Crest Nicholson Holdings Plc · LSE:CRST
Crest Nicholson — Non-Deal Roadshow (May 2014)
26 slides from Crest Nicholson's roadshow presentation, May 2014
Slide 1: Crest Nicholson Holdings plc
Crest Nicholson Holdings plc May 2014
Slide 2: Contents
Contents 1) What’s going on in the Housing Market? Templates 2) Employment & Mortgage access Reserved 370 OM plots, 46 ahead 3) Interest Rates – assessing potential impact Legally Completed 222 units, 25 ahead 4) Land, Planning and supply chain Sales of £56.9m, £1.5m behind 5) Recap on the propositi
Slide 3: Housing Market in good health
Housing Market in good health ‘We've cut the deficit we inherited to keep ‘Underlying demand is likely to remain interest rates at a record low and prioritised robust, as mortgage rates remain close to limited financial resources for investment in all-time lows, and as consumer confidence housing’ i
Slide 4: …but with recovery comes concerns
…but with recovery comes concerns ‘The housing market poses the biggest ‘Britain should be nervous about what is threat to the country's financial stability’ going on in the housing market’ Housing Minister, Kris Hopkins Spencer Dale, Bank of England's outgoing Chief Economist 1 May 2014 1 May 2014
Slide 5: Two key factors in the house buying decision
Two key factors in the house buying decision: • Have I got a job? • Can I get a mortgage? 4
Slide 6: Employment – incidence and changes
Employment – incidence and changes Total Employment by Region (,000) Region 2010 Q4-13 Change East 2,796 2,961 +5.9% East Midlands 2,096 2,166 +3.4% +3.8% Templates London 3,738 4,001 +7.1% North East 1,152 1,174 +1.9% North West 3,156 3,146 -0.3% +1.9% +3.5% Northern Ireland 775 801 +3.5% -0.3% +5.
Slide 7: Resilience in earnings
Resilience in earnings +1.5% 9% +1.0% 8% +0.5% 7% 0% GDP & -0.5% 6% Unemployment -1.0% 5% -1.5% 4% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Quarterly GDP Growth Estimate Quarterly Unemployment Rate Estimate 10 40 0 20 -10
Slide 8: Mortgage access
Mortgage access 140 15% 120 10% 100 UK Mortgage 5% 80 0% Loans 60 -5% 40 Approved 20 -10% 0 -15% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Templates Monthly Mortgage Approval Growth (RHS) Monthly Mortgage Approvals (000) (LHS) Reserved 370 OM plots, 46 ahead • Mortgage access has steadi
Slide 9: Help to Buy – redressing the imbalance
Help to Buy – redressing the imbalance • Help to Buy (HTB) is recalibrating the market:- Abnormal Normal • Help where help is needed: 87.5% of all HTB transactions have been First-Time Buyers; activity in this group traditional driver of healthy housing market • Stimulating wider organic housing mar
Slide 10: Mortgage affordability
Mortgage affordability Mortgage costs as a proportion of income UK house prices to income ratio 70% Significant reduction from 48% in 2007 to 28% 6.0x Multiple dropped from 2007 peak of 5.9x currently despite flat real income growth towards long-run average of 4.1x 5.5x 60% Current 5.0x multiple: 4.
Slide 11: Mortgage affordability
Mortgage affordability Average mortgage / interest rates 10.0% 2 YR Fix 75% SVR UK Base Rate 8.0% 6.0% 4.0% 2.0% 0.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Bank of England UK mortgage volumes (house purchases) Upside in mortgage volume
Slide 12: Mortgage Market Review
Mortgage Market Review Enshrines best practice progressively adopted post credit-crunch Affordability checks, greater applicant scrutiny, a longer term view of buyer finances = Responsible Lending 11
Slide 13: Land Market
Land Market Land available at or above our hurdle rates: • London market continues to be highly competitive • Strategic land opportunities good for experienced teams with proven track record • Regional short term land markets areTemplates more variable Reserved 370 OM plots, 46 ahead However: – Lega
Slide 14: Planning context
Planning context Improving supply of consented land • NPPF starting to take effect • Planning consents in England up 24% from 140,555 plots in 2012 to 174,471 plots in 2013 Templates … but tighter in Southern England Reserved 370 OM plots, 46 ahead • Increases not evenly spread • Midlands increases
Slide 15: Supply Chain
Supply Chain Table 9 : Bricks - Production, Deliveries and Stocks • Build costs c.50% of Revenue Great Britain Production Deliveries Stocks* (from) • Build cost inflation – weighted- (a) Brick Type average increases of c.5% through All Types 2013 2009 1,257 1,469 887 2010 1,430 1,606 702 31% • Need
Slide 16: Elections can create uncertainty…
Elections can create uncertainty… • Potential for policy changes can create uncertainty and a temporary drop in activity Reserved 370 OM plots, 46 ahead Templates • Sales rates in 8 weeks prior to General Election in 2005 were Legally 25% lower Completed 222 than units, prior year – but recovered to
Slide 17: … but Housing remains on the agenda
… but Housing remains on the agenda Jan 2014 – “as part of our long-term economic plan we introduced the Help to Buy scheme, so hardworking people with sufficient earnings can get on, fulfil their aspirations and enjoy the security of owning their own home.” Templates Reserved 370 OM plots, 46 ahead
Slide 18: Implications for Crest Nicholson
Implications for Crest Nicholson Positive environment in which to continue growing shareholder value New division in 2014 next phase of the growth story 17
Slide 19: Maintaining focus on our Differentiation
Maintaining focus on our Differentiation 2,500 South East Consented site size by region (number of plots per site) South West 2,000 Strategic London Midlands 1,500 Conversions 1,000 Templates Long land 500 Design & - bank Sustainability Southern focus Strong Partnership NAV working growth Natural sc
Slide 20: Strategic positioning
Strategic positioning • Scale and nature of future housing provision kept under review • Garden Village concepts being developed on larger sites Reserved 370 OM plots, 46 ahead • Continuing to engage on Private Rental Sector Legally Completed 222 units, 25 ahead Sales of £56.9m, £1.5m behind 19
Slide 21: Previously reported projections
Previously reported projections • Revenue growth of 50% in three years from October 2013; ASP (primarily mix) and Volume Templates • 2,500 units to deliver this year Reserved 370 OM plots, 46 ahead • Double-digit NAV and EPS growth across forecast Legally Completed 222 units, 25 ahead horizon Sales
Slide 22: Experienced team focused on returns
Experienced team focused on returns • Re-growing business to a ‘natural scale’ that fits with Templates hands-on management style Reserved 370 OM plots, 46 ahead • Leveraging overhead to sustain strong Legally EBIT margins Completed 222 units,and 25 ahead sweating assets to drive ROCE Sales of £56.9
Slide 23: Balanced growth: new Division
Balanced growth: new Division • Additional Division will enable Crest Nicholson to mine known, strong areas more intensively Templates Reserved 370 OM • Supports plots,breadth Outlet 46 aheadand growth beyond 3,000 units Legally Completed 222 units, 25 ahead • Land to pump prime largely in place; re
Slide 24: Conclusions
Conclusions • Fundamentals of Housing Market are sound; strength based on economic recovery and mortgage access, aided by ‘Help to Buy’ Templates Reserved 370 rate • Interest OM plots, 46 aheadshould not derail momentum; movements affordability remains good even at 200bps higher Legally Completed 22
Slide 25: Q&A
Crest NICHOLSON Q&A
Slide 26: 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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