Results presentation Six months ended 28 February 2017 5 April 2017 - PowerPoint PPT Presentation

Results presentation Six months ended 28 February 2017 5 April 2017 Coppice Gate, Southampton

 Overview and current trading Clive Fenton  Financial results Rowan Baker  Review of operations John Tonkiss  Outlook for growth Clive Fenton 2

 Solid progress during H1 despite constraints of lower forward order book brought into the year and delays to workflow post-Brexit  Trading conditions remained stable in the period with lead sales indicators running well ahead of prior year  Good underlying sales performance. Reservations year-to-date held back by fewer sales releases  Weaker secondary market leading to increased levels of PX transactions and discounts and incentive costs  Robust balance sheet with cash discipline maintained  Strong period for planning, with detailed planning consents achieved on 34 sites (2016:19)  Achieved HBF Five Star customer satisfaction award for a record 12th consecutive year - the only housebuilder of any size or type to achieve this  February’s Housing White Paper underlines the Government's commitment to increase the supply of retirement housing 3

Enquirers Sales leads Visitors Sales Net Completions & Forward releases* reservations Sales (£m) £503m £440m £496m £418m    CY PY CY PY 31 March 2017 28 February 2017 Note: *35 sales releases as at end of March (2016:46) 4 All comparative data as at week 30 FY16 unless otherwise stated

 Strong workflow momentum recovery following EU Referendum in June  All build programmes on track for sites expected to first occupy in H2 FY17  Higher margins and ASPs expected in H2 FY17 driven by improved age mix of legal completions and the quality and location of developments being brought to market  Announcing an interim dividend of 1.8p to be paid on 9 June 2017 (2016: 1.0p pro-rata*)  Full year guidance remains in line with market expectations Horizons, Poole * Non pro-rata dividend for prior year would have been 1.75p per share 5

6 River View Court, West Bridgford

 Half year revenue of £238m (2016: £250m)  Total legal completions of 866* units (2016: 923 units) at an improved gross average selling price 1 of £260k (2016: £257k)  Statutory profit before tax of £21.8m (2016: £29.0m) and underlying profit before tax 2 of £22.8m (2016: £39.1m) with decrease driven by sales mix, increase in discount and incentive usage, additional land renegotiation costs and continued investment in regional operational infrastructure  Discounts and incentives averaged 7% of list price (2016 full year: 6%) due to age mix of legal completions and higher level of part exchange transactions  Continued financial discipline with net debt of £30.4m (2016: £23.9m) and low gearing at 4% (2016: 4%) 1. Gross average selling price is calculated as average list price less cash discounts and PX top ups 2. 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 expenses to operating profit and profit before tax respectively * Includes two commercial units 7

H1 FY17 H1 FY16 Change Key financial metrics  6% legal completions reduction due to Revenue £238.2m £250.2m (5%) lower forward order book brought into FY17 and higher weighting of volumes into Legal completions 866* 923 (6%) H2 Gross average selling price 1 £260k £257k 1%  Volumes decline partially offset by small Net average selling price 1 £254k £253k 0% pricing improvements resulting in revenue decrease of 5% Underlying operating profit 2 £24.1m £40.2m (£16.1m)  Underlying operating profit margin 2 10% 16% (6ppt) Margin percentage reduction mainly driven by profitability mix, increased discounts Underlying profit before tax 2 £22.8m £39.1m (£16.3m) and incentives and land renegotiation costs Return on capital employed 3 (ROCE) 14% 18% (4ppt)  Net (debt)/cash (£30.4m) (£23.9m) (£6.5m) Lower ROCE driven by lower operating profit together with increased land and Gearing 4 4% 4% 0ppt construction spend to support future growth Tangible gross asset value (TGAV) £657m £602m £55m 1.0p 5 0.8p 5  Interim dividend per share 1.8p Robust balance sheet and low gearing 1. Gross average selling price is calculated as average list price less cash discounts and PX top-ups. Net average selling price is the average list price less cash discounts, PX top-ups and other incentives. These measures exclude commercial units. 2. 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 expenses to operating profit and profit before tax respectively 3. Return on capital employed (ROCE) is calculated by dividing underlying operating profit for the previous 12 months by the average tangible gross asset value at the beginning and end of the 12 month period. Tangible gross asset value is calculated as net assets excluding goodwill and intangible assets, excluding net (debt)/cash 4. Gearing is calculated by dividing net (debt)/cash by net assets 5. Pro-rated from the IPO in November 2015 to February 2016. Had we applied our policy of paying a 1/3 first half and 2/3 second half dividend in the prior year, H1 FY16 dividend would have been 1.75p per share 8 * Includes two commercial units

 Margin impact of sales mix driven by the age profile and regional mix of legal completions  Average gross selling price increase from £257k to £260k  Average discounts and incentive costs increase from 5% to 7% as a result of age mix of sales and increased use of PX to support weaker secondary market  Build cost increases offset by pricing improvement  Additional 10 sites aborted in H1 FY17 in order to protect future profitability of land bank  H1 FY16 Volume Sales mix Build cost Pricing Additional Land Other H1 FY17 Other costs mainly relate to continued operating increase improvement discounts renegotiation operating investment in regional operational margin and incentive costs margin cost infrastructure to support growth activity 9

Discounts and incentives CY first occupation PY & earlier first occupations FY13 FY14 FY15 FY16 H1 FY16 H1 FY17 H1 FY16 H1 FY17   10

 Margin calculated at a site level before allocation of variable costs  ASP = gross average selling price H1 first occupations H2 first occupations H1 FY17 H2 FY17 E Margin* <20% 20%-25% Margin* Margin* >25%    11

300 250 200 150 100 50 0 -50 H1 opening net Net revenue Land spend Build spend Operating costs Tax & interest Promissory note Dividends paid H1 closing net cash & overheads debt reduction debt 12

 FY17 out-turn guidance remains in line with market expectations  Flat to modest growth in legal completions (0-2%)  Improved ASP to exceed £270k for full year  Build activity on track to deliver H2 first occupations  Margins slightly lower than prior year with significant margin recovery in H2 due to more favourable regional mix and increased weighting of completions from newer, higher margin sites in H2  Robust balance sheet with continued focus on careful cash management leading to sustained low gearing 13

Viewpoint, Gosport 14

Sales initiative  New Relationship Management team in place in all regions to develop early relationships with enquirers prior to site sales launch  New website redesigned to support customer journey and search functionality  New digital agency appointed to support search engine optimisation, pay per click and online display activity to improve online efficiency  New core creative style for national advertising implemented to deliver stronger customer response to media  Outsourced call handling is driving improved conversion rates to visits while being supplemented by outbound call campaigns  Improvements to the consistent look and feel of our Sales Offices  High impact training delivered to area sales managers who are critical to sales performance 15

Development initiative  The development initiative (Project FUSION) is the backbone of improving and streamlining our end to end development process  DATUM is our industry leading product management platform containing specification, project and commercial libraries  This initiative, assisted by DATUM, is supporting a major focus on:  Design standardisation (apartment, kitchen, bathroom layouts)  Consistent adoption internally and externally  Value Engineering practices at a product and project level (heating, ventilation, M&E services and commercial kitchens)  Improved cost management using automated estimating tool 16