RESULTS PRESENTATION Half year ended 31 December 2019 5 February 2020 The Spires, St Ives, Cambridgeshire 1
David Thomas Chief Executive Redwood Heights, Plympton 2
KEY HIGHLIGHTS Strong first half of the year with 9.1% growth in total home completions (1) • Attractive housing market fundamentals • Progressing well on our medium term targets, good progress on margin initiatives • Leadership in quality and customer service • Resilient business model with good cash generation and attractive cash returns • (1) Including JVs in which the Group has an interest 3
OUR VISION – DELIVERING FOR THE LONG TERM We aim to be the leading national • sustainable housebuilder and create long term value for stakeholders 4
INVESTMENT PROPOSITION Highly Strong balance Industry leading Broad Shorter owned experienced sheet and cash quality and geographic build and sales land bank generation service standards spread teams Growing Delivering margin Attractive volumes improvement cash returns 3-5% volume growth per 2.5x dividend cover supplemented annum in wholly owned Land acquisition hurdle rate of by special returns when home completions over minimum 23% gross margin market conditions allow the medium term 5
OPERATIONAL TARGETS – PROGRESS UPDATE Medium term targets Progress in the half year 3-5% growth per annum in wholly owned Highest half year completions in 12 years home completions Completions Present business capacity of 20,000 homes per On track to deliver 3-5% growth in wholly annum owned completions in FY20 Significant progress towards our margin targets New land acquisitions at minimum 23% Gross margin gross margin Adjusted gross margin up 60 bps to 23.0% (Gross margin 22.2%) ROCE Minimum of 25% Strong ROCE of 29.3% for the 12 months to 31 December 2019 6
Steven Boyes Chief Operating Officer Patch Meadows, Somerton 7
STRONG SALES PERFORMANCE Average net private reservations per active outlet per week Strong sales rate of 0.69 • H1 FY20 H1 FY19 Change Significant growth of 7.8% • Regional 0.67 0.62 8.1% Good demand across the country • London 1.50 1.56 (3.8%) Strong end to the half year • Group 0.69 0.64 7.8% JV (1) 1.11 1.70 (34.7%) (1) The JV sales rate for the prior year includes a bespoke design and build arrangement, excluding this the sales rate in H1 FY20 is in line with the prior year 8
COMPLETION GROWTH Completions Highest half year completions for 12 years • H1 FY20 H1 FY19 Change Delivering a smoother completions profile • Regional 7,588 7,138 6.3% On track to deliver 3-5% growth in wholly • London 412 264 56.1% owned completions in FY20 Group 8,000 7,402 8.1% JV 314 220 42.7% Total 8,314 7,622 9.1% 9
FUTURE DRIVERS OF COMPLETION GROWTH (1) Regional (2) Outer London Cambridgeshire 4.9% 102.4% (new) 116.7% 7,552 homes mes 500 500 home mes 143 homes mes Delivery (3) (H1 FY19: 7,196 homes) (H1 FY19: 247 homes) (H1 FY19: 66 homes) Land bank (4) 75,755 plots 8,401 plots 2,185 plots 1,800 homes 725 homes Present business 24 divisions @ 725 homes per annum per annum per annum capacity Present business capacity of 20,000 homes per annum T arget: 3-5% growth in wholly owned home completions per annum (1) Including JVs in which the Group has an interest (2) Excluding new Cambridgeshire division (3) In addition 119 homes (H1 FY19: 113) in Central London delivered (4) Owned and controlled land bank at 31 December 2019, 2 wholly owned Central London plots and 159 JV Central London plots not included 10
COMPLETIONS ANALYSIS - BUYER TYPE Investor Similar profile to prior year 4% 4% • Part exchange 10% 12% Affordable 18% Help to Buy remains an important customer • 21% proposition Other private 30% 30% 29% 29% Affordable completions in line with FY19; • expect to be c. 21% for FY20 Help to Buy 38% 38% 34% Part exchange is a valuable sales tool • H1 FY2 Y20 H1 FY1 Y19 11
PRICING TRENDS Private completions average selling price (£’000) Change of regional and product mix • H1 FY20 H1 FY19 Change Trading through high value central London • site, increasing London ASP Regional 303.9 296.2 2.6% Greater delivery from London JV schemes • London 1,028.1 860.6 19.5% Group 312.0 317.3 (1.7%) JV 647.3 490.7 31.9% 12
LAND MARKET • Continue to acquire land at hurdle rates Savills UK Residential Land Index versus HBF planning consents 120 450 • High quality opportunities available across the 400 Savills UK Residential Development Land Index 100 country 350 Planning consents pa (‘000s) 80 300 (100 = 2007 peak) • Larger sites are more suitable for dual branding 250 60 200 • Land approvals - H1 FY20: 9,242 plots 40 150 - Expect to approve 18,000-22,000 plots per 100 20 annum UK greenfield land prices 50 England planning consents 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 13
LAND – HIGH QUALITY OPPORTUNITIES ACROSS THE COUNTRY Wembley Park rk, London - joint venture partnersh ship ip with Penistone, e, near Sheffiel ield – dual branded, wide product Transp spor ort for r London range Redevelopment of a car park Greenfield site near Sheffield • • 446 homes, 12,000 sqft commercial space 459 homes comprising Barratt and David Wilson brands • • 43% affordable 30% affordable • • Private ASP c. £450k Private ASP c. £310k • • Expected start Q3 FY21 Expected start Q1 FY21 • • 14
DRIVING OPERATING MARGIN – STRATEGIC LAND • Enhanced margin of c. 300 basis points (1) H1 FY20 H1 FY19 • Strong strategic land bank with good 1,942 1,894 Home completions from strategic land geographic spread Conversion to owned and controlled 2,421 2,472 land bank (plots) • Continue to target 30% of completions in the medium term 12,988 12,192 Acres held Number of locations 263 271 (1) On strategic land approved since 2009 versus ongoing land 15
DRIVING OPERATING MARGIN – NEW PRODUCT ROLL OUT Completions using new product ranges (1) • Increased delivery momentum from new ranges 5,000 4,500 +19% • Completions in H1 FY20: 4,491 (H1 FY19: 2,159) (1) 4,000 +53% +31% 3,500 3,000 Homes • More suitable for MMC 2,500 2,000 1,500 • Suitable for c. 85% of our completions 1,000 500 0 H1 FY18 H1 FY19 H1 FY20 % of active outlets (1)(2) 32% 58% 76% with new product range (1) Including JVs in which the Group has an interest (2) As at 31 December 2019 16
DRIVING OPERATING MARGIN – CONTINUED PRODUCT REFINEMENTS • Continued process to review and enhance • Hipped roofs introduced on a number of house types - reduce brickwork +31% - quicker and safer build Gabled roof • Optimised internal floor plans - improve living spaces - increase profitability Hipped roof 17
MANAGING THE COST ENVIRONMENT Materials Labour • Pockets of cost pressure Modest material pressures • moderating All pricing fixed to June 2020 • • Simplified, faster build Half of pricing fixed to • • Increased use of offsite December 2020 and over a manufacturing and MMC third fixed to June 2021 • Apprenticeship schemes Build costs expected to increase by around 3% in FY20 18
QUALITY AND CUSTOMER FOCUS • Long term commitment in quality and customer service • Comprehensive internal processes • Lowest reportable items level of Large Builder Group • More NHBC Pride in the Job Awards than any Mark Summersgill, Site Manager at Grey Towers Village and Supreme Winner in the Large Builder category at the NHBC Pride in the Job Awards other housebuilder for 15 consecutive years • Awarded HBF 5 Star for ten years 19
STRONG PERFORMANCE • Strong completion growth and sales rate • Good progress on operating margin initiatives • Delivering industry leading quality and customer service • Focus on Health & Safety Filwood Park, Bristol 20
Jessica White Chief Financial Officer Kingsbrook, Aylesbury 21
KEY HIGHLIGHTS H1 FY20 H1 FY19 Change £m (unless otherwise stated) 2,266.2 2,132.0 6.3% Revenue 503.7 482.2 4.5% Gross profit 23.0 22.4 60 bps Adjusted gross margin % 22.2 22.6 (40 bps) Gross margin % 421.7 409.7 2.9% Operating profit 19.4 19.0 40 bps Adjusted operating margin % 18.6 19.2 (60 bps) Operating margin % 423.0 408.0 3.7% PBT 33.8 32.7 3.4% Earnings per share pence 433.8 387.7 11.9% Net cash 29.3 29.5 (20 bps) ROCE % 22
REVENUE SUMMARY H1 FY20 H1 FY19 Change Completions (units) 6,301 6,078 3.7% Private 1,699 1,324 28.3% Affordable 8,000 7,402 8.1% Total completions 21% 18% 300 bps % Affordable 314 220 42.7% JV 8,314 7,622 9.1% Total completions (inc JVs) ASP (£’000) 312.0 317.3 (1.7%) Private 160.0 120.9 32.3% Affordable 279.8 282.2 (0.9%) Total 502.1 404.6 24.1% JV 23
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