Taylor Wimpey Plc · LSE:TW.
Taylor Wimpey — FY2017 Earnings Presentation
67 slides from Taylor Wimpey's earnings presentation, Feb 28, 2018
Slide 1: Full Year Results Presentation for the year ended 31 December 2017
Full Year Results Presentation for the year ended 31 December 2017 28 February 2018
Slide 2: Disclaimer
Disclaimer This presentation is not intended to, and does 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 en
Slide 3: Agenda
Agenda 2017 overview, market environment and operations Pete Redfern Sustainable financial performance Ryan Mangold Current trading, medium term outlook and strategy Pete Redfern 3
Slide 4: 2017 overview, market environment and operations
2017 overview, market environment and operations Pete Redfern Chief Executive
Slide 5: Group financial highlights
Group financial highlights Return on net operating assets* Total dividends paid 30.7 32.4 500 450.5 30 27.1 400 355.9 308.4 20 300 % £m 200 10 100 0 0 2015 2016 2017 2015 2016 2017 2016-2018 medium term target: 2016-2018 medium term target: Average of 30% Total £1.3bn over period Operating profit* m
Slide 6: UK operating highlights
UK operating highlights 90% 14.0% £69.3k (2016: 86%) (2016: 13.9%) (2016: £65.5k) Average customer Voluntary employee Contribution per satisfaction score turnover completion† over the last six months 0.77 152 17.1k (2016: 0.72) (2016: 211) (2016: 10.8k) Private net sales rate Health and Safety Addit
Slide 7: UK market performance
UK market performance H2 2017 H1 2017 H2 2016 H1 2016 Average outlets open 284 292 286 294 Private sales rate (net) 0.66 0.87 0.65 0.78 Private sales price £000 287 289 279 271 Cancellation rate (private) 15% 11% 14% 12% ▪ Record Q1 2017 gives strong H1 comparator ▪ 109 new outlets opened in 2017 (2
Slide 8: 2017 UK market performance remained strong
2017 UK market performance remained strong Customer interest - organic website visits Website calls 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Week number Week number 2014 2015 2016 2017 2014 2015 2016 2017 Brochure requests Appointments boo
Slide 9: Mortgage cost, availability and Help to Buy
Mortgage cost, availability and Help to Buy ▪ Overall cost of borrowing remains at a low level January January February 2-year fixed rates 2016 2017 2018 HTB equity loan 1.74% – 2.19% 1.64% - 1.89% 1.44% - 2.17% 85% LTV (new build) 1.99% 1.74% 1.64% ▪ Impact of 2017 interest rates movements not sign
Slide 10: UK land pipeline
UK land pipeline 31 Dec 2017 31 Dec 2016 Plots Owned Controlled Total Total Detailed planning 42,908 3,412 46,320 43,860 Outline planning 12,820 7,111 19,931 21,888 Resolution to grant 891 7,707 8,598 10,486 Short term 56,619 18,230 74,849 76,234 Short term with 42,094 - 42,094 38,778 implementable
Slide 11: Land market
Land market ▪ Short term land market ▪ Remains benign by long term standards ▪ Margin ‘nudge’ post Brexit has ‘stuck’ ▪ Environment has allowed us to maintain location quality more consistently than expected ▪ London market ▪ Land environment now more in line with rest of UK ▪ Have seen some better
Slide 12: Quality of land acquisitions
Quality of land acquisitions Land approvals in the period 36% 35% 34% Site based ROCE* 33% 32% 31% 30% 29% 28% 27% 26% 23.0% 24.0% 25.0% 26.0% 27.0% 28.0% Contribution margin* 2013 average 2014 average 2015 average 2016 average 2017 average At current costs and current selling prices in year of acqu
Slide 13: UK planning permissions
UK planning permissions Sites with implementable planning 20,000 permission 18,000 96.0% 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 2.9% 0.6% 0.5% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Started on site as at 31 December 2017 Permissions gained Completions* Starting on site Q1 2
Slide 14: Continuous business improvement
Continuous business improvement Health and Business Customer People and Product and safety operating service resources production methods 14
Slide 15: Three focus areas of our employee proposition
Three focus areas of our employee proposition Culture Attraction and Development Pay and Benefits Increasing collaboration Investment in new Training Benchmarked key teams to through open plan Academies (Production, ensure they remain market environments and Customer Services and competitive improve
Slide 16: Employee changes having a positive impact
Employee changes having a positive impact ▪ Consistent, low attrition rate (14% - 15%) even as competition for staff has increased ▪ 93% employee engagement level (72% response rate) ▪ Ranked 15th best place to work in the UK by Glassdoor - voted for by employees, the only commercial housebuilder to
Slide 17: Customer service
Customer service ▪ Statistics* - “Recommend” score in 2017 at 89% 95% 90% HBF 5* 85% 80% HBF 4* 75% Jan - Mar April - Jun Jul - Sep Oct - Dec 2016 2017 ▪ Embedding culture and processes takes time, but trend is encouraging ▪ Underlying statistics evidence improvement as we move through the year ▪ Sc
Slide 18: Confidence in build delivery
Confidence in build delivery Completion profile by week in final two months of year Completions as a % of final 2 months 44 45 46 47 48 49 50 51 & 52 November December 2014 2015 2016 2017 UK build status for projected full year completions at week 7 2015 2016 2017 2018 0% 10% 20% 30% 40% 50% 60% 70%
Slide 19: Sustainable financial performance
Sustainable financial performance Ryan Mangold Group Finance Director
Slide 20: Summary Group results
Summary Group results £m (before exceptional items) FY 2017 FY 2016 Change Revenue 3,965.2 3,676.2 7.9% Gross profit 1,033.0 940.4 9.8% Gross profit margin % 26.1 25.6 0.5ppt Operating profit* 841.2 764.3 10.1% Operating profit* margin % 21.2 20.8 0.4ppt Profit before tax and exceptional items 812.0
Slide 21: UK performance summary
UK performance summary FY 2017 FY 2016 Change Legal completions – excl JVs 14,387 13,808 4.2% Private 11,602 11,145 4.1% Affordable 2,785 2,663 4.6% Average selling price – excl JVs 264 255 3.5% Private £000 296 286 3.5% Affordable £000 131 124 5.6% Legal completions – JVs 154 73 111.0% Share of pro
Slide 22: Indicative movements in UK operating profit margin
Indicative movements in UK operating profit* margin Annual Impact on 2017 2016 to 2017 change income statement Market inflation on selling prices c.4.0%** 2.6% Market inflation on build cost c.3.5% (1.9)% Net economic benefit captured 0.7% Market impact of landbank evolution (0.6)% Net market impact
Slide 23: UK margin drivers
UK margin drivers £000 per unit FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 ASP 191.3 212.9 229.7 255.0 264.4 Net land cost* (41.2) (45.1) (42.4) (45.4) (45.4) Build cost (105.4) (112.9) (121.9) (137.9) (143.7) Other direct cost and selling expenses (5.9) (5.3) (6.0) (6.2) (6.0) Private and affordable c
Slide 24: Exceptional items
Exceptional items ▪ Exceptional item of £130m provision, before tax, is prudent and remains unchanged ▪ Agreement with freeholders for over 90% of leases ▪ Good progress made with balance of freeholders ▪ Most of the cash flow is expected to be over two years, but likely to be a relatively long tail
Slide 25: Summary Group balance sheet
Summary Group balance sheet Group £m 31 Dec 2017 31 Dec 2016 Change Long term assets and JVs 77.6 74.8 2.8 Land 2,684.5 2,652.5 32.0 WIP 1,391.2 1,331.5 59.7 Debtors 182.3 178.6 3.7 Land creditors (639.1) (599.8) (39.3) Other creditors (816.0) (830.8) 14.8 Pensions and post retirement benefits (64.8
Slide 26: UK landbank
UK landbank ▪ Land cost in short term owned landbank is 14.8% of ASP (2016: 15.4%), supported by strategic pipeline conversions ▪ Land cost as % of ASP on 2017 approvals – 19.8% ▪ Potential revenue in the landbank at 31 Dec 2017 was £47 billion (31 Dec 2016: £42 billion), comprising short term land
Slide 27: Pensions
Pensions Movement in present value of defined benefit obligations Total UK £m FY 2017 FY 2016 FY 2015 FY 2014 Brought forward 232.7 177.1 182.4 182.2 Employer contributions* (23.1) (23.1) (23.1) (36.3) Administration cost 3.0 3.3 3.2 3.1 Interest cost 5.9 6.1 6.0 7.5 Actuarial changes and asset (242
Slide 28: Cash management
Cash management UK metrics FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Completions (excl JVs) 11,547 12,294 13,219 13,808 14,387 Total sq ft per unit 1,002 998 1,029 1,021 1,013 ASP £ per sq ft 191 213 223 250 261 Build cost £ per sq ft 105 113 118 135 142 Land cost £ per sq ft 41 45 41 44 45 % private
Slide 29: Dividend payment profile
Dividend payment profile Change Paid (or to be paid) FY 2016 to per share (pence) FY 2018*** FY 2017 FY 2016 FY 2017 Ordinary dividend* c.4.9 4.6 1.7 171% Special dividend** 10.4 9.2 9.2 - Total c.15.3 13.8 10.9 27% Change Paid (or to be paid) FY 2016 to (£m) FY 2018*** FY 2017 FY 2016 FY 2017 Ordin
Slide 30: Refinancing
Refinancing ▪ Agreement signed in February 2018 to amend and extend the existing £550m facility on improved terms ▪ Term five years with option to extend a further two years subject to individual bank approval ▪ Reduced margin and non utilisation fees ▪ Weighted average life of committed facilities
Slide 31: Robust financial performance
Robust financial performance ▪ Focus on medium term targets 2016-2018 ▪ 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 shareholders over the period ▪ Strength and quality of balance
Slide 32: Current trading, medium term outlook and strategy
Current trading, medium term outlook and strategy Pete Redfern Chief Executive
Slide 33: UK market performance – to date
UK market performance – to date H1 2018 (w/e 18 Feb 2018) H2 2017 H1 2017 H2 2016 H1 2016 Average outlets open 275 284 292 286 294 Private sales rate (net) 0.81 0.66 0.87 0.65 0.78 Private sales price £000 293 287 289 279 271 Cancellation rate (private) 12% 15% 11% 14% 12% ▪ Strong sales start to th
Slide 34: UK market performance – affordable to date
UK market performance – affordable to date H1 2018 (w/e 18 Feb 2018) 31 Dec 2017 31 Dec 2016 Change Average outlets open 275 287 290 (1.0)% Affordable order book £m 465 400 418 (4.3)% Affordable order book units 3,521 3,159 3,529 (10.5)% Affordable order book ASP £k 132 127 118 7.6% Data based on re
Slide 35: Central London market performance
Central London market performance H1 2018 (w/e 18 Feb 2018) H2 2017 H1 2017 H2 2016 H1 2016 Average outlets open 9 8 8 8 9 Private sales rate (net) 0.29 0.24 0.41 0.42 0.29 Private sales price £000 1,049 962 1,147 863 1,011 Cancellation rate (private) 10% 26% 18% 14% 24% ▪ Improving advance interest
Slide 36: Capital Markets Day – long term environment
Capital Markets Day – long term environment ▪ Supply demand imbalance in UK housing remains, underpinning confidence in long term prospects ▪ Customers’ medium term ability to finance house purchase remains a risk, with both interest rates and the dependence on Help to Buy important factors ▪ Custom
Slide 37: Capital Markets Day – key areas under review
Capital Markets Day – key areas under review ▪ Key operational metrics: ▪ Landbank length, including impact of large site strategy ▪ Sales rates and outlet numbers ▪ Long term growth aspirations ▪ Broadening routes to market ▪ Options for customer affordability and finance ▪ Rental market ▪ Market p
Slide 38: Wimpey
38 Wimpey | ple
Slide 39: Future investor communications
Future investor communications ▪ 26 April 2018 AGM and trading update ▪ 15 May 2018 Strategy day ▪ 31 July 2018 Half year results ▪ 13 November 2018 Trading update 39
Slide 40: Appendices
Taylor Wimpey plc Full Year Results Presentation for the year ended 31 December 2017 Appendices
Slide 41: Summary income statement
Summary income statement* Group £m FY 2017 FY 2016 Change H1 2017 Revenue 3,965.2 3,676.2 7.9% 1,727.5 Cost of sales (2,932.2) (2,735.8) 7.2% (1,283.5) Gross profit 1,033.0 940.4 9.8% 444.0 Net operating expenses (199.4) (177.3) 12.5% (99.4) Profit on ordinary activities 833.6 763.1 9.2% 344.6 befor
Slide 42: Cash flow summary
Cash flow summary Group £m FY 2017 H2 2017 H1 2017 FY 2016 Profit from ordinary activities before finance costs* 703.6 489.0 214.6 762.6 (Increase) / decrease in inventories (61.7) 75.5 (137.2) (113.3) Exceptional items 130.0 - 130.0 0.5 Other operating items** (36.0) (34.8) (1.2) (27.6) Cash genera
Slide 43: Group segmental analysis
Group segmental analysis FY 2017 FY 2016 Operating Operating Operating profit* Operating profit* profit* margin RONOA* profit* margin RONOA* £m % % £m % % North 294.9 22.1 35.6 280.0 22.6 34.4 Central and South West 318.0 24.6 43.0 280.7 23.3 39.1 London and South East 271.4 22.0 25.9 250.4 22.0 24.
Slide 44: North Division – segmental analysis
North Division – segmental analysis Scotland, North West North North North East and West Division Division As at 31 Dec 2017 and Yorkshire Midlands FY 2017 FY 2016 Number of outlets 71 72 143 150 Private sales rate (net) 0.77 0.67 0.72 0.68 Completions 3,011 3,065 6,076 5,988 Average selling price o
Slide 45: Central and South West Division – segmental analysis
Central and South West Division – segmental analysis Central and Central and South West South West East and Wales and Division Division As at 31 Dec 2017 Central West FY 2017 FY 2016 Number of outlets 45 38 83 84 Private sales rate (net) 0.86 0.87 0.87 0.75 Completions 2,610 2,525 5,135 4,810 Averag
Slide 46: London and South East Division – segmental analysis
London and South East Division – segmental analysis London and London and South East South East South East excl. London Division Division As at 31 Dec 2017 London market† market† FY 2017 FY 2016 Number of outlets 32 20 52 51 Private sales rate (net) 0.80 0.70 0.77 0.75 Completions 2,230 946 3,176 3,
Slide 47: Tax
Tax £m Asset / (liability) Current tax Deferred tax Net tax As at 1 Jan 2017 (61.4) 57.4 (4.0) Income statement* (124.4) (2.3) (126.7) SOCI / SOCIE 1.4 (26.1) (24.7) Cash paid 126.7 - 126.7 Forex (0.2) 0.3 0.1 As at 31 Dec 2017 (57.9) 29.3 (28.6) ▪ Pre-exceptional underlying tax rate of 18.7% (2016:
Slide 48: Managing UK working capital
Managing UK working capital 2,500 WIP cash spend vs P&L charge 80% 2,000 60% 1,500 £m 40% 1,000 20% 500 0 0% 2013 2014 2015 2016 2017 Development and construction costs in WIP P&L charge (direct build costs) in previous 12 months Cash spend in previous 12 months % of next 12 months completions UK EB
Slide 49: Movement in Group net assets
Movement in Group net assets Breakdown of 31 Dec 2017 31 Dec 2016 movement £m £m % Opening net assets 2,900.3 2,723.3 N/A Pre-exceptional net earnings 660.3 589.7 22.8% Net impact of exceptional items (105.0) (0.4) (3.6)% Actuarial gains/(losses) after tax 128.3 (58.6) 4.4% Net share scheme and othe
Slide 50: UK net operating assets
UK net operating assets £m 31 Dec 2017 31 Dec 2016 Fixed assets 27 24 Investment in JVs 51 50 Land 2,596 2,574 WIP 1,337 1,288 Total inventories 3,933 3,862 Debtors 180 177 Land creditors (618) (577) Other creditors (750) (779) Total creditors (1,368) (1,356) Pension liability and PRMA (65) (234) Pr
Slide 51: Financing
Financing ▪ Net cash at 31 Dec 2017: £511.8m (31 Dec 2016: £364.7m) ▪ Adjusted gearing (net debt plus land creditors): 4.1% (31 Dec 2016: 8.1%) ▪ Average net cash: £186.5m (31 Dec 2016: £87.4m net debt) ▪ Borrowings and facilities: ▪ Fully undrawn £550m Revolving Credit Facility now expiring Februar
Slide 52: Finance charges
Finance charges £m FY 2017 FY 2016 Change Financial indebtedness 6.0 10.9 (45.0)% Land creditor unwind 20.7 17.7 16.9% Pensions 5.9 6.1 (3.3)% Other (2.6) (3.1) (16.1)% Total 30.0 31.6 (5.1)% 52
Slide 53: UK land commitments
UK land commitments 2017 2016 £m < 1 yr 1-2 yrs 2-5 yrs 5+ yrs total total Committed cash payments in respect of unconditional 313 194 107 36 650 607 land contracts Expected cash payments in respect of conditional land 94 59 99 85 337 255 contracts ▪ Included in unconditional land contracts at 31 De
Slide 54: UK land portfolio ‒ net cost
UK land portfolio ‒ net cost 31 Dec 2017 31 Dec 2016 £m Owned Controlled Total Total Detailed planning 1,873 11 1,884 1,757 Outline planning 442 54 496 530 Resolution to grant 23 19 42 62 Sub-total 2,338 84 2,422 2,349 plots 56,619 18,230 74,849 76,234 Strategic 90 69 159 195 plots 26,836 90,409 117
Slide 55: UK short term landbank
UK short term landbank 100,000 7,863 (14,541) 90,000 8,040 80,000 (1,900) 76,234 (847) 74,849 Plots 70,000 60,000 50,000 31 Dec 2016 Plots acquired Strategic land Completions Land sales Review and 31 Dec 2017 conversion incl. JVs scope changes Movement in period Data includes JV plots 55
Slide 56: UK strategic pipeline
UK strategic pipeline 17,381 (7,863) 120,000 (197) (92) 117,245 108,016 100,000 Plots 80,000 60,000 31 Dec 2016 Plots acquired Strategic land Land sales Review and scope 31 Dec 2017 conversion changes Movement in period Excludes land with less than 50% certainty of achieving planning permission Data
Slide 57: North Division - land
North Division - land Scotland, North West North North North East and West Division Division As at 31 Dec 2017 and Yorkshire Midlands FY 2017 FY 2016 Short term owned and controlled land portfolio plots 13,910 13,911 27,821 29,028 Land portfolio years 4.6 4.5 4.6 4.8 Cost per plot £000* 30.8 31.2 31
Slide 58: Central and South West Division - land
Central and South West Division - land Central and Central and South West South West East and Wales and Division Division As at 31 Dec 2017 Central West FY 2017 FY 2016 Short term owned and controlled 17,173 15,615 32,788 31,940 land portfolio plots Land portfolio years 6.6 6.2 6.4 6.6 Cost per plot
Slide 59: London and South East Division - land
London and South East Division - land London and London and South East South East South East excl. London Division Division As at 31 Dec 2017 London market† market† FY 2017 FY 2016 Short term owned and controlled 10,343 3,897 14,240 15,266 land portfolio plots Land portfolio years 4.6 3.5 4.3 5.0 Co
Slide 60: Land disposals
Land disposals £m FY 2017 FY 2016 Proceeds UK 39.0 48.1 Spain 0.5 - Total 39.5 48.1 Gross profit UK 11.0 11.8 Spain (0.3) - Total 10.7 11.8 Land disposals are included in revenue and cost of sales 60
Slide 61: Interest rate
FTB mortgage payments as % of pay / interest rates 100% 16 90% 14 80% 12 70% % of take home pay 10 Interest rate 60% 50% 8 40% 6 30% 4 20% 2 10% 0% - 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Interest rate London UK ▪ FPC recommend to stress test assum
Slide 62: Real house prices
Real house prices £250,000 £200,000 £150,000 £100,000 £50,000 £- 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Nominal prices Real prices Source: Nationwide – Nominal house prices 62
Slide 63: UK customer segmentation
UK customer segmentation 2017 2016 Total reservations FY H2 H1 FY H2 H1 First time buyers 41% 40% 42% 38% 34% 41% Second time buyers 39% 37% 40% 36% 34% 38% Affordable 17% 20% 14% 23% 29% 17% Investor 3% 3% 4% 3% 3% 4% Total 100% 100% 100% 100% 100% 100% Help to Buy* 43% 42% 45% 39% 36% 42% Data bas
Slide 64: UK product mix
UK product mix 2017 2016 Private completions FY H2 H1 FY H2 H1 Apartments 16% 16% 15% 14% 17% 10% 1 / 2 / 3 bed houses 47% 47% 48% 47% 47% 48% 4 / 5 / 6 bed houses 37% 37% 37% 39% 36% 42% Total 100% 100% 100% 100% 100% 100% Data based on completions excluding JVs 64
Slide 65: UK sales performance
UK sales performance H1 2018 (w/e 18 Feb 2018) H2 2017 H1 2017 H2 2016 H1 2016 Average outlets open 275 284 292 286 294 Average sales rate (net) 0.93 0.84 1.02 0.90 0.95 Average selling price £000 272 260 265 235 246 H1 2018 (w/e 18 31 Dec 2 July 31 Dec 3 July As at Feb 2018) 2017 2017 2016 2016 Tot
Slide 66: Spain financial summary
Spain financial summary FY 2017 FY 2016 Change Average number of active sites 18 19 (5.3)% Legal completions 301 304 (1.0)% Average selling price (£000) 311 303 2.6% Average selling price (€000) 352 358 (1.7)% Revenue £m 94.2 93.6 0.6% Operating profit* £m 26.8 20.6 30.1% Operating profit* margin %
Slide 67: Definitions
Definitions ▪ Operating profit is defined as profit on ordinary activities before net finance costs, exceptional items and tax, after share of results of joint ventures. ▪ Adjusted basic earnings per share represents earnings, attributed to the shareholders of the parent, excluding exceptional items