Taylor Wimpey Plc · LSE:TW.
Taylor Wimpey — Investor Day (May 2016)
64 slides from Taylor Wimpey's investor day presentation, May 17, 2016
Slide 1: Analyst and Investor Day
Analyst and Investor Day 17 May 2016
Slide 2: Disclaimer
Disclaimer These presentations are not intended to, and do not constitute or form part of, any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities in Taylor Wimpey plc or any other invitation or inducement to e
Slide 3: Introduction and Summary
Introduction and Summary Pete Redfern Chief Executive
Slide 4: Organisation chart
Organisation chart Pete Redfern Chief Executive Ryan Mangold James Jordan Fergus McConnell Chris Carney Nigel Holland Anne Billson-Ross Lee Bishop Ingrid Skinner Jennie Daly Group Finance Director Group Legal Director Divisional Chairman Divisional Chairman Divisional Chairman Group HR Director Majo
Slide 5: Agenda
Agenda Managing Dividend Strategy through Targets Policy the cycle 5
Slide 6: Strategy
Managing Dividend Strategy through Targets Policy the cycle 6
Slide 7: Testing existing strategy five years in
Testing existing strategy five years in External environment – comparison to expectations Underlying Balance of land investment strategy principles have and risk averse growth not changed Continuous business improvement to add further value 7
Slide 8: 2011 – underlying principles
2011 – underlying principles Maximise the value from each home completion Will not return to ‘feed the machine’ mentality Active management of land portfolio is the key driver of value creation Efficient ‘engine-room’ to protect and enhance value through build stage Far more active approac
Slide 9: 2016 – what's different – housing market?
2016 – what’s different – housing market? Drivers very similar at macro level: Strong underlying demand Mortgage availability and cost key short term determinant of volume and value New build production likely to trend up to c.200k Financing market changed by: Help to Buy Tighter mortg
Slide 10: Shape of the recovery
Shape of the recovery £250,000 £200,000 £150,000 £100,000 £50,000 £0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Nominal prices Real prices Source: Nationwide – Nominal house prices, ONS – RPI 10
Slide 11: 2016 – what's different – housebuilders?
2016 – what’s different – housebuilders? Land and planning remain the single key determinant of success: Defines target customers, product, locations, financial structure, market risk However, importance is slightly diminished: Competition for land reduced Potential for greater control of
Slide 12: Strategy conclusions – land / cash / volume
Strategy conclusions – land / cash / volume Housebuilding remains a cyclical industry – targeting maximum growth every year will lead to bad decisions Acquiring the right land in the right way with the right planning remains critical success factor – landbank scale is about right – stand by c.5.
Slide 13: Strategy conclusions – operational improvement
Strategy conclusions – operational improvement Health Business Customer People and Product and and safety operating service resources production methods 13
Slide 14: Managing through the cycle
Managing Dividend Strategy through Targets Policy the cycle 14
Slide 15: Right time to review housing cycle
Right time to review housing cycle Through the recovery and into a growth phase in prices and volumes Environment remains supportive Strong demand Affordable lending Short term market risk low, but accumulates each year in this environment Monitoring accumulating price growth, affordabil
Slide 16: Shape of this cycle
Shape of this cycle £210,000 £200,000 £190,000 £180,000 £170,000 £160,000 £150,000 £140,000 £130,000 £120,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 Nominal prices Real prices Source: Nationwide – Nominal house prices, ONS – RPI 16
Slide 17: Taylor Wimpey financial and performance comparison
Taylor Wimpey financial and performance comparison 2007 2011 2015 Short term land – years 4.2 6.4 5.7 Strategic pipeline – years 5.0 8.3 8.1 Plot cost as a % of ASP 22% 24% 16% UK operating profit margin % 15.2% 9.7% 20.3% Cash conversion % 10% 24% 67% Contribution per completion £k 38.4 28.6 59.4 N
Slide 18: Our approach to managing cyclical risk
Our approach to managing cyclical risk Operational approach Quality over quantity Managing every site to the optimum – outlet opening, volume, margin, return Strong disciplines for opening new regions or undertaking acquisitions High strategic land proportion Balance sheet structure Lo
Slide 19: Dividend Policy
Managing Dividend Strategy through Targets Policy the cycle 19
Slide 20: Dividend Policy
Dividend Policy New Dividend Policy announced today Ordinary dividend to be paid through the cycle Special dividend at appropriate times in the cycle From 2017, subject to shareholder approval, we will pay an ordinary dividend of approximately 5% of Group net assets - at least £150m p.a. Thi
Slide 21: Dividend Policy
Dividend Policy Ordinary dividend Special dividend Increasing our ordinary As previously announced dividend to a minimum of we have already committed £150m p.a. from 2017 to pay £300m in 2016 The ordinary dividend will be paid in 2017 special dividend will May and October (half and half) be £300m*
Slide 22: Targets
Managing Dividend Strategy through Targets Policy the cycle 22
Slide 23: 2016 - 2018 targets
2016 - 2018 targets Stretching new medium term targets, each of which apply for the period from 2016 to 2018, are to achieve: An average annual return on net operating assets of 30% An average operating profit margin of c.22% A total of £1.3 billion of dividends to be paid in cash to shareho
Slide 24: Conclusion
Conclusion Managing Dividend Strategy through Targets Policy the cycle 24
Slide 25: Confidence in sustainable delivery
Confidence in sustainable delivery Ryan Mangold Group Finance Director
Slide 26: Business focused on sustainable delivery
Business focused on sustainable delivery Disciplined approach to land acquisition: On the right financial terms; and In desirable locations to withstand the cycle A secure future with over five years of consented land Strong strategic landbank with conversions equivalent to 77% of completi
Slide 27: Disciplined approach to land acquisition
Disciplined approach to land acquisition Capital allocation of land approvals Micro location – position within in the period macro location 31% Total: 458 sites in 2015 short term owned 30% landbank A B C D Site based ROCE 29% Q1 – A 7% 14% 2% 0% Macro 28% location – city, 27% broken Q2 – B 17% 34%
Slide 28: Securing the future through consented land
Securing the future through consented* land 100% 90% Gap 80% 70% Controlled with planning - short term 60% Owned with planning - short term 50% Controlled no planning - strategic 40% Owned no planning - strategic 30% 20% Controlled with planning - strategic 10% Owned with planning - strategic 0% 201
Slide 29: Growth in profitability and capital efficiency
Growth in profitability and capital efficiency 2011 2012 2013 2014 2015 RONOA 9.8% 13.3% 16.8% 22.5% 27.1% Operating profit margin 8.8% 11.2% 13.6% 17.9% 20.3% Net operating assets 1,669 1,728 2,000 2,265 2,443 EBITLA* 544 676 813 1,043 1,216 Cashflow before interest, tax and land spend 471 593 746
Slide 30: Managing cash through the cycle
Managing cash through the cycle £'000 / unit UK EBITLA per unit through the cycle EBITLA per plot has ranged 250 45% between c. £50k and £95k since 200 40% 2007 150 35% Used to build the landbank to the quality that exists 100 30% today 50 25% Our current landbank and 0 20% strategy positions
Slide 31: Managing UK working capital
Managing UK working capital £m WIP cash spend v P&L charge through the cycle Approx. units Year end WIP balance expressed as equivalent units 2,100 14,000 100% 1,900 90% 12,000 80% 1,700 10,000 70% 1,500 60% 8,000 1,300 50% 6,000 40% 1,100 4,000 30% 900 20% 700 2,000 10% 500 0 0% 2007 2008 2009 2010
Slide 32: Confidence through a cycle – dividend
Confidence through a cycle – dividend High-quality unlevered balance sheet Land cost in short term owned landbank was 16.3% of ASP at end of 2015 Gross margins in landbank highest ever WIP broadly optimal scale Limited further investment on a like for like basis Land creditors used selec
Slide 33: Strong operational performance and dividend stream
Strong operational performance and dividend stream Landbank quality – land cost Proven record of strategic is 16.3% of ASP in short conversions equivalent to term owned landbank 77% of completions in last 3 years* Sustainable cash generation Dividends Largest strategic Debt servicing landbank
Slide 34: Wimpey
10 Wimpey
Slide 35: Definitions
Definitions Operating profit is defined as profit on ordinary activities before net finance costs, exceptional items and tax, after the share of results of joint ventures Return on capital employed (ROCE) is defined as 12 month rolling operating profit divided by the average of the opening and c
Slide 36: London and South East divisional overview and customer service
London and South East divisional overview and customer service Chris Carney Divisional Chairman, London and South East
Slide 37: London and South East Division
London and South East Division 2
Slide 38: Current trading in the division
Current trading in the division Positive trading environment with no noticeable impact from Brexit Central London market stable Order book value increased +17% Active in land market London & South East, including Central London 2016 week 16 (excluding JVs) 2015 week 16 (excluding JVs) Averag
Slide 39: Financial summary
Financial summary London and South East, London and South East, TWUK including Central London including Central London as % of TWUK 2015 2014 2015 2014 2015 2014 Completions* 2,889 2,895 13,219 12,294 22% 24% Revenue £m 912 826 3,082 2,652 30% 31% PBIT £m 203 155 627 477 32% 32% PBIT margin 22.3% 18
Slide 40: Capital invested and returns
Capital invested and returns Net Operating RONOA Assets 2015: £813m 2015: 31.8% North 2014: £772m 2014: 29.0% Central and 2015: £705m 2015: 34.1% South West 2014: £727m 2014: 25.3% London and 2015: £994m 2015: 22.4% South East, 2014: £819m 2014: 20.6% including Central London 5
Slide 41: Inner London (inside zones 1 & 2)
Inner London (inside zones 1 & 2) 2015* Completions**: 445 (2014: 297) Total revenue: £227m (2014: £150m) Operating profit: £66m (2014: £36m) Blended ASP**: £496k (2014: £503k) * TWCL contributed 214 completions, £153m in revenue and £47m in operating profit ** Excluding JVs 6
Slide 42: Inner London (inside zones 1 & 2)
Inner London (inside zones 1 & 2) The Music Box, Southwark Battersea Exchange, Battersea 7
Slide 43: Outer London (inside the M25, excluding zones 1 & 2)
Outer London (inside the M25, excluding zones 1 & 2) M25 2015* Completions**: 534 (2014: 533) Total revenue: £154m (2014: £148m) - Operating profit: £35m (2014: £35m) Blended ASP**: £287k (2014: £277k) * TWCL contributed 66 completions, £25m in revenue and £11m in operating profit ** Exclu
Slide 44: Outer London (inside the M25, excluding zones 1 & 2)
Outer London (inside the M25, excluding zones 1 & 2) Balham Walk, Balham Emerald Gardens, Kew 9
Slide 45: Home Counties (outside M25)
Home Counties (outside M25) Essex Herts Bucks M25 2015* Completions*: 1,910 (2014: 2,065) - Total revenue: £531m (2014: £528m) Berks Operating profit: £102m (2014: £83m) Surrey Kent Blended ASP*: £277k (2014: £252k) Hamps W Sussex E Sussex * Excluding JVs 10
Slide 46: Home Counties (outside M25)
Home Counties (outside M25) Dovecote Place, Westcott The Bridge, Dartford 11
Slide 47: Customer service
Customer service Completed in-depth review of every aspect and stage of our Customer Journey in mid-2015 2016 focus is on implementing changes in three main areas: New Head of Customer Service in each region Named Customer Relationship Manager for each customer New Home Quality Inspection
Slide 48: Customer service – London and South East
Customer service – London and South East Regional challenges Understanding and implementation of new standards Embedding customer focused mindset in all departments Obtaining buy-in from our subcontractors to the new standards Delivery of training to staff members to ensure consistency in
Slide 49: Looking forward
Looking forward Focus on achieving significant improvements in customer service Realignment of resources to increase the flow of strategic land within London and South East Attraction and development of emerging production talent to combat skills shortage Drive more consistency in our approa
Slide 50: Wimpey
15 Wimpey
Slide 51: Central and South West divisional overview and land
Central and South West divisional overview and land Nigel Holland Divisional Chairman, Central and South West
Slide 52: Central and South West Division
Central and South West Division 2
Slide 53: Current trading in the division
Current trading in the division Consistent level of new enquiries from Q4 2015 into Q1 2016 Sales rate 19% higher than in 2015 Outlet numbers marginally down YoY – managed 24% growth in order book value YoY Central and South West 2016 week 16 (excluding JVs) 2015 week 16 (excluding JVs) Aver
Slide 54: Financial summary
Financial summary Central and South West as % Central and South West TWUK of TWUK 2015 2014 2015 2014 2015 2014 Completions* 4,810 4,383 13,219 12,294 36% 36% Revenue £m 1,075 890 3,082 2,652 35% 34% PBIT £m 243 180 627 477 39% 38% PBIT margin 22.6% 20.2% 20.3% 18.0% — — * Excluding JVs Please note:
Slide 55: Capital invested and returns
Capital invested and returns Net Operating RONOA Assets 2015: £813m 2015: 31.8% North 2014: £772m 2014: 29.0% Central and 2015: £705m 2015: 34.1% South West 2014: £727m 2014: 25.3% London and 2015: £994m 2015: 22.4% South East, 2014: £819m 2014: 20.6% including Central London 5
Slide 56: Strategic land pipeline
Strategic land pipeline As at 31 December 2015: Strategic land pipeline sites 354 6
Slide 57: Strategically sourced developments
Strategically sourced developments Outlets, as at 31 December 2015: Strategic Non strategic 143 154 7
Slide 58: Strategically sourced developments – Central and South West
Strategically sourced developments – Central and South West Outlets, as at 31 December 2015: Strategic Non strategic 46 49 8
Slide 59: Strength in strategic land
Strength in strategic land Strategic land conversions in 2015: 9
Slide 60: Making assets work harder – Central and South West
Making assets work harder – Central and South West Future scope of outlets, as at 31 December 2015: Under Over 200 200 plots plots 45 50 10
Slide 61: Great Western Park, Didcot
Great Western Park, Didcot Working a strategic asset Land acquired * December 2008 Site start ** May 2010 Total plots (TW) 2,837 Plots sold to others 520 Net TW plots 2,317 Legals to date 840 (36%) Balance to complete 1,471 Completions 2012 113 Completions 2015 233 Completions
Slide 62: Emersons Green, Bristol
Emersons Green, Bristol Working a strategic asset Land acquired * January 2013 Site start ** March 2014 Total plots (TW) 2,400 Plots sold to others 1,256 Net TW plots 1,144 Legals to date 156 (14%) Balance to complete 988 Completions 2014 57 Completions 2015 84 Completions 2016
Slide 63: Looking forward
Looking forward Look at where else we can use the approach of “develop not sell” to make our larger assets work harder Improve the quality of service and completed homes for our customers – especially their living environment Continue to find and convert great strategic land opportunities in p
Slide 64: Wimpey
14 Wimpey