Crest Nicholson Holdings Plc · LSE:CRST
Crest Nicholson — FY2018 Earnings Presentation
39 slides from Crest Nicholson's earnings presentation, Jan 29, 2019
Slide 1: Preliminary Results for 2018
Crest Nicholson Holdings plc Preliminary Results for 2018 29th January 2019
Slide 2: Agenda
Agenda • Performance highlights Stephen Stone • Financial performance Patrick Bergin • Building for the future Patrick Bergin • Land pipeline & strategic re-focus Chris Tinker • Outlook & Summary Patrick Bergin • Q&A Classified as General
Slide 3: Agenda
Agenda • Performance highlights • Financial performance • Building for the future • Land pipeline & strategic re-focus • Outlook & Summary • Q&A
Slide 4: 2018 Performance - Highlights Maintained
2018 Performance - Highlights Unit completions of 3,020 (2017: 2,935) +2% Sales inc. JV’s of £1,136.6m (2017: £1,065.6m) +7% Profit before tax of £176.4m (2017: £207.0m) -15% Dividend per share of 33.0p (2017: 33.0p) Maintained Operating profit margin of 16.7% (2017: 20.3%) ROCE of 23.0% (2017: 29.7
Slide 5: Responding to challenges
Responding to challenges Challenges we faced Our responses • Strategy to move up ASP curve • Land buying targeted at lower ASPs undermined by fiscal & political changes • Mitigating sales for intermediate tenure, primarily to Registered • Tougher London market: prices, Providers (RPs); generated str
Slide 6: Looking forward - Strategic focus
Looking forward - Strategic focus 1. Priority on • Commitment to pay ordinary dividend of 33p per cashflow and share in each of FY18 and FY19 * • Focus on shareholder returns dividends • Generating value from our well acquired land pipeline 2. Maximising • Adapting the portfolio to address housing p
Slide 7: Agenda
Agenda • Performance highlights • Financial performance • Building for the future • Land pipeline & strategic re-focus • Outlook & Summary • Q&A
Slide 8: Key Volume Metrics
Key Volume Metrics FY 2018 FY 2017 Inc/(Dec) % Outlets (full year equivalents) 55 51 +8% Sales per Outlet Week (OM inc-PRS) 0.82 0.81 +1% Sales per Outlet Week (OM ex-PRS) 0.74 0.77 (4%) Legal completions Open market (ex-PRS) 2,008 1,982 +1% PRS 375 266 +41% Affordable 637 687 (7)% Total 3,020 2,935
Slide 9: Key Price Metrics
Key Price Metrics ASPs FY 2018 FY 2017 Inc/(Dec) % Legal completions OM ex-PRS 432 417 +4% OM inc. PRS 393 388 +1% Affordable* 194 174 +11% Total housing 351 338 +4% OM Reservations in 2018 OM ex-PRS 424 416 +2% OM inc. PRS 404 403 - Forward sales OM ex-PRS 392 433 (9%) Affordable* 136 143 (5%) * Af
Slide 10: Income statement
Income statement Income statement (£m, Change FY 2018 FY 2017 % change unless stated) on 2017 Revenue 1,136.1 1,043.2 92.9 9% Cost of sales (881.4) (768.3) (113.1) Gross profit 254.7 274.9 (20.2) (7)% % gross profit margin 22.4% 26.4% (400bps) Administrative expenses (64.9) (63.3) (1.6) Operating pr
Slide 11: Pricing
Pricing House Price Inflation • House price experience (Open Market Reservations) toughest on higher-value, discretionary sales; SUB £600k WEIGHTED modestly negative overall £601K TO £1m £1m+ AVERAGE 1.1% 0.4% 0.2% • Increased use of part exchange; inventory value -0.6% -0.2% -0.2% of £34m up from £
Slide 12: Margins
Margins • Selected disposals of excess stock made to Registered Providers, maintaining receipts • Build cost inflation at c.3% of cost, 1/3rd in London where cost increases on a number of projects were higher • Initiatives to offset impact of cost inflation underway Classified as General 8
Slide 13: Balance sheet
Balance sheet Balance sheet (£m, unless stated) 31st October 31st October Change on 2018 2017 Oct’17 Non-current Assets 109.7 110.0 (0.3) • Inventory increase Inventory 1,186.2 1,086.5 99.7 in part due to Trade & other receivables/assets 97.2 106.2 (9.0) growth of new Cash and cash equivalents 184.3
Slide 14: Cash flow
Cash flow Cash flow (£m, unless stated) FY 2018 FY 2017 Change Operating profit before changes in working capital and provisions 194.2 217.7 (23.5) Decrease/(increase) in trade and other receivables 2.5 (26.8) 29.3 Increase in inventories (99.7) (150.7) 51.0 Increase in trade and other payables 20.6
Slide 15: Agenda
Agenda • Performance highlights • Financial performance • Building for the future • Land pipeline & strategic re-focus • Outlook & Summary • Q&A
Slide 16: Operational delivery going well
Operational delivery going well Growing Outlets Increased Output Templates Improving safety – reduced AIIR Customer recommendation Classified as General 11
Slide 17: Outlet growth driven from newer divisions
Outlet growth driven from newer divisions Templates • South, Eastern & South West steady at 10-12 outlets each • Existing investment in Chiltern & Midlands divisions driving outlet growth • Former London schemes moved into CNR, South & Eastern Classified as General 12
Slide 18: Continuing to deliver quality schemes
Continuing to deliver quality schemes Classified as General 13
Slide 19: Driving business improvements
Driving business improvements Operational efficiencies • Procurement gains to secure from greater rationalisation of specification and supply chain – new Director of Group Operations to drive benefit realisation Templates • New ‘Aurora’ range of more contemporary house types launched, complementing
Slide 20: Aurora range
Aurora range New ‘Aurora’ range to update Crest product offer & drive business benefits • Common floorplates, with a strong DNA – based on light, open layouts • Designed to be OSM-efficient, but capable of delivery in traditional masonry form • Opportunity to drive group-level procurement benefits a
Slide 21: Off-site manufacturing
Off-site manufacturing Business case for OSM covers a range of factors: ➢ Addressing skills shortages ➢ Driving productivity – speed and scope for non-sequential working Templates ➢ Quality and safety ➢ Precision – reduced waste/re-work • Scale trials underway on 4 projects and c.300 units to test a
Slide 22: Operational efficiencies – target benefits
Operational efficiencies – target benefits Procurement benefits Aurora housing range OSM Rationalisation of suppliers underway Expecting 50% adoption within three years 25% adoption within three years • Operational efficiencies to partially offset build cost inflation, in absence of sales price infl
Slide 23: Agenda
Agenda • Performance highlights • Financial performance • Building for the future • Land pipeline & strategic re-focus • Outlook & Summary • Q&A
Slide 24: Land Pipeline supports new Strategy
Land Pipeline supports new Strategy • Land bank creates flexible store of value for the future • GDV and margins underpinned by growing proportion of strategic land • ASP’s being repositioned and reduced • Increased granularity shows how the land portfolio is de-risked for the future • Short term po
Slide 25: Our evolving land bank portfolios
Our evolving land bank portfolios Plots 34,434 36,128 (1) +5% GDV £11.5bn £11.82bn + 2.8% Short-term land bank: ASP £340k £326k -4.2% • Increased by 18.6%, repositioned 36,128 34,434 to lower ASP’s through: ➢ Strategic land conversions: 2,461 plots at ASP £317k 16,837 Strategic 18,174 ➢ Midlands plo
Slide 26: Strategic land underpins high quality Short term land bank
Strategic land underpins high quality Short term land bank FY18 by Source FY17 by Source • Strategic land now 42% of short term land bank (8,036 plots) Strategic Land 37% • Strategic land characteristics: Strategic Land Private 42% Private 46% ➢ Strong embedded margins as 48% land acquired at a disc
Slide 27: Deeper Dive into our flexible Land Pipeline
Deeper Dive into our flexible Land Pipeline FY18 Units Long-term strategic land 36,128 (1) 36,128 • Unallocated but controlled • Sites held under long term 10,958 options exercised and priced at point of acquisition Strategic Land 16,837 Medium-term pipeline • Backbone sites consented or subject to
Slide 28: Oct 18 Land pipeline characteristics
Oct 18 Land pipeline characteristics Short-term land by type Medium-term pipeline by type Longer-term land by type Strategic Owned 12% 22% Strategic Partnership 69% Partnership 15% 31% Strategic Partnership 73% 12% Owned/ Controlled 66% Short-term pipeline Medium-term pipeline Long-term strategic la
Slide 29: Significant embedded value with low NIV
Significant embedded value with low NIV Balance Sheet Expected total Land Pipeline Plots (2) GDV £bn (2) ASP £k (2) Land at cost - land cost - £m £m Short-term(1) 12,271 4.35 333 695 913 Medium-term 12,899 4.37 339 43 867 pipeline Long-term 10,958 3.36 306 9 621 strategic FY18 Total 36,128 12.08 327
Slide 30: Broadening our channels to market
Broadening our channels to market Current sales profile Proposed sales profile Selected use Open market sales: 70% Open market sales: 60% of Joint Ventures and Affordable homes: 20%-25% intermediate Affordable homes: 20%-25% housing pre- sales to Intermediate – 10% PRS: 5% – 10% improve cash flows a
Slide 31: Our PRS model is now well established
Our PRS model is now well established • In 2018 we completed 375 Park Central, homes for the private rented Birmingham: ➢ 230 PRS units market on 3 developments delivered for BBS capital • Strategic partnership with M&G ➢ Delivered in 24 months about to contract its 5th development • Other investmen
Slide 32: A new context for partnerships and JV’s
A new context for partnerships and JV’s • In total £9bn Government funding for Crest Nicholson Potential RP Partners affordable housing programmes • 2018 HE strategic partnership with 7 New Strategic Registered Providers for extra 23,500 Strong Land bank Homes England Large site place Partnerships i
Slide 33: Leveraging our land bank with selected JV’s
Leveraging our land bank with selected JV’s Case Study Harry Stoke, Bristol; • £280m GDV JV to be contracted this year and with circa 900 consented plots sold into a Crest/Registered Provider JV • Land receipt realised upon formation of JV and shared infrastructure and development costs funding movi
Slide 34: Agenda
Agenda • Performance highlights • Financial performance • Building for the future • Land pipeline & strategic re-focus • Outlook & Summary • Q&A
Slide 35: Forward sales
Forward sales YTD YTD FY18 FY17 FY19 FY18 Units – all years 2,861 2,462 2,102 1,997 % change on prior period +16% +5% GDV (£m) – all years 639.4 575.7 413.4 391.4 % change on prior period +11% +6% GDV (£m) – current year 419.2 441.0 253.1 265.3 (5%) (5%) • JV’s will add a further £50m to forward lan
Slide 36: Outlook
Outlook • Sales rates to date for 2019 in line with second half of 2018; achieved prices in line with October estimates • Political and economic uncertainty likely to continue to impact near-term sales prospects • First half results will therefore be lower than prior year • Further EBIT margin press
Slide 37: Summary
Summary • Engaged with specific challenges arising in 2018; took action to sustain receipts & manage cash & WIP • Business operations delivering increased number of new homes; operational efficiency programmes in train • Land pipeline flexible and retains significant embedded margin • Developing our
Slide 38: Agenda
Agenda • Performance highlights • Financial performance • Building for the future • Land pipeline & strategic re-focus • Outlook & Summary • Q&A
Slide 39: 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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