Taylor Wimpey Plc · LSE:TW.
Taylor Wimpey — H1 2017 Earnings Presentation
64 slides from Taylor Wimpey's earnings presentation, Aug 1, 2017
Slide 1: Half Year Results Presentation
Half Year Results Presentation for the half year ended 2 July 2017 1 August 2017
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 H1 2017 overview and operations Pete Redfern Strong financial performance Ryan Mangold Current trading and strategy Pete Redfern 3
Slide 4: H1 2017 overview and operations
H1 2017 overview and operations Pete Redfern Chief Executive
Slide 5: Group financial highlights
Group financial highlights Return on net operating assets* Total dividends paid/declared 30.8 c.500 500 c.451 30 25.2 23.2 400 356 20 300 £m % 200 10 100 0 0 2015 H1 2016 H1 2017 H1 2016 2017 2018 2016-2018 medium term target: 2016-2018 medium term target: Average of 30% Total £1.3bn over period H1
Slide 6: UK operating highlights
UK operating highlights £2,111m 1.45 £65.5k (H1 2016: £2,156m) (H1 2016: 1.25) (H1 2016: £59.7k) Total value of Net operating asset Contribution per period end order turn* completion* book† 0.87 20.3% 5,166 (H1 2016: 0.78) (H1 2016: 19.3%) (H1 2016: 5,782) Private net sales rate Operating Plots conv
Slide 7: UK market performance
UK market performance H1 2017 H2 2016 H1 2016 H2 2015 H1 2015 Average outlets open 292 286 294 300 302 Private sales rate (net) 0.87 0.65 0.78 0.66 0.78 Private sales price £000 289 279 271 273 257 Cancellation rate (private) 11% 14% 12% 13% 11% Private sales rate H1 2017 c.12% higher than H1 2016
Slide 8: Central London market performance
Central London market performance H1 2017 H2 2016 H1 2016 H2 2015 H1 2015 Average outlets open 8 8 9 8 8 Private sales rate (net) 0.41 0.42 0.29 0.87 0.53 Private sales price £000 1,147 863 1,011 845 1,202 Cancellation rate (private) 18% 14% 24% 12% 5% Central London trading in H1 2017 broadly in
Slide 9: UK land pipeline
UK land pipeline 2 July 2017 31 Dec 2016 Plots Owned Controlled Total Total Detailed planning 40,940 4,171 45,111 43,860 Outline planning 13,579 6,007 19,586 21,888 Resolution to grant 1,273 10,533 11,806 10,486 Short term 55,792 20,711 76,503 76,234 Short term with 40,408 - 40,408 38,778 implementa
Slide 10: Continuous business improvement
Continuous business improvement Health and Business Customer People and Product and safety operating service resources production methods 10
Slide 11: Customer service
Customer service Statistics* - “Recommend” score H1 2017 at 87.8% 95% 90% HBF 5* Seeing steady improvement in customer 85% service scores 80% HBF 4* Embedding culture and processes takes time, but trend is encouraging 75% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 2017 Leasehold
Slide 12: Employee survey 2017
Employee survey 2017 Employee ‘Talkback’ survey sought feedback on a wide range of issues High response rate of 72%, up from 55% in 2015, includes 65% of site based employees Generally very positive results including; Engagement – “I am willing to go the extra mile for my team and Taylor Wim
Slide 13: Strong financial performance
Strong financial performance Ryan Mangold Group Finance Director
Slide 14: Summary Group results
Summary Group results £m (before exceptional H1 2017 H1 2016 Change FY 2016 items) Revenue 1,727.5 1,457.2 18.5% 3,676.2 Gross profit 444.0 363.8 22.0% 940.4 Gross profit margin % 25.7 25.0 0.7ppt 25.6 Operating profit* 349.0 279.1 25.0% 764.3 Operating profit* margin % 20.2 19.2 1.0ppt 20.8 Profit
Slide 15: UK performance summary
UK performance summary H1 2017 H1 2016 Change FY 2016 Legal completions – excl JVs 6,580 6,019 9.3% 13,808 Private 5,219 4,835 7.9% 11,145 Affordable 1,361 1,184 14.9% 2,663 Average selling price – excl JVs 253 238 6.3% 255 Private £000 287 266 7.9% 286 Affordable £000 123 125 (1.6)% 124 Legal compl
Slide 16: Indicative movements in UK operating profit margin
Indicative movements in UK operating profit* margin Annual Impact on H1 2017 H1 2016 to H1 2017 change income statement Market inflation on selling prices c.3.7%** 2.4% Market inflation on build cost c.3.5% (2.0)% Net economic benefit captured 0.4% Market impact of landbank evolution (1.8)% Net mark
Slide 17: Exceptionals and tax
Exceptionals and tax Exceptional item - £130m, before tax, provided for leasehold. We view this as an appropriate estimate, and in line with prior guidance No NRV release/write-off given stability and low level of NRV sites Pre-exceptional underlying tax rate of 19.1% (H1 2016: 20.0%) Expect
Slide 18: Summary Group balance sheet
Summary Group balance sheet Group £m 2 July 2017 3 July 2016 Change 31 Dec 2016 Long term assets and JVs 81.0 65.4 23.9% 74.8 Land 2,593.9 2,881.7 (10.0)% 2,652.5 WIP 1,461.3 1,396.8 4.6% 1,331.5 Debtors 230.6 231.9 (0.6)% 178.6 Land creditors (526.1) (656.3) (19.8)% (599.8) Other creditors (901.6)
Slide 19: UK landbank
UK landbank Land cost in short term owned landbank is 15.1% of ASP (H1 2016: 16.3%), supported by strategic pipeline conversions Land cost as % of ASP on H1 2017 approvals – 17.8% Potential revenue in the landbank at 2 July 2017 was £43 billion (3 July 2016: £42 billion), comprising short term
Slide 20: Quality of land acquisitions
Quality of land acquisitions Land approvals in the period 35% 34% 33% Average Site based ROCE* 32% 31% 30% 29% 28% 27% 26% 23.0% 24.0% 25.0% 26.0% 27.0% 28.0% Average contribution margin* 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 H1 Acquisition margins and ROCE metrics continue to improve Mai
Slide 21: Managing UK working capital
Managing UK working capital WIP cash spend vs P&L charge 2,500 70% % of next 12 months completions 60% 2,000 50% 1,500 £m 40% 1,000 30% 20% 500 10% 0 0% H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 Development & construction costs in WIP P&L charge (direct build costs) in previous 12 months Cash spend in pre
Slide 22: Pensions
Pensions Movement in present value of defined benefit obligation Total UK £m H1 2017 FY 2016 FY 2015 FY 2014 Brought forward 232.7 177.1 182.4 182.2 Administration cost 1.7 3.3 3.2 3.1 Interest cost 3.1 6.1 6.0 7.5 Employer contributions* (14.1) (23.1) (23.1) (36.3) Net asset growth (62.9) (271.4) 7
Slide 23: Managing cash through the cycle
Managing cash through the cycle 300 UK EBITLA per unit 45% 250 40% £'000 / unit 200 35% 150 30% 100 50 25% 0 20% 2012 2013 2014 2015 2016 2017 H1 Margin * Land Cost (net) Build Cost Direct Selling Expenses Overhead Costs EBITLA % of ASP Turning profit into cash 1,000 75.1 75.7 76.2 76.5 80 70.6 800
Slide 24: Dividend payment profile
Dividend payment profile Change Paid (or to be paid) per share (pence) FY 2018*** FY 2017 FY 2016 FY 2016 to FY 2017 Ordinary dividend* c.4.9 4.6 1.7 171% Special dividend** c.10.4 9.2 9.2 0% Total c.15.3 13.8 10.9 27% Change Paid (or to be paid) (£m) FY 2018*** FY 2017 FY 2016 FY 2016 to FY 2017 Or
Slide 25: Summary
Summary Focus on delivery of 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 Maintain balance sheet discipline Group
Slide 26: Current trading and strategy
Current trading and strategy Pete Redfern Chief Executive
Slide 27: UK market performance – to date
UK market performance – to date H2 2017 (w/e 23 H1 2017 H2 2016 H1 2016 H2 2015 H1 2015 July 2017) Average outlets open 295 292 286 294 300 302 Private sales rate 0.71 0.87 0.65 0.78 0.66 0.78 (net) Private sales price 287 289 279 271 273 257 £000 Cancellation rate 14% 11% 14% 12% 13% 11% (private)
Slide 28: UK market performance
UK market performance Customer interest – organic website visits Website calls 150,000 10,000 120,000 8,000 90,000 6,000 60,000 4,000 30,000 2,000 0 0 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 201
Slide 29: Mortgage lending
Mortgage lending Overall cost of borrowing remains at very low levels January July January July 2-year fixed rates 2016 2016 2017 2017 HTB equity loan 1.74% – 2.19% 1.74% - 1.99% 1.64% – 1.89% 1.39% – 1.87% 85% LTV (new 1.99% 1.74% - 1.89% 1.74% 1.52% build) Appetite of lenders in 2017 remains s
Slide 30: Politics and economic environment
Politics and economic environment Brexit negotiations and General Election have increased political uncertainty No impact on trading but alert to risk of potential change in customer confidence Tone and policy on housing remains positive from both Conservative and Labour parties Key factors
Slide 31: Central London
Central London Trading in H1 2017 has been stable and in line with January expectations Customer confidence has improved Prices on our schemes are stable and have reduced by less than we anticipated We haven’t agreed new land deals since late 2015 – we will have developed the majority of our
Slide 32: Dividends
Dividends We announce a special dividend for 2018 of £340m today. Total dividends paid 2016-18 will stand at c.£1.3bn, in line with target It is our intention and expectation to continue to make material capital returns to shareholders beyond 2018. Specific details on future capital returns for
Slide 33: Taylor Wimpey strategic priorities
Taylor Wimpey strategic priorities Medium to long term focused strategy, balancing growth, capital structure, returns to shareholders and risk Sustainable, high-quality growth Maintain and develop land strategy Continuous improvement in landbank quality Maintain short term scale in the 75-
Slide 34: Outlook and summary
Outlook and summary H1 2017 trading has been very positive and we are on track with FY17 expectations 2018 special dividend confirms total return of £1.3bn over 2016-18, in line with target. Capital returns to continue in 2019 and beyond Without a major change in interest rates or lending, we
Slide 35: ple
35 ple Wimpey |
Slide 36: Future investor communications
Future investor communications 13 November 2017 Trading update 10 January 2018 Trading update 28 February 2018 Full year results 26 April 2018 AGM & Trading update 31 July 2018 Half Year results 36
Slide 37: Appendices
Taylor Wimpey plc Half Year Results Presentation for the half year ended 2 July 2017 Appendices
Slide 38: Summary income statement
Summary income statement* Group £m H1 2017 H1 2016 Change FY 2016 Revenue 1,727.5 1,457.2 18.5% 3,676.2 Cost of sales (1,283.5) (1,093.4) 17.4% (2,735.8) Gross profit 444.0 363.8 22.0% 940.4 Net operating expenses (99.4) (84.6) 17.5% (177.3) Profit on ordinary activities 344.6 279.2 23.4% 763.1 befo
Slide 39: Cash flow summary
Cash flow summary Group £m H1 2017 FY 2016 H2 2016 H1 2016 Profit from ordinary activities before finance costs* 214.6 762.6 481.2 281.4 (Increase) / decrease in inventories (137.2) (113.3) 237.7 (351.0) Other operating items** 128.8 (27.1) (56.3) 29.2 Cash generated / (used) by operations 206.2 622
Slide 40: Group segmental analysis
Group segmental analysis H1 2017 H1 2016 FY 2016 Operating Operating RONOA* Operating Operating RONOA* Operating Operating RONOA* profit* profit* % profit* profit* % profit* profit* % £m margin £m margin £m margin % % % North 144.8 22.8 34.3 136.9 23.6 33.1 280.0 22.6 34.4 Central and South 130.5 24
Slide 41: North Division
North Division Scotland, North West North North North East and West Division Division As at 2 July and Yorkshire Midlands H1 2017 FY 2016 Number of outlets 71 73 144 150 Private sales rate (net) 0.85 0.73 0.79 0.68 Completions 1,534 1,437 2,971 5,988 Average selling price on 209 218 213 207 completi
Slide 42: Central and South West Division
Central and South West Division Central and Central and East and Wales and South West South West Central West Division Division As at 2 July H1 2017 FY 2016 Number of outlets 52 43 95 84 Private sales rate (net) 0.98 0.99 0.98 0.75 Completions 1,080 1,129 2,209 4,810 Average selling price on 270 211
Slide 43: London and South East Division including Central London
London and South East Division including Central London London and London and South East South East South East, excl. London Division inc. Division inc. London market† market† Central London Central London As at 2 July HY 2017 FY 2016 Number of outlets 39 18 57 51 Private sales rate (net) 0.94 0.84
Slide 44: Movement in Group net assets
Movement in Group net assets H1 2017 rolling H1 2016 rolling Breakdown of 12 months 12 months movement £m £m Opening net assets 2,592.2 2,417.0 N/A Pre-exceptional net earnings 647.5 505.3 25.0% Net impact of exceptional items (107.6) 9.9 (4.2)% Actuarial gains / (losses) after tax 30.8 (1.6) 1.2% N
Slide 45: UK net operating assets
UK net operating assets £m 2 Jul 2017 3 Jul 2016 31 Dec 2016 Fixed assets 26 24 24 Investment in JVs 55 41 50 Land 2,503 2,777 2,574 WIP 1,401 1,366 1,288 Total inventories 3,904 4,143 3,862 Debtors 228 225 177 Land creditors (501) (640) (577) Other creditors (832) (875) (779) Total creditors (1,333
Slide 46: Financing
Financing Net cash at 2 July 2017 is £429.0 million (31 December 2016: £364.7 million, 3 July 2016: £116.7 million) Adjusted gearing (net debt plus land creditors) – 3.5% (31 December 2016: 8.1%, 3 July 2016: 19.9%) Average net cash of £223.8 million (31 December 2016: £87.4 million net debt,
Slide 47: Finance charges
Finance charges £m H1 2017 H1 2016 Change FY 2016 Financial indebtedness 2.8 5.4 (48.1)% 10.9 Land creditor unwind 10.0 8.5 17.6% 17.7 Pensions 3.1 3.2 (3.1)% 6.1 Other (1.5) (4.3) (65.1)% (3.1) Total 14.4 12.8 12.5% 31.6 47
Slide 48: UK land commitments
UK land commitments At 31 At 2 Jul £m < 1 yr 1-2 yrs 2-5 yrs 5+ yrs Dec 2017 2016 Committed cash payments in respect of unconditional 256 148 114 16 534 607 land contracts Expected cash payments in respect of conditional land 137 42 53 6 238 255 contracts Included in unconditional land contracts a
Slide 49: UK land portfolio ‒ net cost
UK land portfolio ‒ net cost 2 Jul 2017 31 Dec 2016 £m Owned Controlled Total Total Detailed planning 1,696 16 1,712 1,757 Outline planning 492 32 524 530 Resolution to grant 52 35 87 62 Sub-total 2,240 83 2,323 2,349 plots 55,792 20,711 76,503 76,234 Strategic 99 58 157 195 plots 27,604 77,415 105,
Slide 50: UK short term landbank
UK short term landbank 90,000 5,166 (6,667) - 80,000 2,828 - (650) 76,234 (408) 76,503 Plots 70,000 60,000 50,000 31 Dec 2016 Plots acquired Strategic land Completions inc. Land sales Review and 2 Jul 2017 conversion JVs scope changes Movement in period 50
Slide 51: UK strategic pipeline
UK strategic pipeline 120,000 2,992 (5,166) 108,016 (823) 105,019 100,000 Plots 80,000 60,000 31 Dec 2016 Plots acquired Strategic land Land sales Review and scope 2 Jul 2017 conversion changes Movement in period 51
Slide 52: North Division – land
North Division – land Scotland, North West North North North East and West Division Division and Yorkshire Midlands H1 2017 FY 2016 As at 2 Jul Short term owned and controlled land portfolio plots 14,969 13,728 28,697 29,028 Land portfolio years 4.8 4.5 4.7 4.8 Cost per plot £000* 27.5 31.4 29.3 29.
Slide 53: Central and South West Division – land
Central and South West Division – land Central and Central and East and Wales and South West South West Central West Division Division As at 2 Jul H1 2017 FY 2016 Short term owned and controlled 17,928 15,394 33,322 31,940 land portfolio plots Land portfolio years 7.1 6.3 6.7 6.6 Cost per plot £000*
Slide 54: London – land
London and South East Division including Central London – land London and London and South South East South East, excl. London East Division inc. Division inc. London market† market† Central London Central London FY 2016 As at 2 Jul H1 2017 Short term owned and controlled 10,814 3,670 14,484 15,266
Slide 55: Land disposals
Land disposals £m H1 2017 H1 2016 FY 2016 Proceeds UK 23.2 9.3 48.1 Spain 0.6 - - Total 23.8 9.3 48.1 Gross profit UK 8.5 3.3 11.8 Spain (0.3) - - Total 8.2 3.3 11.8 Land disposals are included in revenue and cost of sales 55
Slide 56: Real house prices
Real house prices £250,000 £200,000 £150,000 £100,000 £50,000 £0 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 56
Slide 57: FTB mortgage payments as % of pay / interest rates
FTB mortgage payments as % of pay / interest rates 100% 16 90% 14 80% 12 70% % of take home pay Interest rate % 10 60% 50% 8 40% 6 30% 4 20% 2 10% 0% 0 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Interest rate London UK Source: Nationwide / Bank of Engla
Slide 58: UK product mix
UK product mix Private 2017 2016 2015 completions H1 FY H2 H1 FY H2 H1 Apartments 15% 14% 17% 10% 13% 15% 11% 1 / 2 / 3 bed houses 48% 47% 47% 48% 47% 46% 49% 4 / 5 / 6 bed houses 37% 39% 36% 42% 40% 39% 40% Total 100% 100% 100% 100% 100% 100% 100% Data based on completions excluding JVs 58
Slide 59: UK sales performance
UK sales performance H2 2017 (w/e 23 July H1 2017 H2 2016 H1 2016 2017) Average outlets open 295 292 286 294 Average sales rate (net) 0.78 1.02 0.90 0.95 Average selling price £000 270 265 235 246 H2 2017 (w/e 23 July 2 July 2017 31 Dec 2016 3 July 2016 As at 2017) Total order book value £m 2,224 2,
Slide 60: Spain financial summary
Spain financial summary H1 2017 H1 2016 Change FY 2016 Average number of active sites 18 18 0.0% 19 Legal completions 68 53 28.3% 304 Average selling price (£000) 342 266 28.6% 303 Average selling price (€000) 394 342 15.2% 358 Revenue £m 24.6 14.8 66.2% 93.6 Operating profit* £m 2.8 0.3 833.3% 20.6
Slide 61: UK customer segmentation
UK customer segmentation 2017 2016 2015 Total reservations H1 FY H2 H1 FY H2 H1 First time buyers 42% 38% 34% 41% 36% 33% 39% Second time buyers 40% 36% 34% 38% 37% 36% 38% Affordable 14% 23% 29% 17% 20% 24% 16% Investor 4% 3% 3% 4% 7% 7% 7% Total 100% 100% 100% 100% 100% 100% 100% Help to Buy* 45%
Slide 62: Capital allocation
Capital allocation Net operating Net operating assets* – assets* – H1 2017 H1 2017 cap delivery North £830m £812m Central and £890m £806m South West London and South East, including £1,160m £1,093m Central London * See definitions slide in the appendix 62
Slide 63: Rent vs buy
Rent vs buy Monthly Cost of Buying / Renting a comparable Taylor Wimpey Property £400 £300 £200 £100 £- £(100) £(200) Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Cheaper to Service Mortgage Cheaper to Rent Cost of buying: based on average quoted mortgag
Slide 64: 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