch, Group Chief Executive
Dean Finch Group Chief Executive
Slide 29: Outlook
Outlook Strong, resilient platform for the future • Strong demand remains • Average private sales rate c.1% ahead year on year • Robust forward sales of over £2.3bn • Average selling price up 10% year on year • Customer enquiry rates remain healthy with low cancellation rates
Slide 30: Outlook
Outlook Strong, resilient platform for the future • Growing outlet position: forecasting 10% growth in active outlets across the year • Enhancing our great assets, including: • Industry-leading land holdings • Vertical integration • Embedded resilience in owned land holdings • Gross margin c.33% • L
Slide 31: Building an Even Stronger Business: Half Year Results Presentation
BUILDING AN EVEN STRONGER BUSINESS Half Year Results Presentation 17 August 2022
Slide 32: Appendix 1: H1 2022 performance
Appendix 1: H1 2022 performance Underlying trading (adjusted for goodwill impairment) H1 2022 H1 2021 New housing Total % of revenue Total % of revenue Revenue £1,633.7m £1,749.3m Cost of sales: − land cost (£194.5m) (11.9%) (£246.2m) (14.1%) − build and other direct costs (£933.0m) (57.1%) (£962.6m
Slide 33: Appendix 1: H1 2022 performance
Appendix 1: H1 2022 performance
Slide 34: Appendix 2: Half yearly profit & loss
Appendix 2: Half yearly profit & loss
Slide 35: Appendix 3: Financial record - Income statement
Appendix 3: Financial record - Income statement
Slide 36: Appendix 4: Financial record - Balance sheet
Appendix 4: Financial record - Balance sheet
Slide 37: Appendix 5: Trading performance - Brand
Appendix 5: Trading performance - Brand
Slide 38: Appendix 5: Trading performance - Brand
Appendix 5: Trading performance - Brand
Slide 39: Appendix 6: Trading performance - Divisional
Appendix 6: Trading performance - Divisional
Slide 40: Appendix 6: Trading performance - Divisional
Appendix 6: Trading performance - Divisional
Slide 41: Appendix 6: Trading performance - Divisional
Appendix 6: Trading performance - Divisional
Slide 42: Appendix 7: Analysis of new home sales
Appendix 7: Analysis of new home sales By Price Band (Private) By House Type (All) 25% 36% Over £300,000 Detached 33% 35% 22% Semi- 30% £250,000 to £299,999 25% detached 27% 27% 14% £200,000 to £249,999 Townhouse 23% ' 27% 19% 18% £150,000 to £199,999 Apartment 14% 10% 7% 2% Less than £150,000 Bunga
Slide 43: Appendix 7: Analysis of new home sales
Appendix 7: Analysis of new home sales 6mths to June 2022 NHBC 36% 30% 14% 18% 2% 6mths to June 2022 35% 27% 27% 10% 1% 6mths to December 2021 35% 29% 27% 9% 0% 6mths to June 2021 36% 28% 27% 8% 1% 6mths to December 2020 40% 28% 26% 6% 0% 6mths to June 2020 37% 28% 26% 9% 0% 6mths to December 2019 3
Slide 44: Appendix 7: Analysis of private new home sales
Appendix 7: Analysis of private new home sales 6mths to June 2022 5% 14% 23% 25% 33% 6mths to December 2021 7% 17% 27% 23% 26% 6mths to June 2021 7% 19% 27% 22% 25% 6mths to December 2020 7% 21% 29% 21% 22% 6mths to June 2020 10% 22% 27% 19% 22% 6mths to December 2019 11% 24% 27% 18% 20% 6mths to Ju
Slide 45: Appendix 8: Land holdings at 30 June 2022
Appendix 8: Land holdings at 30 June 2022
Slide 46: Appendix 9: Balance sheet
Appendix 9: Balance sheet Work in progress Land Land creditors Part exchange stock Shared equity debt, Cash Shareholders’ funds Capital employed Capital employed (inc. land crs) Net asset value per share Capital returns (paid) value per share Jun Jun Change Dec 2022 2021 2021 | e2261m £1,046.0m + £1
Slide 47: Appendix 10: Cash flows
Appendix 10: Cash flows H122 H121 Change £m £m Operating cash generated (before working capital movements) [asa | 4918 8% Movement in working capital | sd (Increase) / decrease in gross land e988) 259 Increase in land creditors 35.5 Net land movement 614 (increase) / decrease in WIP part exchange an
Slide 48: Appendix 11: Cash flow generated from operations
Appendix 11: Cash flow generated from operations 1,000 900 800 288.3 700 600 93.5 500 400 576.0 300 491.8 494.0 451.1 £m 200 298.6 100 - (106.5) (100) (169.6) (200) (387.7) (300) (400) (500) H1 2020 H2 2020 H1 2021 H2 2021 H1 2022 Cash generated from operating activities (pre-tax) Movement in workin
Slide 49: Appendix 12: Strength through the cycle
Appendix 12: Strength through the cycle 1,000 HALF YEARLY AVERAGE CASH GENERATION: £524M * 900 800 700 600 500 £m 400 300 200 100 - H1 12 H2 12 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19 H2 19 H1 20 H2 20 H1 21 H2 21 H1 22 Cash generation * Reported profit after ta
Slide 50: Appendix 12: Strength through the cycle
Appendix 12: Strength through the cycle 1,500 ANNUAL AVERAGE CASH GENERATION: £911M * 1,350 1,200 1,050 900 £m 750 600 450 300 150 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Cash generation* Reported profit after tax pre exceptional items * Net cash flow generation
Slide 51: Appendix 13: Mortgage approvals for house purchase
Appendix 13: Mortgage approvals for house purchase 150 Average monthly approvals since beginning of 1993: 79,630 Dec 2020: 101,200 Approvals - Volume ('000) 100 Dec 2013: Dec 2015: 72,800 71,000 Dec 2017: Dec 2019: 62,000 65,900 Dec 2009: Dec 2011: 59,000 52,300 Dec 2021: 71,000 Dec 2016: Dec 2018:
Slide 52: Appendix 14: New housing starts
Appendix 14: New housing starts Annual Housing Starts (2009 - H1 2022) 200 175 New Housing Starts ('000) 150 125 100 75 50 25 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: NHBC Housing Market Report (July 2022)
Slide 53: Appendix 14: New housing starts
New Housing Starts ('000) 0 2 4 6 8 10 12 14 16 18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Source: NHBC Housing Market Report (July 2022) Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Appendix 14: New housing starts Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Ja
Slide 54: Disclaimer
Disclaimer Important Notice Certain statements in this results presentation are forward-looking statements. Forward-looking statements involve evaluating a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those stat