Taylor Wimpey Plc · LSE:TW.
Taylor Wimpey — H1 2020 Earnings Presentation
53 slides from Taylor Wimpey's earnings presentation, Jul 29, 2020
Slide 1: Half Year Results Presentation for the six months to 28 June 2020
Half Year Results Presentation for the six months to 28 June 2020 29 July 2020
Slide 2: Disclaimer
Disclaimer For the purposes of this notice, this “presentation” shall include these slides and any question-and-answer session that follows oral briefings by representatives of Taylor Wimpey plc. This presentation is for information purposes only and is not intended to, and does not constitute or fo
Slide 3: Agenda
Agenda UK operational Financial review Priorities, tactics overview and guidance and outlook Pete Redfern Chris Carney Pete Redfern 3 Half Year Results Presentation for the six months to 28 June 2020
Slide 4: UK operational overview
UK operational overview Pete Redfern Chief Executive
Slide 5: Emerging from the crisis in a position of strength
Emerging from the crisis in a position of strength Near term Proactive Operational opportunities / management strength and long term through crisis planning strategy • Prioritised health and safety • Decisive and transparent • Resilient business model, decisions to stop and restart long term strateg
Slide 6: Operating overview
Operating overview • Safe and steady return to sites with capacity of c.80% achieved Production • Implications to costs and speed of build likely to be largely limited to 2020 • Continued to open new outlets • IT systems allowed us to successfully work throughout the crisis • Returned to sales offic
Slide 7: Medium to long term structural backdrop remains favourable
Medium to long term structural backdrop remains favourable ● Government recognition of importance of housebuilding to economy Political ● Welcome steps Government has taken to work with sector during the crisis environment ● Sustained desire to increase housebuilding volumes ● Ongoing improvement of
Slide 8: Positive sales momentum and forward indicators
Positive sales momentum and forward indicators First quarter During shutdown Post shutdown pre-shutdown weeks 14-21 weeks 22-30 Average outlets open 240 231* 243 Net private sales rate per outlet per week 0.97 0.30 0.70 Cancellation rate (private) 15% 29% 30% Cancellations per week as % of private o
Slide 9: NHS and care workers discount scheme
NHS and care workers discount scheme H2 2020 Reservations (w/e 26 July 2020) H1 2020 Order book £m 324.4 228.6 Order book units 1,164 830 Order book ASP £000 279 275 H2 2020 Completions (w/e 26 July 2020) H1 2020 Legal completions 42 6 ASP 319 422 • Net private sales rate for the year to date exclud
Slide 10: Land – significant near term land market opportunities
Land – significant near term land market opportunities ● Raised equity of c.£510 million net proceeds to pursue attractive land opportunities over next 6-12 months due to market dislocation ● Number of opportunities and strength of our negotiating position continues to improve ● Ability to add small
Slide 11: Quality additions to a strong landbank
Quality additions to a strong landbank ● Approved 5,167 plots in H1 2020 (H1 39.0% 2019: 5,846 plots) at average 37.0% contribution margin of 28.5% and ROCE of 34.8% 35.0% ● Six sites, with average plots of 166, Site based ROCE* approved since the end of June 33.0% ● Short term landbank stood at c.7
Slide 12: Financial review and guidance
Financial review and guidance Chris Carney Group Finance Director
Slide 13: Summary Group results
Summary Group results £m (before exceptional items) H1 2020 H1 2019 Change FY 2019 Revenue 754.6 1,732.7 (56.4)% 4,341.3 Gross profit* 91.0 409.6 (77.8)% 1,044.1 Gross profit margin % 12.1 23.6 (11.5)ppt 24.1 Operating (loss) / profit* (16.1) 311.9 - 850.5 Operating margin % (2.1) 18.0 (20.1)ppt 19.
Slide 14: Impact of COVID-19 on build output and private completions
Impact of COVID-19 on build output and quarterly private completions profile Build output by week Private completion delivery Private completions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Q1 Q2 Q3 Q4 2019 2020 2019 2020 actuals 2020 mid-range of current forecast scenario ●
Slide 15: Impact of COVID-19 on operating profit
Impact of COVID-19 on operating profit H1 2020 H1 2019 Incremental COVID-19 costs Revenue Cost of Sales Gross Profit Net operating Operating Revenue Cost of Sales Gross Profit Net operating Operating expenses Profit expenses Profit incl. JV share incl. JV share ● COVID-19 costs of £39.2 million incl
Slide 16: Indicative movements in UK operating margin
Indicative movements in UK operating margin H1 2019 to H1 2020 Annual change Impact on H1 2020 income statement (ppt) Market inflation on selling prices c.1.2%* 0.8 Market inflation on build cost c.3.0% (1.7) Net economic benefit captured (0.9) Market impact of landbank evolution - Net market impact
Slide 17: UK performance summary
UK performance summary H1 2020 H1 2019 Change FY 2019 Legal completions – excl JVs 2,713 6,432 (57.8)% 15,520 Private 2,076 4,838 (57.1)% 12,043 Affordable 637 1,594 (60.0)% 3,477 Average selling price – excl JVs 269 261 3.1% 269 Private £000 307 301 2.0% 305 Affordable £000 144 139 3.6% 141 Legal c
Slide 18: Summary Group balance sheet
Summary Group balance sheet Group £m 28 June 2020 30 June 2019 Change 31 Dec 2019 Long term assets and JVs 134.9 122.4 12.5 115.3 Land 2,806.3 2,809.8 (3.5) 2,735.9 WIP 1,737.1 1,605.2 131.9 1,460.1 Debtors 186.0 236.4 (50.4) 204.7 Land creditors (630.6) (717.7) 87.1 (729.2) Other creditors (745.6)
Slide 19: Group cashflow
Group cashflow Group £m H1 2016 H1 2017 H1 2018 H1 2019 H1 2020 Operating profit / (loss) 281.2 350.5 344.3 311.9 (16.1) Payments to the pension scheme (12.7) (12.3) (31.6) (25.1) (14.8) Increase in net land (109.3) (9.0) (40.3) (80.1) (167.5) Increase in WIP and other (199.6) (123.0) (77.4) (222.7)
Slide 20: Financial priorities
Financial priorities ● Maintaining focus on cost management and margin ● Work closely with subcontractors and suppliers to achieve a competitive and sustainable cost base ● Follow through with implementation of systems improvements to drive efficiencies (e.g. tender management, workflow, valuation t
Slide 21: 2020 guidance
2020 guidance Completions Volumes impacted by COVID-19 shutdown, c.40% lower than 2019 Year end net cash c.£550-£750 million Build cost inflation c.3% Finance charges c.£25 million (c.£10 million cash) JV share of profit Similar levels to 2019 Expect to resume ordinary dividend payment (2020 final)
Slide 22: Priorities, tactics and outlook
Priorities, tactics and outlook Pete Redfern Chief Executive
Slide 23: Our priorities
Our priorities Do the right Deliver quality Build on the Manage costs Use the thing and homes and as skills and now and opportunity to show our close to ‘normal responsiveness challenge the make great land leadership service’ to our of the business underlying cost investments customers as to adapt t
Slide 24: Accelerating out of the shutdown period
Accelerating out of the shutdown period ● Early closure of sites and sales centres to plan and communicate a safe and responsible reopening Proactive ● Operating majority of sales centres and show homes with high levels of demand for appointments since reopening response ● Restarted construction on
Slide 25: Differentiators demonstrated through challenging first half
Differentiators 1. Strong culture and values demonstrated Investing in our people and supporting our partners through challenging first half 2. Renewed focus on sustainability Continued to progress quality, customer care and biodiversity and carbon goals 3. Quality landbank and strong balance sheet
Slide 26: Outlook
Outlook ● Strong 2020 visibility – c.97% forward sold for private completions with strong and growing order book, with very limited availability of homes for customers to move into in 2020 ● Now operating at c.80% production capacity with further improvement expected in Q4 ● Robust demand with stron
Slide 27: Appendices
Appendices Half Year Results Presentation for the six months to 28 June 2020 Taylor Wimpey plc
Slide 28: Group financial highlights
Group financial highlights Return on net operating assets Cash conversion 100 30.9 29.4 86.4 30.0 71.3 20.0 16.8 46.5 % % 10.0 0.0 0 H1 2018 H1 2019 H1 2020 H1 2018 H1 2019 H1 2020 Operating margin Landbank years 6.5 20.0 6 5.3 20.0 18.0 5.1 5 15.0 4 Years 10.0 % 3 5.0 (2.1) 2 0.0 1 -5.0 H1 2018 H1
Slide 29: H1 2020 operational performance – our KPIs
H1 2020 operational performance – our KPIs Customer H1 2020 H2 2019 H1 2019 FY 2019 Customer satisfaction – would you recommend 8-week score %* 91 90 89 89 Customer satisfaction – would you recommend 9-month score %** 76 78 77 77 Build quality Construction Quality Review – average score out of 6 4.3
Slide 30: H1 2020 operational performance – our KPIs
H1 2020 operational performance – our KPIs Efficiency H1 2020 H2 2019 H1 2019 FY 2019 Net private sales rate per outlet per week 0.70 0.92 1.00 0.96 Private legal completions per outlet 8.8 29.7 18.8 48.2 Order book value £m 2,904 2,176 2,366 2,176 Order book volume – number of homes 11,686 9,725 10
Slide 31: Summary income statement
Summary income statement* Group £m H1 2020 H1 2019 Change FY 2019 Revenue 754.6 1,732.7 (56.4)% 4,341.3 Cost of sales (663.6) (1,323.1) (49.8)% (3,297.2) Gross profit 91.0 409.6 (77.8)% 1,044.1 Net operating expenses (105.3) (97.5) 8.0% (201.6) (Loss) / profit on ordinary activities (14.3) 312.1 - 8
Slide 32: Cash flow summary
Cash flow summary Group £m H1 2020 FY 2019 H2 2019 H1 2019 (Loss) / profit from ordinary activities before finance costs* (24.3) 856.8 544.7 312.1 (Increase) / decrease in inventories (423.8) (21.7) 218.2 (239.9) Exceptional items charge / (credit) 10.0 (14.3) (14.3) - Other operating items** (37.2)
Slide 33: Group segmental analysis
Group segmental analysis H1 2020 H1 2019 FY 2019 Operating (loss)/ Operating Operating Operating Operating Operating profit margin RONOA profit margin RONOA profit margin RONOA £m % % £m % % £m % % North (3.2) (1.2) 18.1 134.4 20.7 34.2 320.0 20.7 37.1 Central and South 22.3 8.5 24.2 124.8 20.9 39.7
Slide 34: UK landbank
UK landbank ● Land cost in short term owned landbank is 14.8% of ASP (H1 2019: 15.3%), supported by strategic pipeline conversions ● Land cost as % of ASP on H1 2020 approvals of 20.1% (H1 2019: 21.2%) ● Potential revenue in the landbank at 28 June 2020 was £54 billion (31 Dec 2019: £53 billion), co
Slide 35: Net private sales by price band
Net private sales by price band £201k – £251k – £301k – £451k – £601k – Net private sales <£200k £250k £300k £450k £600k £1m >£1m Total North 556 570 444 346 44 5 - 1,965 Central and South West 62 225 364 625 118 10 - 1,404 London and South East 41 62 85 422 224 102 38 974 Total 659 857 893 1,393 38
Slide 36: Central London market performance
Central London market performance H1 2020 H2 2019 H1 2019 H2 2018 H1 2018 Average outlets open 4 5 6 7 8 Private sales rate (net) 0.59 1.12 0.54 0.36 0.47 Private sales price £000 1,158 1,035 1,006 1,092 896 Cancellation rate (private) 30% 14% 24% 39% 12% Data based on reservations excluding JVs 36
Slide 37: Financing
Financing ● On 18 June 2020 the Company successfully issued new ordinary shares raising net proceeds of £510.1 million after expenses ● Net cash at 28 June 2020: £497.3 million (31 December 2019: £545.7 million, 30 June 2019: £392.0 million) ● Adjusted gearing* including land creditors of 3.5% (31 D
Slide 38: Help to Buy – a manageable adjustment
Help to Buy – a manageable adjustment First time buyers using Help to Buy as a % of total H1 2020 Homes England Region Help to Buy price cap** private completions % within price cap North East £186,100 31% 24% North West £224,400 44% 62% Yorkshire & The Humber £228,100 33% 57% East Midlands £261,900
Slide 39: Tax
Tax Asset / (liability) Current tax £m Deferred tax £m Net tax £m As at 1 January 2020 (67.9) 29.8 (38.1) Income statement* 10.3 (2.0) 8.3 SOCI / SOCIE 0.2 9.3 9.5 Cash paid 34.1 - 34.1 Other (including foreign - 0.3 0.3 exchange) As at 28 June 2020 (23.3) 37.4 14.1 ● Pre-exceptional effective tax r
Slide 40: Pension fund contributions
Pension fund contributions ● Funding update as at 28 June 2020: ● Technical provisions deficit of £217 million and funding level of 92% ● Deficit contributions of £40 million per year re-instated from January 2019 until the earlier of full funding or Q4 2020 ● Deficit contributions for Q2 2020 subse
Slide 41: Pensions
Pensions Movement in present value of defined benefit obligations Total UK £m H1 2020 FY 2019 FY 2018 FY 2017 Pre-IFRIC 14 (surplus) / deficit brought forward (100.5) (33.1) (23.9) 232.7 Employer contributions* (16.1) (47.1) (34.1) (23.1) Administration cost 1.3 1.8 1.9 3.0 Interest (income) / charg
Slide 42: UK land commitments
UK land commitments As at 28 As at 31 £m < 1 yr 1-2 yrs 2-5 yrs 5+ yrs June 2020 Dec 2019 Committed cash payments in respect of unconditional land 287 163 173 24 647 740 contracts Expected cash payments in respect of conditional land 94 44 89 3 230 295 contracts ● Included in unconditional land cont
Slide 43: UK planning permissions
UK planning permissions 20,000 Sites with implementable planning permission 18,000 16,000 96.2% 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 2.6% Permissions gained (rolling 12 months) Completions* (rol
Slide 44: Finance charges
Finance charges £m H1 2020 H1 2019 Change FY 2019 Financial indebtedness 5.7 2.4 137.5% 5.5 Foreign exchange movements (0.6) 0.5 - 1.1 Unwind of land creditors and 9.5 9.0 5.6% 21.5 other items Pensions 0.8 1.8 (55.6)% 3.2 Interest on lease liabilities 0.2 0.2 - 0.5 Total 15.6 13.9 12.2% 31.8 44 Hal
Slide 45: UK land pipeline
UK land pipeline 28 June 2020 31 Dec 2019 Plots Owned Controlled Total Total Detailed planning 39,742 5,266 45,008 43,460 Outline planning 13,178 5,288 18,466 19,726 Resolution to grant 1,281 12,583 13,864 12,426 Short term 54,201 23,137 77,338 75,612 Short term with implementable 39,300 - 39,300 36
Slide 46: UK land portfolio ‒ net cost
UK land portfolio ‒ net cost 28 June 2020 31 Dec 2019 £m Owned Controlled Total Total Detailed planning 1,912 8 1,920 1,891 Outline planning 377 82 459 514 Resolution to grant 17 25 42 40 Sub-total 2,306 115 2,421 2,445 plots 54,201 23,137 77,338 75,612 Strategic 189 93 282 191 plots 35,628 102,161
Slide 47: Customer service
Customer service Customer satisfaction (Would you H1 2020 average FY 2019 average recommend?) 8-week score Homes legally completed Oct 19-Mar 20 Homes legally completed Oct 18-Sep 19 Taylor Wimpey UK Ltd 91% 89% North 91% 88% Central and South West 92% 91% London and South East 90% 90% 9-month score
Slide 48: Land disposals
Land disposals Proceeds £m H1 2020 H1 2019 FY 2019 UK 2.2 6.8 37.9 Spain - - - Total 2.2 6.8 37.9 Gross profit £m UK 2.1 4.2 19.3 Spain - - - Total 2.1 4.2 19.3 Land disposals are included in revenue and cost of sales 48 Half Year Results Presentation for the six months to 28 June 2020
Slide 49: UK customer segmentation
UK customer segmentation Total reservations H1 2020 FY 2019 H2 2019 H1 2019 FY 2018 H2 2018 H1 2018 First time buyers 50% 34% 31% 38% 34% 33% 35% Second time buyers 39% 34% 31% 37% 31% 30% 32% Affordable 8% 27% 32% 20% 30% 31% 29% Investor 3% 5% 6% 5% 5% 6% 4% Total 100% 100% 100% 100% 100% 100% 100
Slide 50: UK product mix
UK product mix Private completions H1 2020 FY 2019 H2 2019 H1 2019 FY 2018 H2 2018 H1 2018 Apartments 8% 11% 11% 11% 12% 14% 10% 1 / 2 / 3 bed houses 50% 48% 49% 47% 48% 47% 49% 4 / 5 / 6 bed houses 42% 41% 40% 42% 40% 39% 41% Total 100% 100% 100% 100% 100% 100% 100% Data based on completions exclud
Slide 51: UK sales performance
UK sales performance H2 2020 (w/e Private and affordable reservations excl JV 26 July 2020) H1 2020 H2 2019 H1 2019 Average outlets open 250 237 243 257 Average sales rate (net) 0.84 0.76 1.37 1.24 Average selling price £000 312 308 253 269 H2 2020 (w/e As at 26 July 2020) 28 June 2020 31 Dec 2019 3
Slide 52: Spain financial summary
Spain financial summary H1 2020 H1 2019 Change FY 2019 Average number of active sites 20 20 - 21 Legal completions 58 109 (46.8)% 323 Average selling price £000 352 379 (7.1)% 373 Average selling price €000 407 434 (6.2)% 429 Revenue £m 20.3 41.1 (50.6)% 120.4 Operating profit £m 3.5 8.1 (56.8)% 32.
Slide 53: Definitions
Definitions ● Operating profit or loss is defined as profit on ordinary activities before net finance costs, exceptional items and tax, after share of results of joint ventures. ● Operating margin is defined as operating profit or loss divided by revenue. ● Adjusted basic earnings per share represen