Barratt Redrow Plc · LSE:BTRW
Barratt Redrow — Barratt Developments — H1 2015/16 Earnings Presentation
63 slides from Barratt Redrow's earnings presentation, Feb 24, 2016
Slide 1: Results presentation: six months ended 31 December 2015
Half Year 2015/16 1 Results presentation Six months ended 31 December 2015 24 February 2016
Slide 2: Strong first half performance
Half Year 2015/16 2 Strong first half performance (1) Total completions 7,626 +9% Gross margin 18.6% +1.2ppts PBT £295.0m +40% (2) ROCE 25.5% +3.9ppts (1) Includes joint ventures (‘JV’s’) in which the Group has an interest (2) Return on Capital Employed (‘ROCE’) is calculated as earnings before inte
Slide 3: Neil Cooper, Chief Financial Officer
Half Year 2015/16 3 Poppy Fields, Charing, Ashford Neil Cooper Chief Financial Officer
Slide 4: Profit & loss
Half Year 2015/16 4 Profit & loss £m (unless otherwise stated) H1 15/16 H1 14/15 Change Revenue 1,875.5 1,576.3 19.0% Gross profit 348.4 274.7 26.8% Gross margin 18.6% 17.4% 1.2ppts Total administrative expenses (46.6) (50.6) 7.9% Operating profit 301.8 224.1 34.7% Operating margin 16.1% 14.2% 1.9pp
Slide 5: Revenue breakdown
Half Year 2015/16 5 (1) Revenue breakdown H1 15/16 H1 14/15 Change Total completions 7,107 6,712 5.9% Total ASP (£’000) 254.2 229.2 10.9% Housing completions revenue (£m) 1,806.6 1,538.4 17.4% Other revenue (£m) 68.9 37.9 81.8% Total revenue (£m) 1,875.5 1,576.3 19.0% (1) Unless otherwise stated, al
Slide 6: Summary revenue drivers
Half Year 2015/16 6 Summary revenue drivers H1 15/16 H1 14/15 Change Completions Private 5,993 5,563 7.7% Affordable 1,114 1,149 (3.0%) Total 7,107 6,712 5.9% % Affordable 16% 17% (1ppt) (1) JV 519 259 100.4% Total completions (inc JV’s) 7,626 6,971 9.4% ASP (£’000) Private 281.1 253.2 11.0% Afforda
Slide 7: Operating margin bridge
Half Year 2015/16 7 Operating margin bridge 17.0% 16.5% 16.7% 16.0% 0.2% 0.2% 15.5% 0.3% 0.3% 15.0% 0.4% 14.5% 0.5% 14.0% 16.1% 13.5% 14.2% 13.0% 12.5% 12.0% H1 14/15 Legacy Private/ Product mix Volume Admin Net inflation H1 15/16 unwind affordable expenses & other mix
Slide 8: Cash flow
Half Year 2015/16 8 Cash flow 300 250 200 150 £m 100 50 0 -50 -100 -150 -200 Profit from Net Non- Other Subtotal Dividends Other Subtotal WIP & Land JV Net cash continued interest cash non- investing Part Ex. investment outflow operations & tax/ movements build & financing JV & working assoc. capita
Slide 9: Run down of legacy assets
Half Year 2015/16 9 Run down of legacy assets £m 31 December 2015 30 June 2015 31 December 2014 (1) Old land 218.3 259.7 344.9 (1) WIP on old land 182.6 210.4 297.1 Equity share 92.3 107.0 116.9 Equity share – JV 25.5 25.6 25.6 Commercial pre 2009 25.7 33.6 37.2 Total 544.4 636.3 821.7 (1) Old land
Slide 10: Completing the transformation to new land
Half Year 2015/16 10 (1) Completing the transformation to new land Total Average 100% ASP(2) gross Land type £k margin(2) 90% Impaired 155 c.8% old(3) 80% 70% Non impaired 206 c.10% % of total completions old(3) 60% 87% New(4) 263 c.22% 92% 96% 50% 40% 30% 20% 10% 9% 6% 4% 3% 1% 0% 2% FY16 (f) FY17
Slide 11: Landbank by land type
Half Year 2015/16 11 (1) Landbank by land type ASP £k 155 206 265 258 259 258 19,949 28% Number of plots 52,007 64% 46,296 976 4,735 7% 1% (2) (2) (2) Impaired old Non-impaired old Owned new Total owned Conditional Total Category of land (1) Analysis is based on landbank as at 31 December 2015 and o
Slide 12: Other finance matters
Half Year 2015/16 12 Other finance matters • Pensions balance sheet asset increased from £5.3m at year end to £19.6m • Effective tax rate at 19.0% versus 20.4% in comparable period • Interest in line with prior year: - non-cash interest increase of £2.1m - cash interest decrease of £2.0m • Sale of a
Slide 13: Guidance for FY16
Half Year 2015/16 13 Guidance for FY16 c. 15,750 (ex JV) Completions: c. 17% affordable c. 1,000 JV ASP: Total ASP in owned landbank of £258k Total admin expenses: c. £145m JV share of profits: c. £60m c. £58m Interest cost: (£25m cash, £33m non-cash) Land cash spend: c. £1bn Land creditors: c. 1/3
Slide 14: Steven Boyes, Chief Operating Officer
Half Year 2015/16 14 Montague Park, Wokingham Steven Boyes Chief Operating Officer
Slide 15: Further good progress in the half
Half Year 2015/16 15 Further good progress in the half • Strong demand across all our regions • Pricing trends remain positive • On track to rebalance completions • Focus on managing build costs • Continue to secure excellent land opportunities
Slide 16: Strong first half sales performance
Half Year 2015/16 16 Strong first half sales performance Private sales rate • Strong sales performance in the per active site per H1 15/16 H1 14/15 Change week first half Northern 0.60 0.56 +7.1% • Help to Buy at 32% of total Central 0.58 0.52 +11.5% completions East 0.65 0.55 +18.2% • Investor sale
Slide 17: Pricing trends remain positive
Half Year 2015/16 17 Pricing trends remain positive Private ASP (£’000) H1 15/16 H1 14/15 Change Northern 226.4 203.7 +11.1% Central 226.1 205.2 +10.2% East 275.1 258.0 +6.6% West 281.7 236.6 +19.1% Southern 356.5 342.1 +4.2% London 451.7 448.6 +0.7% Group 281.1 253.2 +11.0% • Good pricing trends ac
Slide 18: Barratt London – reservations by price band
Half Year 2015/16 18 Barratt London – reservations by price band (1) London private reservations – ASP bandings – 12 months to 31 Dec 2015 1% 5% 20% 74% £100k to £600k £600k to £1m £1m to £2m £2m+ • 90% of London completions in the half priced at £800 per sq ft or less (1) Including JV private reser
Slide 19: Barratt London – wide geographic spread
Half Year 2015/16 19 Barratt London – wide geographic spread London portfolio • Delivery in 16 London Boroughs (1) • Landbank plots : - Zone 1: 18% zone - Zone 2: 11% - Zone 3-5: 71% Live developments Future developments 1 Camden Courtyards 2 Chandos Way 3 High Street Quarter 4 Landmark Place 5 Lomb
Slide 20: Cost environment
Half Year 2015/16 20 Cost environment Build materials Labour • Minimal inflationary pressures on build cost • Labour cost increases in specific locations • Supply chain performing well • Cost increases starting to moderate • Centralised Group procurement and • Increased use of off-site manufacturing
Slide 21: Land model – driving returns, minimising risk
Half Year 2015/16 21 Land model – driving returns, minimising risk Operational Strategic Owned Conditional Target • c. 3.5 years • c. 1.0 year • c. 20% of completions in FY17 Plots • 52,007 • 19,949 • 11,492 acres ASP • £258k • £259k • n/a Key features • Consented • Consent expected within 6- • Viab
Slide 22: Efficient and flexible landbank
Half Year 2015/16 22 (1) Efficient and flexible landbank (2) Average site size (units) Owned landbank: • Total owned plots: 52,007 1% • Total sites: 523 11% • Barratt sites: 215 38% • David Wilson sites: 164 50% • Dual branded sites: 144 0-50 51-200 201-500 500+ (1) Based on owned landbank plots and
Slide 23: Operational land approvals – last 3 years
Half Year 2015/16 23 (1) Operational land approvals – last 3 years Northern Central East West Southern London Total No. of plots 14,576 11,140 9,184 7,585 12,097 4,035 58,617 approved Average site size 133 128 128 124 198 367 146 Social % 17% 25% 23% 30% 30% 23% 24% Government % 14% 22% 11% 31% 23%
Slide 24: Whetstone Park, Whetstone, Leicester
Half Year 2015/16 24 Whetstone Park, Whetstone, Leicester Land source: Strategic GDV: £39m Total units: 150 Private ASP: £319k Approved: May 2014 On site: August 2014 Expected completion: September 2018
Slide 25: St Andrews View, Morley, Leeds
Half Year 2015/16 25 St Andrews View, Morley, Leeds Land source: Strategic GDV: £37m Total units: 173 Private ASP: £239k Approved: April 2014 On site: July 2014 Expected completion: June 2018
Slide 26: Madden Gardens, Letchworth, Hertfordshire
Half Year 2015/16 26 Madden Gardens, Letchworth, Hertfordshire Land source: Private vendor GDV: £47m Total units: 159 Private ASP: £391k Approved: March 2014 On site: October 2014 Expected completion: June 2017
Slide 27: Increasing the contribution from strategic land
Half Year 2015/16 27 Increasing the contribution from strategic land Strategic land completions Strategic land targets 25% • Targeting c. 20% of total completions in FY17 21% c.20% 20% • Strategic portfolio of 11,492 acres(1) (276 locations) 17% • H1 15/16 – approved 4,624 strategic % of total compl
Slide 28: Operating model driving higher returns
Half Year 2015/16 28 Operating model driving higher returns • Maximising sales opportunity – balance of value and volume • On track to reposition our delivery profile • Actively managing build costs • Securing longer term land supply – at least meeting hurdle rates
Slide 29: David Thomas, Chief Executive
Half Year 2015/16 29 David Thomas The Gateway, Pickering, North Yorkshire Chief Executive Fairmilehead, Edinburgh
Slide 30: Market fundamentals remain attractive
Half Year 2015/16 30 Market fundamentals remain attractive • Demand continues to exceed supply • Strong Government support • Positive lending environment • Attractive land market • Limited competition from smaller housebuilders Old Merchant Taylors, Croxley Green
Slide 31: Demand continues to exceed supply
Half Year 2015/16 31 Demand continues to exceed supply 250,000 250,000 200,000 200,000 150,000 150,000 100,000 100,000 50,000 50,000 0 0 Housing output Household formation Data source: Department for Communities and Local Government. Numbers based on housing starts and projected household formation
Slide 32: Strong Government support continues
Half Year 2015/16 32 Strong Government support continues April 2013 November 2015 November 2015 HTB (Equity Loan) HTB Shared HTB (Equity Loan) value increased to Ownership product launched 40% in London launched October 2013 November 2015 November 2015 Starter Homes HTB (Mortgage HTB (Equity Loan) s
Slide 33: Increased lender competition driving low rates
Half Year 2015/16 33 Increased lender competition driving low rates Lender market share(1) Average mortgage rates(2) 4.0 2% 1% 4% 5% 4% 21% Mortgage rate (%) 4% 3.5 11% 29% 3.0 19% 2.5 Lloyds Nationwide Santander NatWest Woolwich Leeds 2.0 Skipton TSB Virgin Money Jan-14 Jan-15 Jan-16 Others Standar
Slide 34: Savills UK Residential Development Land
Savills UK Residential Development Land Index (100 = 2007 peak) (1) 20 40 60 80 0 100 120 Jan-83 Jan-85 Jan-87 Half Year 2015/16 Jan-89 Jan-91 Jan-93 Greenfield land Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Data source: VOA, Savills & Numis Research estimates Jan-05 Jan-07 Jan-09 House prices - UK Jan-11
Slide 35: Changing market share
Half Year 2015/16 35 Changing market share % 100% 90% 80% 59% 70% 60% 50% 40% 30% 28% 20% 10% 13% 0% 1-100 (SMEs) 101-2000 (Regional) 2000+ units (National) (1) Data source: NHBC. Size bands by % NHBC starts
Slide 36: Future focus
Half Year 2015/16 36 Future focus Targeted Highest level Industry Fast asset Construction land buying of customer leading sales turn model excellence strategy service & marketing Disciplined Improve key Attractive cash growth financial metrics returns
Slide 37: Group's medium term targets
Half Year 2015/16 37 Group’s medium term targets Targets for FY17 Gross margin Minimum 20% ROCE Minimum 25% c. 4.5 years land supply (ex JV) Landbank FY17 completions: c. 20% public sector, c. 20% strategic Year end net cash Maintain appropriate capital structure Average net debt c. £250m Land credi
Slide 38: New land continues to outperform hurdles
Half Year 2015/16 38 New land continues to outperform hurdles(1) (2) Gross margin ROCE Minimum hurdle rate 20% 25% Completed new land sites to date 21% 39% (1) Analysis based on sites from new land acquired since May 2009 that have been completed, totalling 181 sites and 13,823 plots (2) Site ROCE o
Slide 39: Strong cash returns
Half Year 2015/16 39 (1) Strong cash returns Ordinary Special cash Total capital Total pence per dividend payment return share (£m) (£m) (£m) Paid to date 221 100 321 32.2p Proposed payments Year to November 2016 180(2)(3) 125 305 30.5p(3) Year to November 2017 198(2)(3) 175 373 37.3p(3) Total propo
Slide 40: Current trading remains strong
Half Year 2015/16 40 Current trading remains strong H2 15/16 H2 14/15 Change to date to date Average net private reservations (1) 0.71 0.71 - per active site per week Average net private reservations 260 279 (6.8%) per week Total forward sales (2) £2,579.5m £2,275.3m 13.4% (including JV’s) (1) An ac
Slide 41: Positive on outlook
Half Year 2015/16 41 Positive on outlook • Strong consumer demand • Positive mortgage lending environment • Land market remains attractive • Build material cost pressures moderated Further good progress expected in FY16
Slide 42: Q&A
Half Year 2015/16 42 Q&A Trumpington Meadows, Trumpington, Cambridge Old Merchant Taylors, Croxley Green
Slide 43: Appendices
Half Year 2015/16 43 Appendices Old Leithfield Merchant Park, Godalming, Taylors, Surrey Croxley Green
Slide 44: Appendices
Half Year 2015/16 44 Appendices Page • Completions analysis – buyer type 45 • Completions analysis – product mix 46 • Balance sheet – landbank 47 • Approved land payment profile 48 • Land creditors payment profile 49 • Owned and conditional landbank by region 50 • Strategic landbank by region 51 • B
Slide 45: Completions analysis – buyer type
Half Year 2015/16 45 Completions analysis – buyer type 16% 17% Affordable 8% 8% Part exchange 33% 32% Help to Buy Investor 11% 10% Other private 31% 34% H1 14/15 H1 15/16
Slide 46: Completions analysis – product mix
Half Year 2015/16 46 Completions analysis – product mix 100% 8% 8% 4% 5% 80% 29% 31% 60% 34% 40% 33% 20% 12% 11% 13% 12% 0% H1 14/15 H1 15/16 Flats (non-London) 1 & 2 Bed 3 Bed 4 Bed 5 & 6 Bed Flats (London)
Slide 47: Balance sheet – landbank
Half Year 2015/16 47 Balance sheet – landbank 31 December 2015 31 December 2014 Landbank plots Owned / unconditional contracts 52,007 50,444 Conditional contracts 19,949 18,503 Total landbank plots 71,956 68,947 JV plots – owned / conditional 6,124 6,904 Total landbank plots (including JV’s) 78,080
Slide 48: Approved land payment profile
Half Year 2015/16 48 (1) Approved land payment profile 31 December 2015 Purchased Conditional Approved Total Plots 77,395 17,978 6,869 102,242 Value (£m)(2) 4,039 933 349 5,321 Payment profile (£m) Purchased Conditional Approved Total Paid to date 2,949 24 - 2,973 H2 15/16 343 189 40 572 FY17 378 24
Slide 49: Land creditors payment profile
Half Year 2015/16 49 Land creditors payment profile 1,100 1,000 1,025.8 900 310.1 800 700 600 £m 362.2 500 400 300 141.5 200 100 212.0 0 31-Dec-15 H2 15/16 FY17 FY18 FY19 & beyond
Slide 50: Owned and conditional landbank by region
Half Year 2015/16 50 Owned and conditional landbank by region Years supply(1) owned and conditional land Plots as at 31 6.2 December 2015 6.0 5.5 5.5 Owned land 52,007 5.2 5.2 5.0 4.9 4.9 4.6 JV 4.5 JV JV 4.6 Conditional 19,949 4.5 4.2 4.3 JV land JV 4.1 4.0 4.0 3.9 4.5 Total 71,956 3.5 controlled J
Slide 51: Strategic land bank by region
Half Year 2015/16 51 Strategic land bank by region 31 December 2015 Acres Locations Northern 3,465 93 Central 1,978 42 East 2,804 65 West 1,100 40 Southern 2,145 36 Group 11,492 276
Slide 52: Balance sheet – stock & WIP
Half Year 2015/16 52 Balance sheet – stock & WIP 31 December 2015 30 June 2015 31 December 2014 Units £m Units £m Units £m Stock (build complete) - Reserved 324 433 293 - Unreserved 409 425 505 - Showhomes 110 127 161 Total 843 141 985 153 959 139 Unreserved per active site 1.1 1.1 1.3 WIP 1,449 1,2
Slide 53: Investment in joint ventures and associates
Half Year 2015/16 53 Investment in joint ventures and associates £m 31 December 2015 30 June 2015 31 December 2014 Housebuilding London 154.0 124.6 127.4 Non-London 40.8 44.6 55.9 Total housebuilding 194.8 169.2 183.3 Other Commercial 2.8 5.1 4.8 Equity share joint venture 25.5 25.6 25.6 Associates
Slide 54: Joint ventures breakdown
Half Year 2015/16 54 Joint ventures breakdown Housebuild JV’s only FY16 (f’cast) FY15 FY14 (1) Completions - London c. 630 501 442 - Non-London c. 370 347 205 Total c. 1,000 848 647 % Affordable c. 21% 29% 9% (2) Share of profit - London c. £50m £35.5m £35.8m - Non-London c. £10m £10.1m £5.0m Total
Slide 55: Joint ventures – London
Half Year 2015/16 55 (1) Joint ventures – London Profit Private : Private share JV partner Total GDV Total units Affordable ASP (%) (%) Fulham Riverside, 50 : 50 L&Q £548m 468 £1,320k 86 : 14 Fulham Aldgate Place, 50 : 50 British Land £337m 463 £874k 67 : 33 Aldgate Nine Elms, 50 : 50 L&Q £563m 645
Slide 56: Joint ventures – non-London
Half Year 2015/16 56 (1) Joint ventures – non-London Profit Private : Housebuild only share JV partner Total GDV Total units Affordable (%) (%) The Acres, Horley 78.5 : 21.5 Wates £161m 511 78 : 22 Bluebell Gate, East Grinstead 50 : 50 Wates £50m 142 70 : 30 The Fieldings/ 50 : 50 Wates £84m 305 95
Slide 57: Net interest charge analysis
Half Year 2015/16 57 Net interest charge analysis £m H1 15/16 H1 14/15 Cash interest Interest on term debt and overdrafts 2.3 4.3 Interest on private placement notes 2.0 2.0 Utilisation / non-utilisation fees on RCF’s 2.3 3.2 Swap interest 3.6 3.6 Other interest 1.4 0.5 Total cash interest 11.6 13.6
Slide 58: Net interest charge analysis – non-cash
Half Year 2015/16 58 Net interest charge analysis – non-cash £m H1 15/16 H1 14/15 Non-cash interest Land creditors / deferred payables 18.7 17.2 Financing fees 1.5 1.6 Equity share (1.8) (2.5) Pension (0.2) (0.2) Total non-cash interest 18.2 16.1
Slide 59: Financing arrangements
Half Year 2015/16 59 Financing arrangements Loan Facility Amount Maturity Interest basis (1) (2) RCF facilities £700m December 2019 LIBOR +1.50% Private placement notes (3) £48m August 2017 8.1% - May 2011 Issue July 2019 (4) Pru M&G UK Companies Fund £100m 3m LIBOR +4.00% – July 2021 Get Britain Bu
Slide 60: Tax
Half Year 2015/16 60 Tax £m H1 15/16 H1 14/15 Profit before tax 295.0 210.2 Tax Current 57.7 35.7 Deferred 0.4 7.2 Impact of rate change on deferred tax (2.0) - Tax charge 56.1 42.9 Effective tax rate 19.0% 20.4%
Slide 61: Forward sales analysis – owned
Half Year 2015/16 61 Forward sales analysis – owned 21 February 2016 22 February 2015 Change Value (£m) - Private 1,564.1 1,377.5 13.5% - Affordable 523.4 439.6 19.1% - due in H2 (£m) 1,570.2 1,419.3 10.6% - due after H2 (£m) 517.3 397.8 30.0% Total value 2,087.5 1,817.1 14.9% Plots - Private 5,169
Slide 62: Forward sales analysis – joint ventures
Half Year 2015/16 62 (1) Forward sales analysis – joint ventures 21 February 2016 22 February 2015 Change Value (£m) - Private 406.0 314.3 29.2% - Affordable 86.0 143.9 (40.2%) - due in H2 (£m) 395.0 152.3 159.4% - due after H2 (£m) 97.0 305.9 (68.3%) Total value 492.0 458.2 7.4% Plots - Private 684
Slide 63: Disclaimer
Half Year 2015/16 63 Disclaimer This document has been prepared by Barratt Developments PLC (the “Company”) solely for use at a presentation in connection with the Company's Half Year Results Announcement in respect of the six months ended 31 December 2015. For the purposes of this notice, the prese
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