half year results – 22 february 20121st michael’s reach, marazion, cornwall half year results to...

Half Year Results – 22 February 20121 St Michael’s Reach, Marazion, Cornwall

Half Year Results to 31 December 2011Greg Fitzgerald, Chief Executive and Frank Nelson, Finance Director

Half Year Results – 22 February 20122

Agenda

• Overview and Highlights

• Strategy

• Financial Review

• Operating Review

• Outlook

• Appendices


• Excellent financial results

• Housing market resilient

• Confident of delivering housebuilding strategy

• Construction performing well in difficult markets

• Strong balance sheet

Overview

Strong market outperformance in H1


Highlights

Housebuilding margin1 up 69% Construction margin in line with forecasts

11.0%

6.5% 2.5% 2.2%

H1 11 H1 12 H1 11 H1 12

Excellent half year results

1 Excluding significant land sale

Profit Before Tax up 89% Dividend up 100%

£32.2m

£17.0m 4.5p

9.0p

H1 11 H1 12 H1 11 H1 12


Strategy

Growth beyond 2013 supports enhanced dividend policy

• Confident of delivering three year transformational expansion plan in housebuilding

• Housebuilding strategy and outputs beyond 2013

• Disciplined growth strategy based on maximising returns, not volume

• Retain strong southern bias

• Focus on increasing margins

• Construction strategy unchanged

• Maintain top quartile performance

• Focus on margins and cash rather than size of order book

• Positioned for growth when markets allow

• New enhanced and sustainable dividend policy

• Higher cash generation

• Dividend twice covered by earnings

• Progressive growth thereafter

Half Year Results – 22 February 20126 Thornbury Park, Isleworth, London

Financial Review


£m 2011 2010 % Increase

Group revenue 746.8 575.9 30%

Profit from operations 38.6 17.9 116%

EBIT 35.6 17.1 108%

Net finance costs (3.4) (0.1)

Profit before tax 32.2 17.0 89%

Taxation (7.1) 22% (4.9) 29%

Profit after tax 25.1 12.1 107%

Financial Review

Earnings Per Share: basic 31.1p 14.8p 110%

diluted 30.4p 14.8p 105%

Strong growth in EBIT, PBT & EPS

Income Statement, Half Year to 31 December


1. Operating profit excluding Group2. Revenue includes share of joint ventures3. Includes significant land sale. Underlying margin 11.0%4. Group includes £3.6m additional LTIP charge

Financial Review

2011 2010

£m Revenue2

Profit/(Loss)from

Operations Margin MarginHousebuilding 277.0 35.0 12.6%3 6.5%

Construction 499.9 10.9 2.2% 2.5%

PPP Investments 7.7 1.1 NA NA

Group 0.3 (8.4)4 NA NA

TOTAL 784.9 38.6 4.9% 3.0%

75% of Group profits from housebuilding1

Housebuilding completions 2011 2010

Gross units 1,352 851

Net of JV partners’ share 1,216 779

Segmental Analysis, Half Year to 31 December


-80

-60

-40

-20

0

20

40

60

Financial Review

Movement in net debt – reflects investment in housebuilding

• Net debt in line with expectations

• Investment in land

• Average debt of £86m over 12 months to 31 December 2011

• £325m bank facility in place until 2015

£m

Openingnet debt1 Jan 11

Cash fromoperatingactivities

Workingcapitalmovtshouse-building

Workingcapitalmovtscon-struction

Interest Tax Other Dividend Closingnet debt31 Dec 11

(31)

60

(18)

(38)

(10)(5)

(13)

(70)(15)


Financial Review

£m 2011 2010

Total equity 468.6 435.1

Tangible Net Assets 342.5 313.7

Net debt (69.8) (30.7)

Amounts invested in joint ventures 63.3 53.4

Land 436.4 392.1

Work in progress 250.9 193.1

Land creditors (138.4) (74.2)

Total invested in housebuilding developments and JVs 612.2 564.4

Strength maintained

See Appendix 3 for balance sheet sector analysis

Balance Sheet Highlights, Half Year to 31 December


Financial Review

Dividend – new enhanced policy

• Interim dividend doubled

• Twice covered by earnings

• Enhanced, sustainable and progressive

0

5

10

15

20

7.6p

10.9p

3.3p

9.2p

11.5p

4.5p

9.0p

12.5p

16.0p

FY 09 FY 10 FY 11 H1 12

Final Interim

3.3p


0%

10%

20%

30%

Financial Review

Housebuilding - gross margin %1 Construction - cash as % of revenue

FY 09 H1 10 FY 10 H1 11 FY 11 H1 12

1 Before significant land sale and after sales costs of circa 2%

0%

5%

10%

15%

20%

Operating margin Overhead

3.7

6.2 7.1 8.0

5.6

8.1 9.9

12.7

16.1

FY 09 FY 10 FY 11 H1 12

20 22 23

15

11.0

6.1

17.1

19 21

Housebuilding margin progression, construction cash in line with forecast


0%

5%

10%

15%

20%

8.6

0%

5%

10%

15%

20%

Financial Review

Housebuilding2Group1

FY 09 FY 10 H1 11 FY 11 H1 12

10.9

8.6

15.6

FY 09 FY 10 H1 11 FY 11 H1 12

4.2 4.5 6.2

14.1

Return on net assets growing strongly

1 Group RONA is calculated as EBITA divided by average net assets including goodwill2 Housebuilding RONA is calculated as housebuilding EBITA divided by average net assets including goodwill

8.2

4.3

Half Year Results – 22 February 201214 Kingston Mills, Bradford-on-Avon, Gloucestershire

Operating ReviewHousebuilding


Operating Review - Housebuilding

COMPLETIONS up 59%

1,352 (H1 11: 851)

Record completions with margin significantly up

SALES IN HAND1 up 34%

£605m (H1 11: £450m)

LAND BANK1 up 7%

10,700 (H1 11: 10,000)

AVGE SALES PRICE3 up 17%

£239k (H1 11: £204k)

MARGIN up 69%

11.0%2 (H1 11: 6.5%)

1 Current at 19 February2 12.6% after significant land sale3 Excludes affordable



South 1,081 Midlands/East 271 1,352

Post July 2008 846 Legacy 506

1,352

By land bank

Completions Analysis – strong southern focus

By area of operation

63%

80%

Private 974 Affordable 378 1,352

By sector

72%



By acquisition period Product mix1Geographical split

Post July 2008 8,150 Legacy 2,550 10,700

Houses 5,600 Apartments 3,000 8,600

South 7,700 Midlands/East 3,000 10,700

Land Bank Analysis – 76% of land bank acquired at current market prices

By sector

Current at 19 February1 Excludes affordable

Private 8,600 Affordable 2,100

10,700

76% 65%72% 80%



Legacy Post July 2008 TOTAL

10,000

8,000

6,000

4,000

2,000

0

Development Revenue £m

Average Margin1

£0.6bn £1.8bn £2.4bn

10% 21% 18%

Current at 19 February

1 Blended private/affordable – after sales costs of circa 2%

Land Bank Delivery – over 20% gross margin on post July 2008 land

2,550

8,150 10,700


0%

25%

50%

75%

100%

Jan Jan Jan Jan Jan


Forecast Land Bank/Completions – disciplined growth strategy from 2013

0

30

60

90

120

Number of sales outlets

FY 11 HY 12 FY 12 FY 13 FY 14

78

95

0

3000

6000

9000

12000

Land bank by acquisition period

FY 11 HY 121 FY 12 FY 13 FY 14

Revenue by period %

FY 11 HY 12 FY 12 FY 13 FY 14

Acquired post July 2008 Legacy

Not yet acquired Acquired post July 2008 Legacy

100 10086

1 Current at 19 February


• Affordable rent delivering enhanced revenues

• Secured one of highest awards (£17m) to private developers under Affordable Homes Programme

• Acquired further public land releases under Delivery Partner Panel

• Established joint venture arrangements for partnering with key Registered Providers

• Increased presence within frameworks

Affordable Housing – expertise optimising margins


Half Year Results – 22 February 201221 Edgbaston Cricket Ground

Operating ReviewConstruction


Operating Review - Construction

MARGIN upper quartile

2.2% (H1 11: 2.5%)

Performing well in difficult markets

CASH upper quartile

£149m (H1 11: £174m)

ORDER BOOK1 in line

£1.6bn (H1 11: £1.75bn)

WORK SECURED1 maintained

67% (for 2013) (H1 11: 61%)

1 Current at 19 February



Order Book – good visibility of revenues

£m

Infrastructure 877

Building 534

Partnerships 165

By Client TypeBy Division

0%

25%

50%

75%

100%

FY 09 FY 10 FY 11 H1 12

Private

Regulated

Public

56 52 42

403732

181112

44

42

14




Order Book – strength in selected sectors

£m

Commercial 152 Education 86 FM 111 Health

59 Other Public & 126 Regulated

£m

Water 431 Transport 245 Other Civil Engineering 120 Renewables 42 Communications 33 Energy from Waste 6

Building Infrastructure


Half Year Results – 22 February 201225 M74, Glasgow

Outlook


Market Outlook

Housebuilding

• Mortgage availability continues to improve

• Government initiatives supporting the market

• Active land market

• Planning environment remains uncertain

• Build costs remain stable

• Market strongest in south

Housebuilding resilient, construction difficult

Construction

• Difficult market conditions

• Regulated sector strong

• London and South East most resilient

• Government support for infrastructure investment


Divisional Outlook

Housebuilding

• Strong southern bias and focus on mainstream markets

• Legacy land bank significantly reduced

• Good land opportunities

• Focus on margin growth

• Strong start to second half

Strong housebuilding momentum, visibility in construction

Construction

• Resilient performance maintained

• Strong foundations in client relationships and frameworks

• Robust risk management maintained

• Focus on workload with acceptable returns


Group Outlook

• Confident in ability to further enhance value

• Housebuilding – disciplined growth strategy

• Construction – strategy unchanged

• Dividend policy – enhanced, sustainable and progressive

Well positioned to deliver profitable growth

Half Year Results – 22 February 201229 Halley VI Research Station, Antarctica

Half Year Results to 31 December 2011Greg Fitzgerald, Chief Executive and Frank Nelson, Finance Director


Appendices

1. Investment proposition

2. Cash flow summary

3. Balance sheet/debt profile

4. Net finance costs

5. Housebuilding data

5.1 Revenue analysis

5.2 Sales, completions by buyer type

5.3 Forecast land creditors’ payment profile

5.4 Trading overview

5.5 Analysis of sales reserved, contracted and completed

5.6 Private sales, analysis of incentives on reservations

5.7 Land bank valuation


ROBUST BUSINESS MODEL

• Top 5 UK housebuilder, top 10 in UK construction

• Complementary economic cycles

• Competitive advantage in range of services offered to clients

WELL POSITIONED IN ATTRACTIVE MARKETS• Southern focused land bank where

risk/return is most attractive

• Delivering strong momentum in margins, profits and returns

• Higher than average visibility of revenues in construction through regulated exposure

• Construction offers medium term potential

Appendices

1. Investment proposition

STRATEGIC CLARITY

• Successful execution of three year transformation plan in housebuilding

• Disciplined approach to capital allocation

• Clear growth strategy for housebuilding beyond 2012/13

DELIVERING GROWTH AND INCOME

• Value creating strategy fit for market environment

• Enhanced, sustainable and progressive dividend policy – twice covered by earnings

• Balance sheet strength retained


£m 2011 2010Cash from operating activities 31.1 9.7Working capital movements (120.3) (105.9)Net cash used in operations (89.2) (96.2)Interest, tax and dividends (14.3) (10.6)Other (2.6) (0.4)Net cash outflow (106.1) (107.2)Opening net cash 36.3 76.5Closing net debt (69.8) (30.7)

Appendices

Cash Analysis

Housebuilding (includes loans to JVs) (579.3) (517.2)Construction 149.4 174.0Group and Others 360.1 312.5TOTAL (69.8) (30.7)

2. Cash Flow Summary – Half Year to 31 December


£mTangible

Net AssetsAverage

Cash/(Debt)

Construction (60) 160

Housebuilding and Group(NAV after deduction of debt)

403 (246)

Net Tangible Assets 343 (86)

Notes £m

Total net assets per B/S 469

Less intangibles (126)

Net tangible assets 343

3. Balance Sheet/debt profile by sector – illustrative only

Appendices


£m 2011 2010

Net interest payable on borrowings (3.9) (1.4)

Interest receivable from joint ventures 0.5 0.9

Fair value gains on financing activities - interest rate swaps 0.3 0.7

Unwind of discount on shared equity receivables 0.8 0.6

Unwind of discount on payables (1.0) (0.6)

Net finance cost of pension fund - (0.3)

Other (0.1) -

TOTAL (3.4) (0.1)

4. Net Finance Costs – Half Year to 31 December

Appendices


Appendices

5.1 Housebuilding - Revenue analysis, regional

TOTAL Units 1,352 Revenue £277m

WEST Units 287 (21%) Revenue £46.1m (17%)

EAST & NORTH Units 271 (20%) Revenue £42.4m (15%)

SOUTH EAST Units 794 (59%) Revenue £188.5m (68%)


Appendices

46%

30%

13%

6%5%

H1 12 FY 11H1 11

36%

28%

9%

9%

18%

41%

33%

11%

7%

8%

Affordable

Private with Shared Equity

Private with Part Exchange

Private - Investor

Private

Based on 1,352 completions

5.2 Housebuilding - Sales, completions by buyer type


Appendices

FY12 FY13 TOTAL

150

125

100

75

50

25

0

42.5

77.3

138.4

FY14

18.6

£m

5.3 Housebuilding - Forecast land creditors’ payment profile


Appendices

5.4 Housebuilding - Trading overview

H1 121 H1 11 FY 11

Revenue (£m) 256 153 388

Land cost 29.7% 28.0% 27.4%

Build cost 53.2% 57.7% 56.5%

Gross margin 17.1% 14.3% 16.1%

Admin expense 6.1% 7.8% 8.0%

Operating margin 11.0% 6.5% 8.1%

1 Excludes significant land sale


Appendices

5.5 Housebuilding - Analysis of sales reserved, contracted, and completed

Feb 12 Dec 11 Feb 11

£m

Private 417.3 339.9 286.4

Affordable 166.4 161.0 155.7

Land Sales 21.1 21.1 7.9

Total 604.8 522.0 450.0

For completion in FY12 480.2 416.2 293.9

For completion post FY12 124.6 105.8 156.1

Total 604.8 522.0 450.0

% of projected FY revenue secured 78% 68% 76%

Plots

Private 1,655 1,358 1,243

Affordable 1,480 1,438 1,444

Total 3,135 2,796 2,687


Appendices

5.6 Housebuilding - Private sales, analysis of incentives on reservations

H1 12 H2 11 H1 11

None 52% 58% 50%

Incentives

Part exchange 12% 11% 10%

Assisted move 5% 5% 4%

Shared equity 11% 14% 27%

Investor sales 20% 12% 9%

TOTAL 100% 100% 100%


Appendices

5.7 Housebuilding - Land bank valuation

Strategic land bank of 6,750 plots

Cost per plot £000 H1 12 H1 11 FY 11 FY 10

Opening land bank 51 51 51 45

Closing land bank 53 52 51 51

Weighted ASP in land bank 217 202 215 203

Plot cost as % of weighted ASP 24% 26% 24% 25%


DisclaimerSub- Heading

This presentation is being made only to and is directed at persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or any other persons to who it may otherwise lawfully be communicated (all such persons being referred to as “relevant persons”).

Any person who is not a relevant person should not act or rely on this presentation or any comments made during the presentation. This presentation does not constitute or form part of, and should not be construed as, any offer or invitation to subscribe for, underwrite or otherwise acquire, any securities of the Company or any member of its group nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities in the Company or any member of its group or any commitment whatsoever. This presentation does not purport to contain all the information that may be required to evaluate any proposed transaction and should not be relied on in connection with any such potential transaction. Any recipient hereof should conduct its own independent analysis of the Company. Recipients should note that the Company will not update or otherwise revise this presentation.

The financial information set out in this document does not constitute the Company’s statutory accounts. Statutory accounts for the financial year ended 30 June 2011, which received an auditors’ report that was unqualified and did not contain any statement concerning accounting records or failure to obtain necessary information and explanations, have been filed with the Registrar of Companies.

half year results – 22 february 20121st michael’s reach, marazion, cornwall half year results to...

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