1 Overview and current trading Clive Fenton Review of operations - PowerPoint PPT Presentation

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Overview and current trading Clive Fenton Review of operations John Tonkiss Financial results Rowan Baker Business outlook Clive Fenton 2

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760 legal completions 1 (2017: 864 2 ), constrained by fewer first occupations than prior year (2018: 16, 2017: 19), resulting from pause in build activity following EU referendum H1 underlying operating profit of £14.5m (2017: £24.1m), in line with guidance given in March Significant investment in H1 to promote high level of sales releases (2018: 50, 2017: 32) and deliver H2 completions, impacting H1 margins Improved customer satisfaction score by 2.3% to 93.5%, achieving HBF Five Star customer satisfaction award for a record 13 th consecutive year – the only housebuilder of any size or type to achieve this Work to mitigate impact of ground rent uncertainty continues 1. Excluding 20 Affordable Housing units and one commercial unit 4 2. Excluding two commercial units

Forward order book currently 13% ahead of prior year Forward order book Trading has remained resilient despite a challenging secondary market £116m 1 September +£25m £141m House price inflation remains subdued across our products £250m 14 November +£27m £277m  RICS Feb 18 Market Report £323m 24 January +£43m £366m “Activity indicators continue to weaken” £418m 28 February  Nationwide March 18 House Price Index £487m +£69m “Annual house price growth remained subdued” £512m 6 April +£69m £581m  Halifax March 18 House Price Index FY17 FY18 “House prices continue to remain broadly flat … the lowest rate of growth since March 13” Total sales releases at 6 April 2018 : 54 2017 : 35 5

Workflow and build activity remains on track to deliver c.80 new sales releases (2017: 52) and more than 65 first occupations in FY18 (2017: 49) Full year out-turn expectation remains unchanged since the trading update announcement in March  Expected to be within the current range of analyst forecasts, albeit there remains continuing uncertainty created by the Government announcement on ground rents Announcing an interim dividend of 1.9p to be paid on 8 June 2018 (2017: 1.8p) 6

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Even geographical spread of land bank split 38% South, 34% Central, 28% North Land market remains benign and competition remains highly fragmented Caution exercised in H1 in response to proposed ground rent changes:  22 land exchanges (2017: 30 land exchanges) - > 25% site margin expected (excluding FRI income) Land exchanged February 2018 2.1 acre site currently occupied by a school  21 planning consents (2017: 34 planning consents) Central location less than 0.25 miles from town centre Lower level of activity reflects:  A more measured land buying approach  Further time to renegotiate land prices and/or planning agreements to mitigate margin impact Mitigating actions progressing well with action plans identified for partial recovery of ground rent income potentially lost Land exchanged March 2017 8 Land price reduction of £300k negotiated in H1 FY18 (overage clause in place should FRI be chargeable)

New brand campaign – ‘Retirement living to the full’ Television advertising campaign premiered 10 January Fully integrated across television, social, online and offline channels Resulting improvement in brand awareness to date:  Additional 14,150 web sessions - 16% year on year increase in calls from website  Additional 2,400 calls generated  Additional calls/web hits delivered 1,000 additional enquiries  11% increase in first time visitors Other sales initiatives Salesforce selected for new market-leading CRM replacement system and implementation underway 9

Part-exchange (PX) usage PX transactions Increased volume of PX transactions - 38% of legal completions (2017: 26%) reflecting ongoing subdued secondary market 163 289 PX transactions: 201 126  163 third party PX (2017: 201) 22  126 on balance sheet PX (2017: 22) H1 FY18 H1 FY17 In-house PX 3rd party PX providers  Reflecting national roll-out of on-balance-sheet PX solution 126 properties purchased and 130 sold H1 FY18 H1 FY17 3% Tight controls in place to ensure regions do not exceed capital allocation 17% Average buy-in price of 96% of market value 23%  Average purchase price £300k 21% 62%  Average loss on sale of £2.7k 74% Properties resold on average c.11.5 weeks post buy-in Saving of c.£2.6m compared to use of third party PX 10

Development and Build initiative Continued product specification improvement  c.£33k saving identified per development across ground floor and cavity wall insulation  Use of 500mm porotherm blocks to accelerate build cycle time New commercial estimating tool (Bidcon) now live across all regions  Optimises quality of cost information available at land buying stage to improve commercial decision making New sub-contractor tender process now live across all regions Build cost environment Skilled labour resourcing and shortages remain challenging Some material pressures, particularly brick supply shortages 60% of annual material spend covered by fixed pricing agreements to December 2018 Build cost inflation of c.3-4% expected to continue in H2 FY18 and FY19 11

‘Pepper Pot’ Sales 17% of older people would rent a property – equivalent to c.2 million Further 25 units sold across 9 developments to PfP Capital in H1 people 1 FY18 (H1 2017: 0) 31 forward sales agreed and due to complete in H2 FY18 Touchstone, a Places for People group company, embedded as letting and asset manager Shared Ownership Pilot to be launched in the North West region, based on an anticipated 70%/30% offering, with further national rollout expected Build to Rent On-going discussions to agree potential development scope and specification Several sites being considered with benefits expected over the medium-term 12 1. Source: Strutt & Parker 2017

Only 2,637 new bungalow homes registered in 2017 versus 26,408 in 1986 1 Opens up new land opportunities and enables development potential to be maximised 240 units across 15 sites now in land bank, as part of mixed schemes (incorporating either RL or RLP product) 7 further sites (180 units) with offers accepted 3 sites released for sale and due to first occupy in H2 FY18 – strong off-plan sales performance to date:  Chipping Norton 64% reserved off plan (first occupation May 2018)  Wymondham 50% reserved off plan (first occupation July 2018)  Buntingford 40% reserved off plan (first occupation August 2018) Net average selling price of c.£400k 13 1. NHBC new home statistics annual review 2017 & 2016

Build programmes > 49 first occupations expected in H2 – all of which have sales released All build programmes are on track Phasing is heavily weighted to Q4 with c.40 first occupations forecast in this period Sales Completions and forward sales currently at £581m and currently on track to deliver expected full year out-turn. Outcome dependant on sales progress over next quarter Off-plan sales on track to deliver >50% by first occupation >40 New divisional structure now fully in place to increase operational 9 oversight. Q3 FY18 Q4 FY18 First occupation sites 14 * First occupation defined as the date of the first legal completion within a given development

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Reduction in legal completions to 760 H1 FY18 H1 FY17 Change Key financial metrics (2017: 864), constrained by lower level of first occupations and a subdued Legal completions 1 760 864 (12)% secondary market Average selling price 2 £298k £260k +15% Significant increase in average selling Revenue £239.6m £238.2m +1% price to £298k (2017: £260k), driven by Gross profit £32.0m £39.7m £(7.7)m continued improvement to quality and Gross profit margin 13.4% 16.7% (3ppts) location of developments Underlying operating profit 3 £14.5m £24.1m £(9.6)m Margin impacted by higher marketing costs to promote H2 first occupations, Underlying operating profit margin 3 6.0% 10.1% (4ppts) build cost inflation and higher incentive Finance expense £(3.1)m £(1.6)m £(1.5)m costs Underlying profit before tax 3 £11.5m £22.8m £(11.3)m Increased finance costs reflecting Statutory profit before tax £10.5m £21.8m £(11.3)m revaluation of shared equity portfolio Underlying basic earnings per share 3 1.7p 3.5p (1.8)p partially due to change in HPI assumptions 1. Excludes 20 affordable housing units and 1 commercial unit in FY18 and 2 commercial units in FY17 2. Average selling price is calculated as average list price less cash discounts and PX top-ups. 3. Underlying operating profit (including underlying operating profit margin and underlying basic earnings per share) and underlying profit before tax are calculated by adding amortisation of brand and exceptional administrative 16 expenses to operating profit and profit before tax respectively