Berkeley Group Holdings Plc · LSE:BKG
Berkeley — H1 2011/12 Earnings Presentation
47 slides from Berkeley's earnings presentation, Dec 2, 2011
Slide 1: Interim Results Presentation
Interim Results Presentation Half Year ended 31 October 2011 2 December 2011
Slide 2: Format of presentation
Format of presentation Chairman Tony Pidgley Finance Director Nick Simpkin Managing Director Rob Perrins Questions
Slide 3: Tony Pidgley
B; Berkeley Se Group TONY PIDGLEY CHAIRMAN
Slide 4: Half year highlights
Half year highlights 1. Strong trading performance 2. Shareholder support for return of £13 per share 3. Continued investment in Land and Build 4. Balance sheet strength retained 5. Continued evolution of Board
Slide 5: Nick Simpkin
NICK SIMPKIN FINANCE DIRECTOR
Slide 6: Review of interim results
Review of interim results • Summary of performance • Summary of financial position • Income statement • Homes completed and ASP • Abridged cash flow • Abridged balance sheet • Inventories • Creditors • Land holdings
Slide 7: Summary of performance
Summary of performance 6 months to 6 months to Oct 2011 Oct 2010 Change Pre-exceptional operating profit £76.4m £58.6m + £17.8m + 30.4% Pre-exceptional operating margin 18.9% 17.4% Profit before tax £101.1m £61.6m + £39.5m + 64.1% EPS – Basic 56.7p 33.5p + 23.2p + 69.3% Weighted ave. no. of shares 1
Slide 8: Summary of financial position
Summary of financial position Oct 2011 Apr 2011 Change Shareholders’ funds £1,010.0m £929.4m + £80.6m + 8.7% Net asset value per share 770.8p 709.2p + 61.6p + 8.7% Shares in issue 131.0m 131.0m - Closing net cash £13.9m £42.0m - £28.1m Land bank - Plots 26,404 27,026 - 622 - Gross margin £2,462m £2,
Slide 9: Income statement (1)
Income statement (1) 6 months to 6 months to Oct 2011 Oct 2010 Change £m £m £m Revenue 404.9 336.2 + 68.7 + 20.4% Gross profit 116.5 28.8% 93.3 27.8% + 23.2 + 24.9% Overheads (40.1) 9.9% (34.7) 10.3% - 5.4 + 15.6% Pre-exceptional operating profit 76.4 18.9% 58.6 17.4% + 17.8 + 30.4% Exceptional prof
Slide 10: Exceptional profit on disposal of subsidiary
Exceptional profit on disposal of subsidiary In HY01 Berkeley disposed of its 51% shareholding in Winstanley 1 Limited. Oct 2011 £m Berkeley’s share of proceeds 75.7 Net assets disposed (44.2) Share of transaction costs (0.8) Exceptional profit 30.7
Slide 11: Income statement (2)
Income statement (2) 6 months to 6 months to Oct 2011 Oct 2010 Change £m £m £m Operating profit 107.1 58.6 + 48.5 +82.8% Net finance (costs)/income (4.4) 1.8 - 6.2 Joint ventures (1.6) 1.2 - 2.8 Profit before tax 101.1 61.6 + 39.5 + 64.1% Tax (27.1) 26.8% (17.4) 28.2% - 9.7 Profit after tax 74.0 44.
Slide 12: Homes completed and ASP
Homes completed and ASP Units ASP Units ASP 2011/12 HY01 1,506 £254,000 St Edward Homes 100 £170,000 2010/11 HY02 1,295 £280,000 2,544 £271,000 2010/11 HY01 1,249 £262,000 St Edward Homes 164 £251,000 2009/10 HY02 1,287 £238,000 2,201 £263,000 2009/10 HY01 914 £299,000 2008/09 HY02 533 £388,000 1,50
Slide 13: Abridged cash flow
Abridged cash flow 6 months to 6 months to Oct 2011 Oct 2010 £m £m Profit after tax 74.0 44.2 Increase in inventory – land (115.0) (211.8) Increase in inventory – build WIP & stock (59.2) (104.3) Transfer from inventory to rental fund (23.2) - Increase in land creditors 80.5 171.1 Other working capi
Slide 14: Abridged balance sheet
Abridged balance sheet Oct 2011 Movements Apr 2011 £m £m £m Non-current assets - Intangible assets 17.2 - 17.2 - Investment properties 51.8 23.2 28.6 - Investment in JV’s 37.8 (0.9) 38.7 - Other non-current assets 33.4 3.9 29.5 Inventories 1,787.4 174.2 1,613.2 Debtors 72.7 (24.0) 96.7 Creditors (1,
Slide 15: Investment properties
Investment properties No. Total number of properties to be transferred 896 Properties transferred at 31 October 2011 364 Properties still to be transferred 532 31 Oct 2011 Net book value of properties £51.8 million Market Value £80.2 million Gross running yield on Market Value 5.5%
Slide 16: Inventories
Inventories Oct 2011 Movements Apr 2011 £m £m £m Land not under development 388.0 71.4 316.6 Work in progress: Land cost 675.5 43.6 631.9 1,063.5 115.0 948.5 Work in progress: Build cost 664.5 48.8 615.7 Completed units 59.4 10.4 49.0 1,787.4 174.2 1,613.2
Slide 17: Creditors
Creditors Oct 2011 Movements Apr 2011 £m £m £m Trade creditors and accruals 307.8 8.0 299.8 Deposits and on account receipts 448.5 (23.5) 472.0 Land creditors 146.9 80.5 66.4 Current tax liability 101.0 7.1 93.9 Total creditors 1,004.2 72.1 932.1 Land creditors Land creditors < 6 months 89.7 74.3 15
Slide 18: Land holdings
Land holdings Oct 2011 Variance Apr 2011 Owned 26,101 - 764 26,865 Contracted 295 + 148 147 Agreed 8 -6 14 Plots * 26,404 - 622 27,026 Sales value £8,712m + £577 £8,135m Average selling price £330k + £29k £301k Average plot cost £51k + £7k £44k Land cost % 15.5% + 0.9% 14.6% Gross margin £2,462m + £
Slide 19: Rob Perrins
ROB PERRINS MANAGING DIRECTOR
Slide 20: Performance Highlights
Performance Highlights − 20.8% ROE − £115 million land investment above replacement value − Continued financial strength – ungeared − Forward sales up 15.2% to £937 million
Slide 21: Operational Plan - May 2010
Operational Plan - May 2010 5 year Implied Operational Target Outcome 12.5% compound ROE Double PBT from £110 million to £220 million by April 2015 10.0% compound land bank Increase land bank from £2 billion growth to £3 billion by April 2015
Slide 22: Operational Plan - May 2010
Operational Plan - May 2010 The original targets set in May 2010 reflected: − GDP had shrunk 6.2% from peak to trough − Forecast of 1.0% GDP growth in 2010 − Political uncertainty pending election − 2.5 million unemployed (Q1 2010) forecast to rise to 2.65 million by (Q1 2011) − Housing market had f
Slide 23: Operational Plan – first 18 months
Operational Plan – first 18 months 5 Year FY 2010/11 HY 2010/11 Operational Target (Actual) (Actual) ROE 12.5% 15.3% 20.8% Land Bank 10.0% 13.1% 6.9% Growth (6 months)
Slide 24: Strategic 10 Year Plan
Strategic 10 Year Plan In June 2011, we announced a plan to return £13 per share over 10 years: ROE Implied Performance Impact on 10 Year Plan − c. £10 per share delivered earnings 15.0% − c. £3 per share reduction in balance sheet − £13 per share delivered by earnings 18.5% − No reduction in balanc
Slide 25: Operating strategy
Operating strategy − Protect the value in the balance sheet − Control release of schemes to build − Match operational risk with the market conditions − Add value to the land bank − Invest in the right point in the cycle − People, structure and natural size
Slide 26: Protecting value on the balance sheet
Protecting value on the balance sheet − Securing planning consents − Controlling our assets − Intensive management − Maintain balance sheet strength − Maintain low financial risk
Slide 27: Protecting value on the balance sheet: planning consents
Protecting value on the balance sheet Planning consents: Resolution to grant planning since April 2008: No. H1 2011/12* 2,000 FY 2010/11 6,500 FY 2009/10 7,000 FY 2008/09 4,500 20,000 *Includes Carnwath Road, Fulham Reach, Battersea Reach, Kew Bridge consented in H1 2010/11
Slide 28: Protecting value on the balance sheet
Protecting value on the balance sheet − Securing planning consents − Controlling our assets − Intensive management − Maintain balance sheet strength − Maintain low financial risk
Slide 29: Operating strategy
Operating strategy − Protect the value in the balance sheet − Control release of schemes to build − Match operational risk with the market conditions − Add value to the land bank − Invest in the right point in the cycle − People, structure and natural size
Slide 30: Under Construction and Future Sites: London
Under Construction and Future Sites in London at 31 October 2011 The Berkeley Group Holdings pic London Under Construction BEGEBERBERBEOSSOCone London Future Sites trand BEE EERE ERERE
Slide 31: Under Construction and Future Sites: South East
Under Construction and Future Sites in the South East at 31 October 2011 fa Sey Group a a a i a R a (i LONDON a Py 5 om Wa i a oO Out of London Under Construction Basingst Bez E STS TS RES TST SETS] S15] 5) 5] 3] SP SPEISIE]Sfolal~fololajulu[ | Out of London Future Sites
Slide 32: Operational status
Operational status London South Total East Delivery of Developments: In construction No. sites 35 29 64 Not in construction No. sites 15 17 32 Total Developments No. sites 50 46 96 Planning: Detailed consent No. sites 35 29 64 Resolution to grant No. sites 8 4 12 No current consent No. sites 7 13 20
Slide 33: Operating strategy
Operating strategy − Protect the value in the balance sheet − Control release of schemes to build − Match operational risk with the market conditions − Add value to the land bank − Invest in the right point in the cycle − People, structure and natural size
Slide 34: Market Conditions (1)
Market Conditions (1) Demand has been strong for properties in: − Best locations − Build quality − Well presented Continued International demand − London centric (zones 1 and 2) − Circa 40% of private sales volumes − Berkeley has completed >100 overseas exhibitions
Slide 35: Market Conditions (2)
Market Conditions (2) Market Drivers − London as a world city − Lack of supply in best locations − Property is a stable asset class – wealth preservation − Relative weakness of Sterling − London and South East economy is stronger than balance of UK − Rental demand and positive yields are attractive
Slide 36: Operating strategy
Operating strategy − Protect the value in the balance sheet − Control release of schemes to build − Match operational risk with the market conditions − Add value to the land bank − Invest in the right point in the cycle − People, structure and natural size
Slide 37: Adding value to the land bank
Adding value to the land bank 1. New land acquisition 2. Optimising existing land bank − Bulk and massing on schemes − Change of use reclassification − Affordable housing − Placemaking − Brand 3. St Edward 4. Strategic land 5. Regeneration land
Slide 38: Operating strategy
Operating strategy − Protect the value in the balance sheet − Control release of schemes to build − Match operational risk with the market conditions − Add value to the land bank − Invest in the right point in the cycle − People, structure and natural size
Slide 39: Investment Strategy
Investment Strategy Criteria Land - Counter cyclical strategy - Acquire where Berkeley can add value - Achieve hurdle rates on absolute return and Return on Capital - Acquire to a backstop Build - Match with forward sales - Balanced with earnings and dividend policy - Potential to bring forward sche
Slide 40: Investment in Build
Investment in Build Delivery of Key London Schemes Current estimated Likely No. year of Period Units st 1 revenues of delivery St George Tower 223 2015 3 years Riverlight 750 2016 7 years Chelsea Creek 889 2012 10 years One Tower Bridge 396 2016 6 years Kensington High Street* 529 2015 7 years Ebury
Slide 41: Operating strategy
Operating strategy − Protect the value in the balance sheet − Control release of schemes to build − Match operational risk with the market conditions − Add value to the land bank − Invest in the right point in the cycle − People, structure and natural size
Slide 42: People and Structure
People and Structure {6} Berkeley (5 Berkeley eet’ GFOUp Berkeley A Ste George StJames |g) StEdward — Berkeley irst
Slide 43: People and Structure
People and Structure − Chairman − Deputy Chairman Board − 5 Executive Directors − 6 Independent Non Executive Directors Brands − 5 Core Brands − 18 autonomous teams Operating Teams − Three new teams created (Eastern, Three Valleys, Rental Fund) − 1,100 employees (2008: 700) People − 7,000 contractor
Slide 44: Outlook
Outlook Risks − Macro economic uncertainty − Slowing growth − Credit restrictions Positives − London is a world city − Restricted supply − Brand − Weakness of Sterling − Property as wealth protection
Slide 45: Operating Guidance
Operating Guidance 2011/12 − Aim to maintain H1 ROE at c. 20.0% for full year including exceptional profit on sale of subsidiary − Land bank growth c.8-10% (opportunity led) 2012/13 − Aim to deliver ROE of c. 18.5% to achieve original 5 year plan target 2 years early − Land bank growth c.8% (opportu
Slide 46: Strategic Guidance
Strategic Guidance − Dividends no later than £ 30th September 2015 4.34 30th September 2018 4.33 30th September 2021 4.33 13.00 − If ROE is maintained at c. 18.5% £13 per share will be delivered from future earnings. − Dividend dates dependent on quality and timing of investment opportunities
Slide 47: Questions
Questions Tony Pidgley Chairman Rob Perrins Managing Director Nick Simpkin Finance Director
Berkeley Group Holdings — H1 2011/12 Earnings Presentation on 6ix