Vistry Group Plc · LSE:VTY
Vistry — Bovis Homes Group — FY2017 Earnings Presentation
47 slides from Vistry's earnings presentation, Mar 1, 2018
Slide 1: Full year results 2017
Bovis Homes Group PLC Full year results 2017 1 March 2018 www.bovishomesgroup.co.uk
Slide 2: Agenda
Agenda • Full year performance • Financial review • CEO review -- Operational update -- Medium term targets • Outlook • Q&A Furlong Rise, Cheltenham slide 1
Slide 3: Full year performance
Full year performance • Profit before tax, exceptional and one-off items in-line with expectations • Strong increase in average selling price, with robust underlying prices • Year end completions delivered in a controlled and disciplined manner • Restructuring initiatives complete - business well po
Slide 4: Good progress with medium term targets
Good progress with medium term targets 2020 Target Progress to date 4 star HBF customer satisfaction rating - HBF score since 1 October 2017 trending at 4 star - Contolled delivery in FY17 4,000 completions - Expect to deliver increase in completions in FY18 in a controlled and disciplined manner -
Slide 5: Financial review
Financial review Earl Sibley Group Finance Director Burfield Grange, Hailsham www.bovishomesgroup.co.uk slide 4
Slide 6: Income statement
Income statement (£m) FY16 FY17 Change (restated) Revenue 1,054.8 1,028.2 -3% Gross profit (1) 209.0 184.6 -12% Administrative expenses (1) (49.0) (56.6) +16% Operating profit before exceptional items 160.0 128.0 -20% Exceptional items - (6.8) Share of profit of Joint Ventures 0.3 - Profit before in
Slide 7: Housing revenue analysis
Housing revenue analysis FY16 FY17 Change Average sales price (£k) Private 306.0 334.5 +9% PRS 151.1 - Affordable 119.5 123.4 +3% Total 254.9 272.4 +7% Volume Private 2,884 2,573 -11% PRS 19 - Affordable 1,074 1,072 0% Total 3,977 3,645 -8% Housing revenue (£m) Private 882.6 860.6 -2% PRS 2.9 - Affo
Slide 8: Analysis of profit
Analysis of profit FY16 (restated) FY17 £m unless otherwise stated Housing Land Total Housing Land Total sales sales Revenue 1,029.0 25.8 1,054.8 996.2 32.0 1,028.2 Gross profit 201.3 7.7 209.0 182.2 2.4 184.6 Administrative expenses (49.0) (56.6) Operating profit pre exceptional items 160.0 128.0 G
Slide 9: One-off and exceptional costs in FY17
One-off and exceptional costs in FY17 (£m) FY16 FY17 Customer care provision 7.0 3.5 Advisory fees - 2.8 Restructuring costs - 4.0 Total 7.0 10.3 • Additional one-off £3.5m customer care provision taken through gross profit in H1 17 • £2.8m advisory fees taken as an exceptional item in H1 17 • Restr
Slide 10: Sales prices and construction costs
Sales prices and construction costs FY16 FY17 Change (restated) Sales price per home (£000’s) 254.9 272.4 +7% Sales price per sq ft (£’s) 243.4 251.3 +3% Private sales price (£000’s) 306.0 334.5 +9% Private sales price per sq ft (£’s) 268.1 279.6 +4% Construction cost per home (£000’s) (1) 146.8 165
Slide 11: Significant cash generation
Significant cash generation (£m) FY16 FY17 (restated) Housing receipts 1,061.9 1,086.9 Construction expenditure (703.0) (681.6) Overheads (51.4) (54.7) Operating cash flow 307.5 350.6 Cash expenditure on land (227.6) (225.8) Land sales receipts 22.0 36.9 Dividend payment (55.4) (60.4) Non-trading it
Slide 12: Land acquisition in the year
Land acquisition in the year • Continue to see good opportunities in the land market • With reduced land requirement for FY17, able to be even more selective • 2,550 plots acquired Wellington Lichfield -- Includes 821 plots representing final tranche at Stanton Cross Bishops Itchington Wellingboroug
Slide 13: Net assets
Net assets (£m) 31 Dec 2016 30 June 2017 31 Dec 2017 Land 1,020.6 1,022.0 913.4 Land creditors (343.3) (324.7) (246.7) Land net of creditors 677.3 697.3 666.7 Work in progress 428.6 470.2 408.6 Other assets 142.5 135.4 92.1 Other liabilities (271.1) (256.4) (255.7) Net (debt)/cash 38.6 (32.4) 144.9
Slide 14: Balance sheet optimisation
Balance sheet optimisation Progress in FY18 Opportunity for FY18 Land - Five land disposals (£30.5m) - Reduction of investment on c.£80m - 100m larger sites Work in progress - Significant reduction in part - Optimising site by site WIP c.£40 - £80m exchange (£28.9m) (foundations, roads etc) - Reduct
Slide 15: Operating metrics
Operating metrics FY16 FY17 Sales outlets Average active sales outlets 99 92 Reservations Private reservations in year 2,960 2,274 Affordable reservations in year 1,022 1,730 Year end forward sales Private units 917 926 PRS 19 - Affordable units 1,072 1,730 Total forward sales (units) 2,008 2,656 To
Slide 16: Operational Update
Operational Update Greg Fitzgerald Chief Executive Officer Mildenhall, Sherborne www.bovishomesgroup.co.uk slide 15
Slide 17: Very significant improvements across all areas
Very significant improvements across all areas • Key operational issues identified • Excellent progress in every area in H2 17 • Group started FY18 from a position of strength CEO review - initial impressions • Limited benefit to date from recent investment in people and infrastructure • Greater ‘ha
Slide 18: Transformed our Customer Service
Transformed our Customer Service • HBF score trending well above 80% (4 star) since 1 October 2017 -- 2 regions – 5 star -- 4 regions – 4 star -- 1 region – 3 star • Step change in the way we are doing things and mindset within the business -- Controlled and disciplined period ends in June and Decem
Slide 19: Strong sales position
Strong sales position • Strong forward sales -- Started the year with more than 40% of FY18 consensus forecast revenue secured • Good start to FY18 across all regions • New commission structure for sales advisors -- Additional incentivisation on price • Significant reduction in levels of stock and p
Slide 20: Restructuring successfully completed
Restructuring successfully completed CENTRAL 14,029 sq ft 40 Second Floor Office • Implemented initiatives to simplify and streamline operating structure -- Merger of Eastern and Southern regions • Proximity of developments to regional office key to supporting hands-on management -- Re-located South
Slide 21: High quality, motivated people
High quality, motivated people • Far greater ‘hands on’ management with strong operational focus -- Regional MD’s completed leadership training programme • Increased investment in development and training -- Learning and Development team -- Bovis Homes Training Centre firmly established • Focus on e
Slide 22: High quality build
High quality build • Focus on setting our sites up correctly from the start and ‘getting it right first time’ -- Appointment of five new regional construction directors -- Investment in site managers and site teams • Strengthened sub-contractor relationships -- ‘New’ Bovis Homes is a partner of choi
Slide 23: Progress with commercial
Progress with commercial • COINS to be launched next month -- Drive efficiencies, standardised processes and best practice -- Provide enhanced management information enabling better decision making -- Gives surveyors greater ability to pro-actively manage costs • Significant improvement in frequency
Slide 24: Medium term targets
Medium term targets Greg Fitzgerald Chief Executive Officer Marbury Meadows, Wrenbury www.bovishomesgroup.co.uk slide 23
Slide 25: Growth in completions
Growth in completions • Expect to deliver a c.10% increase in completions to 4,000 units by FY20 -- Controlled and disciplined manner • Maximise economies of scale from current operating structure • 7 balanced operating regions • Shortage of skilled labour remains a constraint to organic growth beyo
Slide 26: Optimising our land bank structure
Optimising our land bank structure • Targeting 3.5 to 4.0 years owned land bank Site size Total sites Total plots • Dec 2017: 17,096 plots equivalent to 0 - 50 25 808 4.3 year land bank assuming 50 -100 34 2,551 4,000 completions 100 -150 25 2,975 • Reducing level of land investment without impactin
Slide 27: Land bank fundamentals remain strong
Land bank fundamentals remain strong • Family homes in prime locations 31 Dec 2016 2017 • Southern location bias with no Average plots per site 141(1) 146(1) London exposure Average sales price £271k £293k • Predominantly lower risk greenfield sites Average land cost £52k £53k • Traditional standard
Slide 28: Stanton Cross - Wellingborough
Stanton Cross - Wellingborough 31 Dec 2017 Owned plots 1,747 Total balance sheet investment £81.6m • Targetting reduction in level of investment -- Discussions re joint venture opportunities ongoing • Main access road including railway and river bridges progressing well -- Completion end 2018 • Nort
Slide 29: Strategic land opportunity
Strategic land opportunity • Strategic land remains an important land supply As at 30 Dec 2017 Total sites Total plots -- Expect to deliver c.10,000 plots from our 0 – 150 plots 11 1,100 strategic land bank over next 5 years 150 – 300 plots 18 3,712 -- Returns expected to exceed our minimum 300 – 50
Slide 30: Progress with affordable housing
Progress with affordable housing • Earlier exchange of contracts ‘The last phase was a smooth -- Reducing risk handover process due to -- Improved cash management your attention to detail and -- Stronger negotiating position presentation of the homes. -- 43 contracts exchanged in FY17 Hope to work w
Slide 31: Margin initiatives
Margin initiatives • Underlying margin embedded in land bank coming through • Four major margin initiatives 1. Price optimisation -- Focused on driving prices across all product and developments -- New commission structure introduced for sales advisors -- Reflects priority focus on controlled volume
Slide 32: New housing range
New housing range Phoenix No.7 - new range • Introduction of industry leading housing range -- Private and affordable house types -- Ready for launch in April 18 -- First completions in FY19 • New homes designed to meet today’s customers’ needs -- Input direct from architects, customers and all busi
Slide 33: New housing range
New housing range Phoenix No.7 - new range P303 Sheringham - current range First floor First floor Ground floor Ground floor slide 32
Slide 34: Market environment
Market environment • Fundamentals are strong -- High level of consumer demand -- Strong support for the sector -- Low interest rate environment -- Competitive mortgage market -- Supportive planning environment -- High employment levels • Pricing remains robust • Attractive land market • Stamp Duty L
Slide 35: Enhanced cash returns to shareholders
Enhanced cash returns to shareholders • On track to deliver min £180m additional cash from specific initiatives • Group will continue to be strongly cash generative Ordinary dividend -- Strategy of maximising sustainable dividends to shareholders -- FY17: 6% increase to 47.5p demonstrating confidenc
Slide 36: Strong outlook for FY18
Strong outlook for FY18 • Strong sales position -- Started the year with 40% of consensus FY18 revenues secured -- Strong start to 2018 with the sales rate up 14% to 0.5 and pricing ahead • Controlled increase in volumes -- Confident of delivering FY18 completions in-line with expectations • Maintai
Slide 37: Q&A
Q&A Sherford, Plymouth www.bovishomesgroup.co.uk slide 36
Slide 38: Disclaimer - important notice
Disclaimer - important notice Certain statements in this presentation are forward looking statements. Forward looking statements involve evaluating a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those statements
Slide 39: Appendices
Bovis Homes Group PLC Full year results 2017 Appendices Winchester Village, Winchester www.bovishomesgroup.co.uk slide 38
Slide 40: Key metrics
Key metrics Revenue (£m) Operating profit margin (%) Profit before tax (£m) £1,028.2m 12.5% £114.0m (1) 1054.80 17.300 160.100 160.1 17.3 1,054.8 17.0 1,028.2 154.7 946.5 14.9 843.84 15.2 133.5 12.975 120.075 809.4 12.5 114.0 632.88 8.650 80.050 556.0 78.8 421.92 4.325 40.025 210.96 0.00 0.000 0.000
Slide 41: Gross profit and admin expenses reconciliation
Gross profit and admin expenses reconciliation (1) (2) £m (unless stated) H1 2016 H2 2016 FY 2016 H1 2017 H2 2017 FY 2017 Housing gross profit pre re-statement 100.3 127.7 228.0 92.0 118.8 210.8 Re-stated direct costs (12.6) (14.1) (26.7) (14.8) (13.8) (28.6) Housing gross profit re-stated 87.7 113.
Slide 42: Header operating structure
Header operating structure Regional Regional head office Satellite office Mercia Stafford West division Coleshill East division West Midlands Northern Home Counties Milton Keynes Cheltenham Stansted Western South East Southern Counties New Ash Green Basingstoke South West Exeter slide 41
Slide 43: Strength of land bank across the regions
Strength of land bank across the regions • Strength of land bank across our West East operating regions 4315 3,664 • Proximity to regional office is a 3452 3,056 key criteria for land acquisition Owned plots 2589 2,759 going forward 2,061 1726 1,964 • Focus on further tightening 1,800 1,792 geograph
Slide 44: Work in progress and other assets
Work in progress and other assets (£m) 31 Dec 2016 30 June 2017 31 Dec 2017 Stock 28.8 24.1 18.8 Show homes 7.8 7.8 4.3 Roads and sewers 188.5 205.2 194.9 Housing and other WIP 142.6 169.7 139.0 Wellingborough WIP 12.3 20.9 31.9 Part exchange 48.6 42.5 19.7 Total work in progress 428.6 470.2 408.6 S
Slide 45: Imputed interest on land creditors drives the financial charge
Imputed interest on land creditors drives the financial charge 12 months ended 31 December (£m) 2016 2017 Bank interest and commitment fees (2.7) (2.4) Issue cost amortisation (0.6) (0.6) Imputed interest on land (5.0) (5.1) Pension financing 0.3 (0.2) Imputed interest on available for sale assets 2
Slide 46: Land creditor payments
Land creditor payments 250 200 £168m 150 £252m £m 100 £44m 50 £40m 0 <1 year 1-2 year 2 year+ Note: The above figures are on an absolute cash basis. Balance sheet land creditors figure of £247m as at 31 December 2017 is on an IFRS accounting basis slide 45
Slide 47: Other liabilities
Other liabilities As at 31 December (£m) 2016 2017 Creditors 239.5 231.2 Corporation tax liability 13.9 16.9 Deferred tax liability - 0.6 Retirement benefit obligations 6.6 - Provisions - Customer care provision 8.2 1.4 - Other 2.9 5.6 Other liabilities 271.1 255.7 slide 46