RESULTS PRESENTATION Year ended 30 June 2019 4 September 2019 Tarleton Lock, Tarleton 1
David Thomas Chief Executive Sandpiper Walk, West Wittering 2
KEY HIGHLIGHTS Strong operational and financial performance • Attractive housing market fundamentals • Highest number of home completions in 11 years, committed to disciplined volume growth • Progressing well towards our medium term targets, continue to deliver margin • improvements Leadership in quality and customer service • Resilient business model, good cash generation and attractive cash returns • 3
OUR VISION – DELIVERING FOR THE LONG TERM • We aim to be the leading national sustainable housebuilder to create long term value for stakeholders 4
INVESTMENT PROPOSITION Growing Delivering margin Attractive volumes improvement cash returns 3 - 5% volume growth 2.5 x dividend cover supplemented per annum in wholly Land acquisition hurdle rate of by special returns when owned home completions minimum 23% gross margin market conditions allow over the medium term 5
OPERATIONAL TARGETS – PROGRESS UPDATE Medium term targets Progress in FY19 3 - 5% growth per annum in wholly owned 2.6% increase in wholly owned home Completions home completions completions to 17,111 with total home Present business capacity of 20,000 per annum completions at 17,856 (1) 210 bps increase in gross margin to 22.8%, New land acquisitions at minimum 23% Gross margin resulting in 120 bps improvement in gross margin operating margin to 18.9% Strong ROCE of 29.7% for the 12 months to ROCE Minimum 25% 30 June 2019 (1) Including JVs in which the Group has an interest 6
Steven Boyes Chief Operating Officer Stapeley Gardens, Nantwich 7
STRONG SALES PERFORMANCE • Strong sales rate at 0.70 Average net private reservations per active outlet per week • H2 sales rate in line with prior year (2019: 0.76, FY19 FY18 Change 2018: 0.77) • London and JV sales rates include bespoke Regional 0.68 0.71 (4.2%) design and build arrangements London 1.63 1.08 50.9% Group 0.70 0.72 (2.8%) JV 1.56 1.00 56.0% 8
COMPLETION GROWTH • Highest completions for 11 years Completions • Growth in wholly owned completions in line with FY19 FY18 Change medium term target • JV completions in line with delivery profile Regional 16,268 15,866 2.5% London 843 814 3.6% Group 17,111 16,680 2.6% JV 745 899 (17.1%) Total 17,856 17,579 1.6% 9
COMPLETIONS ANALYSIS – BUYER TYPE 5% 5% 5% 5% Investor • Similar profile year on year 9% 9% 11% 11% Part-exchange • Help to Buy remains an important customer Affordable proposition 19% 21% • Affordable homes reflect delivery profile of land acquired Other private 31% 27% • Part-exchange is a valuable sales tool Help to Buy 36% 36% 36% 36% FY1 Y19 FY1 Y18 10
PRICING TRENDS REMAIN POSITIVE • Group ASP reflects mix change and trade Private completions average selling price (£’000) through in central London FY19 FY18 Change • Regional pricing reflects change of product mix Regional 297.2 302.4 (1.7%) • JV ASP reflects mix change with more delivery from London schemes London 628.5 809.8 (22.4%) • Some underlying house price inflation Group 312.0 328.8 (5.1%) JV 537.9 520.7 3.3% 11
LAND MARKET Savills UK Residential Land Index versus HBF planning consents • Land prices remain broadly flat HOLDING PICTURE – CB 120 450 SPEAKING TO PHIL BARNES • High quality land opportunities across the country 400 Savills UK Residential Development Land Index 100 • Significant number of planning consents granted 350 Planning consents pa (‘000s) 80 300 • Land approvals (100 = 2007 peak) 250 - FY19: 18,448 plots 60 200 - Medium term: 18,000-22,000 plots per annum 40 150 UK greenfield land prices 100 England planning consents 20 50 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 12
LAND – HIGH QUALITY OPPORTUNITIES ACROSS THE COUNTRY Baltic Street, Edinburgh North Abingdon, Oxfordshire Former builders merchant at Edinburgh’s port district Greenfield site in historic Oxfordshire market town • • 212 apartments 425 two-storey homes - dual branded • • GDV: £44m GDV: £164m • • ASP: £207k ASP: £387k • • 13
DRIVING OPERATING MARGIN – STRATEGIC LAND • Enhanced margin of c. 300 basis points (1) FY19 FY18 • On track to deliver medium term target of 30% of completions 26% 27% Completions from strategic land • Significant increase in conversion to owned land bank from 28 locations Conversion to owned land bank 7,915 2,788 (plots) - Wilmslow, Cheshire – 174 plots 11,995 12,435 Acres held - Lichfield, Staffordshire – 157 plots Number of locations 259 268 (1) On strategic land approved since 2009 versus ongoing land 14
DRIVING OPERATING MARGIN – NEW PRODUCT ROLL OUT Completions using new product ranges • Increased delivery momentum from new ranges 7,000 6,000 • Completions in FY19: 6,024 (FY18: 1,522) (1) 5,000 +19% • Continued process to review product range and enhance further 4,000 +53% +31% Homes 3,000 • Suitable for Modern Methods of Construction 2,000 1,000 0 FY17 FY18 FY19 % of active outlets (2) 20% 42% 72% with new product range (1) Including JVs in which the Group has an interest (2) As at 30 June 15
MANAGING THE COST ENVIRONMENT Materials Labour • Regional pockets of cost pressures • Some specific pressures • Simplified, faster build • All pricing fixed to December • Increased use of off-site 2019 manufacturing • 65% of pricing fixed to • 269 new apprentices, June 2020 trainees and graduates in FY19 Build cost inflation FY19: 3% Build cost inflation FY20: expected to be around 3-4% 16
MODERN METHODS OF CONSTRUCTION • Mitigate industry skill shortage • Further methods to be rolled out via our ‘New Product Introduction’ process • Achieved target of 20% of completions one year ahead of schedule Oregon timber frame installation • New target set to build 25% of completions using Modern Methods of Construction by 2025 17
OREGON ACQUISITION • Acquired in June 2019 • High quality products and experienced management team • Security of supply • Supports our growth target and enables increasing use of Modern Methods of Construction 18
QUALITY AND CUSTOMER FOCUS – LONG TERM INVESTMENT • Long term commitment in quality and customer service Design and layout • Comprehensive internal processes with external benchmarking • Detailed quality inspection and control at every key stage of Build stage inspections build • Reportable Items (RI’s) at 0.17 – around half the Large Builder Group average Completed plot inspection • Experienced customer care teams ensure high level of service post completion Resolve issues before and after completion 19
QUALITY AND CUSTOMER FOCUS – EXTERNAL BENCHMARKS • 5 Star award for 10 years • Only national housebuilder • 84 awards in 2019 to achieve • More than any other housebuilder this for 15 consecutive years • 76 accreditations • Highest scoring including 19 outstanding national awards housebuilder in 2018 • More awards than any other company 20
STRONG PERFORMANCE • Good completion growth • Strong sales rate • Strong progress on margin initiatives • Delivering industry-leading quality and customer service • Health and safety core value Octavia Gardens, Chapel-en-le-Frith 21
Jessica White Chief Financial Officer Oakfields, Harbury 22
KEY HIGHLIGHTS £m (unless otherwise stated) FY19 FY18 Change Revenue 4,763.1 4,874.8 (2.3%) Gross profit 1,084.2 1,008.9 7.5% Gross margin % 22.8 20.7 210 bps Operating profit 901.1 862.6 4.5% Operating margin % 18.9 17.7 120 bps PBT 909.8 835.5 8.9% Earnings per share pence 73.2 66.5 10.1% Net cash 765.7 791.3 (3.2%) ROCE % 29.7 29.6 10 bps 23
REVENUE SUMMARY FY19 FY18 Change Home completions Private 13,533 13,439 0.7% Affordable 3,578 3,241 10.4% Total home completions 17,111 16,680 2.6% % Affordable 21% 19% 200 bps JV 745 899 (17.1%) Total home completions (inc 17,856 17,579 1.6% JVs) ASP (£’000) Private 312.0 328.8 (5.1%) Affordable 132.2 123.7 6.9% Total 274.4 288.9 (5.0%) JV 487.8 437.8 11.4% 24
PRIVATE AVERAGE SELLING PRICE FY19 FY18 Homes ASP (£000) Homes ASP (£000) 127 1,417.3 357 1,023.9 Central London Outer London 477 418.5 342 586.4 London total 604 628.5 699 809.8 Regional total 12,929 297.2 12,740 302.4 Total private 13,533 312.0 13,439 328.8 30 June 2019: 18 Central London private, wholly owned homes remaining FY20 guidance: Land bank ASP £275k 25
DELIVERING MARGIN IMPROVEMENT 23% 22.8% 22% Margin improvement coming through strongly • 20.7% 21% Minimal net impact of inflation in FY19 • 20.0% 20% 19.0% 18.9% 18.9% 19% 18% 17.7% 17.2% 17% 15.8% 16% 15.3% 15% FY15 FY16 FY17 FY18 FY19 Gross Margin Operating Margin 26
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