Bovis Homes Group PLC Agenda - Home | PLC Group · Average sales price (£k) 165.5 172.3 180.1 188.7 +5% Average sales price per sq ft (£) 166.6 171.6 175.7 187.5 +7% Robust sales

Bovis Homes Group PLCPreliminary financial results 2012

www.bovishomesgroup.co.uk

Issued 25 February 2013

Frame 1

•

• Operations

• Financials

• Strategy and outlook

Agenda

• Highlights

Crown Park, Chester

Frame 2

• Significant improvement in ROCE to 7.7% (2011: 5.0%)

• 2012 full year dividend of 9.0 pence per share, 80% increase

...with excellent position for future growth

• Material investment in 3,501 consented plots of land during 2012

• Strong balance sheet with net cash of £19m (2011: £51m)

Profits and returns delivered at upper end of market expectationsProfits and returns delivered at upper end of market expectations

32.1

17.5

10.02011

2012

2011

2012

2011

2012

13.4

54.1

30.7

Profit before tax (£m)

Basic earnings per share (p)

Operating margin (%)

+69%

+75%

+3.4ppt

Frame 3

Volume growth

xGrowth in average sales price

xImproving operating profit margin

=Significant increase in operating profit

• Increased active sales outlets• Better sales rates

• Better mix of traditional homes• More southern locations• Private ASP increased by 5%

• Greater proportion of full margin sites

2012 compound positive profit effect

2012

+15%

+5%

+3.4ppts

+56%

Frame 4

Bovis Homes strategy remains on track

Profit growth

• Rebuilding volumes• Higher ASP• Increasing margins• Improving overhead efficiency

Capital efficiency• Lower net land capital

employed per site

• Improving WIP efficiency• Lower working capital

Targeted ROCE growth in 2012 achieved and significant further growth anticipated

50

60

70

80

90

100

110

2008

92

85

66

73

82

90+

2009

Active sales outlets2010 2011 2012 2013 est

0

2

4

6

8

10

12

2009 2010 2011

%

2012 2013 Proj 2014 Proj

ROCE

Frame 5

• Affordability of owning a home compared to rental is good

• Mortgage availability continues to constrain market demand

• Government initiatives having positive effect - NewBuy momentum increasing with greater awareness and reducing rates - Second phase of FirstBuy in delivery through to early 2014 - Funding for Lending Scheme supporting lenders

• Pricing stable on average with some regional variations - south remains robust

• Market for land competitive, but residential land is available at acceptable returns for housebuilders with capital to deliver

The success of the Group’s growth in returns is not reliant on an improvement in general housing market conditions

Stable but challenging market conditions

Frame 6

• Highlights

•

• Financials


Agenda

• Operations

Cloister Gardens, Sneyd Park, Bristol

Frame 7

Year ended 31 December 2011 2012 Change

Reservations b/fwd 420 568

Reservations:

Private 1,653 1,873 +13%

Social 540 692 +28%

Total 2,193 2,565

Legal completions (2,045) (2,355) +15%

Carried forward 568 778 +37%

Strong sales volumes in 2012

• Private reservations in the year increased by 13%, driven by:- 12% increase in active sales outlets

• Forward order book improved by 37% with: - 8% increase in private reservations

- 57% increase in social reservations mainly due to new sites

Frame 8

• An average of 82 active sales outlets in 2012 (2011: 73)

• Pricing and margins are stronger on new sales outlets

• 27 active sales outlets opened in 2012

• Active sales outlets at 2012 year end of 90

• Average active sales outlets for 2013 expected to be in excess of 90

The Group is confident of achieving strong growth in average active sales outlets in 2013, with the pipeline of land already acquired progressing to sales launch

Active sales outlets growing strongly

Frame 9

2012 number of active sales outlets

week 1 new outlets week 52 change avg weeks 1-52

South 47 23 60 +28% 51

Midlands/North 31 4 30 -3% 30

Retirement 2 - - -100% 1

Total 80 27 90 +13% 82

Increased southern bias driving growth

• Two thirds of sales outlets at year end located in south of England

• Southern bias will increase further over coming years

Frame 10

Private homes 2009 2010 2011 2012 Annual change

Average sales price (£k) 165.5 172.3 180.1 188.7 +5%

Average sales price per sq ft (£) 166.6 171.6 175.7 187.5 +7%

Robust sales prices

• Underlying market prices are stable

• 5% increase in average sales price in 2012 to £188,700

- Increased contribution from homes in south of England

- Increased contribution from traditional family homes

- Reduced contribution from high density town houses

- Underlying sales prices in line with stable marketplace

Frame 11

Significantly higher level of traditional homes

0

20

40

60

80

100

2010 2011 2012

28%

25%

44%

22%

28%

49%

19%

42%

39%

1%3%Retirement

3 storey

Traditional

Apartments

• Strong growth of traditional homes

• Three storey becoming smaller proportion, as lower density schemes increase

Frame 12

Improving private product mix of larger houses

0

20

40

60

80

100

2010 2011 2012

28%

9%

37%

23%

22%

8%

47%

22%

19%

12%

45%

24%

1%3%Retirement

4 bedroom+ houses

3 bedroom houses

2 bedroom houses

Apartments

• Three bedroom plus family housing over two-thirds of private mix

• Apartment mix moderating, anticipated to reduce further in future

• FirstBuy has supported the sale of smaller homes

Frame 13

• 3,501 consented plots on 24 sites acquired during 2012, of which

- 2,651 plots on 18 sites were added to the land bank

- current day GDV of £561m - 86% located in south of England

- 850 plots on 6 sites expected to complete in early 2013

- of these, 408 plots added to the land bank since the year end

Continuing to improve spread and quality of land bank

Strong consented land investment in 2012

Frame 14

OundleRugby

Newton LeysMilton Keynes

Biddenham

Bicester

Broadbridge Heath

Bolnore

Rissington

Dawlish

Paignton

Leavesden

Cuddington

Consented sites added to the land bank

Consented sites contracted, awaiting satisfaction of conditions

Bude

Penryn

St Neots

Evesham

Watchfield

Yarnfield

Kidderminster

Sandbach

Shefford

Oxford

Winchester

Consented land acquired in 2012

Frame 15

Potential plots as at 31 December 2011 2012

South 10,645 11,236

Midlands 7,203 7,032

North 901 1,050

Total 18,749 19,318

Enhanced strategic land investment

• c1,800 potential plots added to the strategic land holdings during 2012

• c1,200 plots converted to the consented land bank during 2012

• c8,000 plots expected to gain planning consent over next three years - incremental investment in promotion costs of £3.5m in 2013

Bovis Homes continues to view strategic land as important in supplying good quality residential land at a discount to market value

Frame 16

• Highlights

• Operations

•


Agenda

• Financials

Homelands, Bishops Cleeve

Frame 17

Year ended 31 December (£m) 2011 2012 Change

Revenue 364.8 425.5 +17%

Gross profit 72.2 96.9 +34%

Administrative expenses (35.8) (40.1) +12%

Operating profit 36.4 56.8 +56%

Finance cost (4.5) (2.9)

Share of equity accounted entities 0.2 0.2

Profit before tax 32.1 54.1 +69%

Taxation charge (8.8) (13.3)

Profit after tax 23.3 40.8 +75%

Summary of Group results - strong profit improvementsSummary of Group results - strong profit improvements

• Strong growth in revenue and gross profit

• Delivering leverage benefit over administrative expenses- Administrative expenses include all sales and marketing costs

• Stronger growth in operating profit and profit before tax

Frame 18

Year ended 31 December (£m) 2011 2012

Excl land Land Excl land Land sales sales Total sales sales Total

Revenue 334.8 30.0 364.8 407.7 17.8 425.5

Gross profit 69.5 2.7 72.2 92.1 4.8 96.9

Administrative expenses (35.8) - (35.8) (40.1) - (40.1)

Operating profit 33.7 2.7 36.4 52.0 4.8 56.8

Gross margin 20.8% 9.0% 19.8% 22.6% 27.0% 22.8%

Operating margin 10.1% 9.0% 10.0% 12.7% 27.0% 13.4%

Strong underlying housing profit improvements

• Gross margin (excluding land sales) increased by 1.8 ppts

• Gross margin (excluding land sales) in H2 2012 of 23.6% (H2 2011: 21.2%)

• Operating margin (excluding land sales) has reached 12.7%, increase of 2.6 ppts

Frame 19

Average sales price (£k) 2011 2012 Change

Private 180.1 188.7 +5%

Social 94.3 103.9 +10%

Total 162.4 170.7 +5%

Volume

Private 1,624 1,854 +14%

Social 421 501 +19%

Total 2,045 2,355 +15%

Housing revenue (£m)

Private 292.5 349.9 +20%

Social 39.7 52.1 +31%

Net housing revenue 332.1 402.0 +21%

Other income 2.7 5.7

Revenue 334.8 407.7 +22%

Housing revenue analysis

Frame 20

2010 2011 2012

Revenue 298.6 334.8 407.7

Revenue 100.0% 100.0% 100.0%

Land 23.4% 23.9% 24.0%

Build and other costs 58.7% 55.3% 53.4%

Gross margin 17.9% 20.8% 22.6%

Operating margin 7.2% 10.1% 12.7%

Good housing gross margin progression

• Build cost % reducing with increase in traditional homes on higher value sites

• Underlying build costs remain stable

Frame 21

Private housing (£k) 2009 2010 2011 2012

Average sales price 165.5 172.3 180.1 188.7

Average land cost (37.8) 23% (44.5) 26% (49.0) 27% (50.8) 27%

Average build and other costs (101.4) 61% (97.2) 56% (94.2) 52% (94.2) 50%

Average gross profit 26.3 30.6 36.9 43.7

Private housing gross margin 15.9% 17.8% 20.5% 23.2%

Enhanced private housing profits

• 18% increase in average gross profit per private home

• Increase in average sales price with shift in product mix and location of legal completions

• Average build and other costs have reduced to 50% of revenue

• Continued strong growth in private housing gross margin

Frame 22


Bank interest and commitment fees (2.0) (1.8)

Issue cost amortisation (0.8) (0.8)

Imputed interest on land (4.3) (3.1)

Pension financing 0.6 0.7

Imputed interest on available for sale assets 1.6 1.7

Other items 0.4 0.4

(4.5) (2.9)

Imputed interest on land creditors drives the financial chargeImputed interest on land creditors drives the financial charge

• Decreased land creditors on average during 2012, compared to 2011, reduced the imputed interest on land

• Refinancing completed in January 2013 with similar costs to existing facility

• Changes in accounting for pensions will lead to removal of pension financing credit in 2013

Frame 23


Housing receipts 319.2 395.1

Construction expenditure (169.7) (224.4)

Overheads (35.4) (40.7)

Operating cash flow 114.1 130.0

Cash expenditure on land (116.9) (164.6)

Land sales receipts 20.6 25.9

Non-trading items (18.7) (23.3)

Net cash flow (0.9) (32.0)

Opening net cash 51.7 50.8

Closing net cash 50.8 18.8

Generating cash to invest

• Operating cash flow was strongly positive in 2012

• The Group remained in a net cash position at 31 December 2012

Frame 24


Land 614.3 666.2

Land creditors (128.8) (123.8)

Land net of creditors 485.5 542.4

Work in progress 166.5 172.7

Other assets 156.2 164.0

Other liabilities (130.4) (139.1)

Net cash 50.8 18.8

Net assets 728.6 758.8

Net assets per share 545p 567p

Increase in net assets

• Remaining land provision of £29m after £7m of utilisation in 2012

• Other assets reflect increase in part exchange (£8m), shared equity (£5m) and fund units (£7m), offset by reduction in land sales debtors (£9m) and other debtors (£4m)

Frame 25

Land creditor payments

2014 2015+2013

£36m

£14m

£74m

£124m£m

0

20

40

60

80

100

120 • The majority of the land creditors are payable within one year

Frame 26

• In 2012, gross margin potential in the land bank has increased by 1.3ppts

• ASPs in land bank have increased by 7.6% during 2012 as higher value, new plots are added

• 86% of additions in south of England

• 8,893 consented plots added in 2010, 2011 and 2012 with gross profit potential of £464m

Growing gross profit potential from land bank

Consented Revenue ASP Gross Gross Plots profit margin £m £000 £m %

2010 additions 3,690 711 192.7 181 25.5%

31 December 2010 13,766 2,307 167.6 461 20.0%

2011 additions 2,552 542 212.4 137 25.3%

31 December 2011 13,723 2,445 178.2 524 21.4%

2012 additions 2,651 561 207.5 146 26.0%

31 December 2012 13,776 2,641 191.7 600 22.7%

Estimates based on current sales prices and current build costs, excluding normal margin enhancement from other income, rents and rebates (2012: c1%)

Frame 27

As at 31 Dec 2009 31 Dec 2010 31 Dec 2011 31 Dec 2012

% land Plots % land Plots % land Plots % land Plots

South 65% 7,822 69% 9,482 72% 9,813 74% 10,171

Midlands 23% 2,735 21% 2,863 18% 2,528 17% 2,335

North 12% 1,485 10% 1,421 10% 1,382 9% 1,270

Group 100% 12,042 100% 13,766 100% 13,723 100% 13,776

Average plot cost £34,900 £39,800 £42,100 £45,800

New land acquisitions increase southern bias

• 13,776 plots with at least outline planning consent, representing circa 5.8 years of supply

• 74% of land bank in south of England

• 47% of land bank (6,454 plots) sourced through strategic land conversion

Frame 28

New land investment driving future margin

130 168 222

26%20%4%+

ASP (£000)

Gross margin %

0

20

40

60

80

100

Pre downturn

at cost

Post downturn

at cost

Written down

33%

13%

54%

Land

ban

k pl

ots

(%)

• Land acquisitions have strengthened the land bank

Land bank plots 31 Dec 31 Dec 31 Dec 31 Dec 2009 2010 2011 2012

Post downturn at cost 348 3% 3,931 29% 5,797 42% 7,368 54%

Pre downturn at cost 7,367 61% 6,198 45% 5,561 41% 4,587 33%

Written down 4,327 36% 3,637 26% 2,365 17% 1,821 13%

12,042 13,766 13,723 13,776

Frame 29

Positive growth in full margin land

0

20

40

60

80

100

2011 2012

36%

60%

4%

17%

45%

38%

2013 est 2014 est

14%

26%

60%

13%

15%

72%

2010

26%

58%

16%

Lega

l com

plet

ions

(%)

Post downturn at cost

Pre downturn at cost

Written down

• Launch of newly acquired sites will deliver increasing percentage of higher margin completions

Frame 30

2010 2011 2012 View of foreseeable future

Revenue (£m) 298.6 364.8 425.5

Operating profit (£m) 21.6 36.4 56.8

Capital turn 0.4 0.5 0.6 c0.8

WIP turn 1.7 2.2 2.5 >3.0

Operating profit margin (%) 7.2 10.0 13.4 c17 - 18

ROCE (%) 3.0 5.0 7.7 c14

Returns benefiting from higher margins andimproving capital efficiency

• Within a reasonable time frame, capital turn should be 0.8

• With operating margins continuing to improve ROCE should increase to c14%

The ROCE recovery is achievable with stable market conditions

Frame 31

• Highlights

• Operations

• Strategy

• Financials

Agenda


Frame 32

2012 - another year of strong delivery of growth strategy

2012 commitment 2012 result

Increasing volume Sales outlet growth More sites acquired Improving sales rates

• Outlets grown from 80 to 90 in year• 3,501 new consented plots• Increase in family homes in mix

Increasing ASP Southern focus Traditional product

• Two thirds of sales outlets in south at year end• 5% increase in average sales price

Increasing margins New full margin sitesPrime locations

• 27 new sales outlets launched in year• Housing gross margin increased to 22.6%

Improved overhead efficiency Increase revenues Overhead control

• Housing revenues increased by 21%• Overhead ratio improved by 1ppt

Increasing ROCE Profit growthLand managementLand sales WIP control

• 56% increase in operating profit• Better spread land bank• c250 plots sold• Reduced WIP compared to increased output

Commitment made at start of 2012

Frame 33

• 350 private reservations in the first eight weeks of 2013 (2012: 320), an increase of 9%

- Sales rates to date of 0.49 net reservations per site (2012: 0.48) with recent weeks at over 0.5 net reservations per site

- Operating from an average of 90 active sales outlets in first eight weeks (2012: 83), an increase of 8%

• Cumulative reservations to date of 1,198 (2012: 926) an increase of 29%

- 599 private (2012: 550)

- 599 social (2012: 376)

• Pricing on reservations achieved in line with expectations

- Average sales price on cumulative private reservations to date of c£200,000 (2012 full year private ASP: £188,700)

• Private housing gross margins to date ahead of H2 2012

Current trading in 2013

Frame 34

• Average sales outlets in excess of 90 will drive private volumes

• Experience to date of sales rates is positive with expectation of normal seasonal pattern through year

• Social volumes expected to increase - maintaining similar share of total volumes

• Average sales price expected to be at least £180,000 due to mix improvements

• Further margin improvement anticipated - higher housing margins and better overhead efficiency

• Strategic land promotion costs increasing by £3.5m

• Increased finance charges with higher average net debt and pension accounting rule change

Latest views for 2013 based on stable market conditions

Frame 35

Strategy going forward

Delivering compound effects of• Increased volumes

- Increased sales outlets- Stronger sales rates

• Higher ASP from mix benefits• Increasing margins• Improving overhead efficiency

Increasing capital efficiency with• Stable net land capital employed• Improving WIP efficiency• Lower working capital

Delivery of ROCE improvements in 2013 with further improvements beyond

50

60

70

80

90

100

110

2008

92

85

66

73

82

90+

2009

Active sales outlets2010 2011 2012 2013 est

0

2

4

6

8

10

12

2009 2010 2011

%

2012 2013 Proj 2014 Proj

ROCE

Frame 36

Disclaimer - important notice

Certain statements in this presentation are forward looking statements

Forward looking statements involve evaluating a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those statements

Forward looking statements regarding past trends, results or activities should not be taken as a representation that such trends, results or activities will continue in the future

Undue reliance should not be placed on forward looking statements

Frame 37

Bovis Homes Group PLCPreliminary financial results 2012

www.bovishomesgroup.co.uk

Appendices

Frame 38

Other assets

As at 31 December (£m) 2011 2012

Fixed assets 11.6 11.9

Investments 5.3 5.4

Part exchange properties 16.9 24.7

Debtors 58.4 54.8

Land sales debtors 25.3 16.2

Available for sale assets 38.7 51.0

Other assets 156.2 164.0

Frame 39

Work in progress


Housing and site overheads 88.5 91.7

Roads and sewers 77.8 81.0

Development properties 0.2 -

Work in progress 166.5 172.7

Frame 40

Other liabilities


Creditors 124.7 132.2

Retirement benefits 2.4 3.2

Provisions 3.3 3.7

Other liabilities 130.4 139.1

Frame 41

ASPs on 2012 legal completions

£ 2011 2012

Apartments 112,900 101,200

2 bedroom houses 131,700 134,200

3 bedroom houses 183,900 190,900

4 bedroom plus houses 253,700 291,300

Retirement 206,200 152,600

Social and partnership 94,300 103,900

Group 162,400 170,700

Frame 42

Consented land acquisitions increase

0

2,000

1,000

3,000

4,000

5,000

6,000

150

140

130

120

110

100

90

80

70

6,000

150150

Consented land acquisitions (LHS)

Land price index (RHS) Filton (LHS)

Elite Homes acquisition (LHS)

Strategic land conversion (LHS)

Plot

s ad

ded

Land

pric

e in

dex

2010 2011 2012200920082007200620052004

Documents

Bovis Homes Group PLC Agenda - Home | PLC Group · Average sales price (£k) 165.5 172.3 180.1 188.7 +5% Average sales price per sq ft (£) 166.6 171.6 175.7 187.5 +7% Robust sales