Countryside Properties plc Analyst Update

Transcription

1 Countryside Properties plc Analyst Update 1 ANALYST UPDATE JUNE 2016

2 Balanced business with two differentiated models H1 16 business split Housebuilding Division South-East focused place making Excellent visibility of outlet growth Industry leading strategic land bank (15 years) Operating margin growth from increased scale Partnerships Division Capital light and low risk model Relationship led, with 30 year track record Political support and barriers to entry Significant visibility of work and growing pipeline REVENUE 56% Housebuilding OPERATING PROFIT 55% Housebuilding LAND BANK 70% Housebuilding TNAV Partnerships Partnerships Partnerships 44% 312.8m 45% 30% 50.8m Plots 26,000 76% 24% 487m Housebuilding Partnerships NOTE: Group financials are shown on an adjusted basis to include the proportional contribution of the joint ventures and associate and exclude non-underlying items 2 ANALYST UPDATE JUNE 2016

3 Housebuilding Performance and guidance COMPLETIONS Private Affordable D&B ,200+ REVENUE ( m) AND GROSS MARGIN 24%+ 23.3% 18.1% % FY13 FY14 FY15 Medium term FY13 FY14 FY15 Medium term UNDERLYING OPERATING PROFIT ( m) & MARGIN 18%+ ROCE 20%+ 15.6% 16.6% 9.9% % 3.2% FY13 FY14 FY15 Medium term 2.1% FY13 FY14 FY15 Medium term NOTE: Group financials are shown on an adjusted basis to include the proportional contribution of the joint ventures and associate and exclude non-underlying items 3 ANALYST UPDATE JUNE 2016

4 Housebuilding well located for growth CAMBRIDGE READING 50 MILES FROM LONDON HORSHAM AMERSHAM LONDON CHELMSFORD MAIDSTONE 31 Active sites 54 Future land bank sites Average site size 214 units 4 ANALYST UPDATE JUNE 2016

5 Housebuilding land bank 87% strategically sourced Average 10% discount to OMV Long term options give flexibility Legacy land fair valued to 15% GM 24% target margin, 25% target ROCE 15 years visibility at target volumes Only 27% owned (c. 4 years) Low land creditors Shadow value in controlled plots 8,600 plots with planning Land bank source 64% 3% Total plots 18,273 Land bank ownership Owned 4,914 10% 27% 87% 9% Legacy land OMV Strategic Owned Plots 639 1,746 15,889 Controlled (conditional contracts) Controlled (option agreements) 5 ANALYST UPDATE JUNE 2016

6 Housebuilding legacy sites Only 2 sites remain, fair valued to 15% Cliveden Sittingbourne Harold Wood Horsted Park Sept 2015 Sept 2016 Sept 2017 Sept 2018 Sept 2019 Sept ANALYST UPDATE JUNE 2016

7 Housebuilding margin growth from strategic land Q FY Sites/ Phases NOTE: As at 31 March ANALYST UPDATE JUNE 2016 On site Owned / Controlled Pipeline 2021 onwards Plots GM 41 16% 27 30% 61 17% 33 20% % % % % % 1,823 28% % 64 20% 48 25% % % % % % % 52 23% % 77 23% 62 23% % 1,070 24% % 87 23% % % % % 49 23% % % % % % 1,750 22% % % % 75 23% % 69 23% % %

8 Housebuilding case study: Beaulieu, Chelmsford Long-term strategic site of 700 acres being assembled and promoted over 20 years 50/50 JV with London & Quadrant to deliver 3,660 homes Potential for 5 sales outlets with differing product ranges and price points 3 phases under construction, 2 currently selling Strong sales and price growth since launch in FY15 1,830 Units 84m Peak funds 673m GDV 40.0% ROCE 28.0% Gross margin 27% Affordable 8 ANALYST UPDATE JUNE 2016

9 Housebuilding Excellent medium term visibility 100% of medium term plan either owned or controlled Pull through of strategic land improving margins No requirement to chase new land, selective acquisitions 94% of medium term plan with planning NPPF and 5 year supply requirement Increased supply impacting land prices Reduction in pre-start conditions anticipated Over 90% forward sold for FY16e as at 31 March 2016 Private order book of 205.3m Private ASP of 426k HOUSEBUILDING OWNED/CONTROLLED STATUS OF LAND BANK FY16e FY17e FY18e Owned HOUSEBUILDING PLANNING STATUS OF ANTICIPATED COMPLETIONS FY16e FY17e FY18e With planning 100% 95% 5% 83% 17% Controlled 86% 100% 98% 14% Without planning 2% 9 ANALYST UPDATE JUNE 2016

10 PLACES PEOPLE LOVE Partnerships Richard Cherry 10 ANALYST UPDATE JUNE 2016

11 Partnerships Performance and guidance COMPLETIONS Private Affordable D&B 1, ,348 1, ,400+ REVENUE ( m) AND GROSS MARGIN 20%+ 19.7% 16.9% % FY13 FY14 FY15 Medium term FY13 FY14 FY15 Medium term UNDERLYING OPERATING PROFIT ( m) & MARGIN 15%+ ROCE 13.8% 10.3% % % 53.5% 69.4% 50%+ FY13 FY14 FY15 Medium term FY13 FY14 FY15 Medium term NOTE: Group financials are shown on an adjusted basis to include the proportional contribution of the joint ventures and associate and exclude non-underlying items 11 ANALYST UPDATE JUNE 2016

12 Partnerships Proven low capital model Source Public procurement or direct negotiation Land Low land cost Land secured via public procurement or negotiation Awarded on design quality, reputation and value Delivery track record essential Attractive sites at low cost and low planning risk Residual land value after priority profit Low land value underpins strong ROCE Build Phase viability + priority profit + project management fee Resilient earnings underpinned by deal structure month phased viability on larger sites Priority profit and project fees protect downside Sell Private GM 20% 1 PRS GM 10% 1 Affordable GM 5-10% 1 Agreed mix with local authority Benefit from private price growth Affordable and PRS pre sold and cash positive Target return Target gross margin > 15% Target ROCE > 50% Blended margin target prioritised for each phase Low capital employed drives ROCE Upside benefit from shared sales overage SOURCE: Company information 1 Target Gross margin figures 12 ANALYST UPDATE JUNE 2016

13 Long standing relationships with local authorities Strong reputation of delivery throughout the cycle High quality product and project execution Provides partners with a share of upside Building trust with partners and council officers Allows early traction with key decision makers Enhances access to opportunities in new areas Early engagement to identify future projects Allows time to carry out suitable preparation Able to showcase expertise through feasibility and benefits studies ahead of bid Local Authority Developments No. of years known Barking and Dagenham 4 25 Hackney 4 20 Southwark 3 20 Tower Hamlets Islington 1 20 Barnet 2 15 Brent 1 10 Newham 1 10 Croydon 1 8 Lambeth 1 8 Ealing 1 5 Havering 1 5 Enfield 3 4 Greenwich 1 3 Waltham Forest 1 3 Bromley 1 2 Westminster 1 - Hammersmith and Fulham 1 - Outer London 12 - Total 51 High Medium Low or unidentified Pipeline of opportunities 13 ANALYST UPDATE JUNE 2016

14 Partnerships competitive landscape remains fragmented Volume Housebuilders Social Housing Builders Housing Associations General Contractors 14 ANALYST UPDATE JUNE 2016

15 Key success factors in winning new work Few competitors meet all requirements, and clients prefer a single interface Reputation and relationships essential for long term developments Limited and fragmented competition Key success factors Design and Place Making Specification, Sales and Marketing Construction Management Countryside Volume House builders Housing Associations Construction Contractors Over 50 completed sites with a further 38 active sites 1 Community Engagement and Management Delivery Track Record & Established Relationships 1 As at 31 March ANALYST UPDATE JUNE 2016

16 Partnerships Land bank and bid pipeline Strong visibility of future work (c. 6.5 years) Rapidly increasing opportunity to bid Selective bidding maintains historic win rate (40%) LAND BANK BY CONTRACT PLUS PREFERRED BIDDER Sept 15 Mar 16 2,157 5,646 1,542 2,430 Owned Land Development Agreements Total plots 9,345 5,296 7,188 Preferred Bidder Total plots 14,914 Savills report identifies one million plot potential on London Local Authority Estates Additional opportunity in North West and West Midlands FUTURE OPPORTUNITIES Sept 15 Mar 16 7,000 8,487 5,173 25,386 Bids in progress Total plots 15,487 Future bids Total plots 30, ANALYST UPDATE JUNE 2016

17 Q FY Strong visibility of future profitability Partnerships South Sites/ Phases On site Development Agreement Preferred bidder onwards Plots GM 75 23% % % % % % % % 1,440 20% 21 35% % % % % % 1,262 23% % % 2,781 23% NOTE: As at 31 March D&B sites 17 ANALYST UPDATE JUNE 2016

18 Q FY Strong visibility of future profitability Partnerships North Sites/ Phases On site Development Agreement Preferred bidder onwards Plots GM % % 1 1,624 17% 79 23% 66 20% % % % % % % % 28 12% 40 24% % % 50 22% 50 23% % % % % % % % NOTE: As at 31 March D&B sites 2 Sigma PRS sites 18 ANALYST UPDATE JUNE 2016

19 Significant further opportunity in bid pipeline Significant future pipeline of 30,559 plots PRESTON 16 sites (5,173 plots) currently under bid ROCHDALE Further 35 sites (25,386 plots) in pre-bid evaluation Opportunity being led by South East Estate Regeneration (25,729 plots) LIVERPOOL WIGAN MANCHESTER Brown field regeneration in the North (4,830 plots) Growing PRS opportunity LETCHWORTH OXFORD WATFORD SOUTHEND -ON-SEA CROYDON 19 ANALYST UPDATE JUNE 2016

20 Partnerships Private Rented Sector Model Accelerates development Opportunity to double production rates on larger sites Increases absorption Increases pace of place making Optimises supply chain and prelims Improves returns Units are forward sold and paid on monthly valuation Improves asset turn Improves cash flow Increases ROCE Increases resilience Mixed tenure delivery reduces reliance on private sales Resilient earnings underpinned by deal structure Margins set by phase Lower time based costs 20 ANALYST UPDATE JUNE 2016

21 Partnerships North case study: Norris Green Village, Liverpool Regeneration of poor quality local authority estate 8 year development programme of mixed tenure units 221 PRS units delivered to date with Sigma/Gatehouse 100% timber frame 2 and 3 standard house types Fast build times delivering up to 160 units p.a. Additional 200 units recently secured to extend the site 829 Units 3m Peak funds 93m GDV >100% ROCE 17.1% Gross margin 27% PRS 21 ANALYST UPDATE JUNE 2016

22 Partnerships North case study: Queen Mary Place, Liverpool Brownfield 12 acre former Queen Mary School site Purchased in Jan 2015 from Liverpool City Council Developed in partnership with Sigma/Gatehouse to deliver Private Rented Units 64 PRS units completed in 2015 with 136 private sale units under construction 100% standard house types Timber frame construction with week unit build times 200 Units 4m Peak funds 28m GDV >100% ROCE 18.7% Gross margin 32% PRS 22 ANALYST UPDATE JUNE 2016

23 Further opportunity in the West Midlands New office located in Wolverhampton Expansion of North West model using standard house types Utilising existing staff and supply chain to grow scale Brownfield regeneration led with significant PRS opportunity 25 potential sites identified (4,300 plots) First site now secured at Rowley Regis TELFORD WOLVERHAMPTON KIDDERMINSTER WALSALL BIRMINGHAM 23 ANALYST UPDATE JUNE 2016

24 West Midlands case study: Black Country Garden City Promoted by Black Country Local Enterprise Partnership Large scale regeneration to deliver 45,000 new homes over 10 years Over 500 sites identified over 3,700 acres Funding available to provide remediation and infrastructure Four initial areas identified as opportunities i54 (BLACK COUNTRY ENTERPRISE ZONE) WOLVERHAMPTON CITY CENTRE Wolverhampton Canal Quarter The Lye DUDLEY Dudley Point M6 JUNC 10 Willenhall WEST BROMWICH WALSALL 24 ANALYST UPDATE JUNE 2016

25 Partnerships structure in place for growth Partnerships Division Partnerships South 1,100 units 1 (1,800 capacity) Partnerships North 1,300 units 1 (1,800 capacity) East Central West North West West Midlands 1 Medium-term target production 25 ANALYST UPDATE JUNE 2016

26 PLACES PEOPLE LOVE Enablers of growth Rebecca Worthington 26 ANALYST UPDATE JUNE 2016

27 Bank debt and interest cost Bank Debt Facility 300m facility with Accordion for up to additional 100m Maturity of five years with two one year extensions Other key changes c. 100bps improvement in margin Removal of fixed charges replaced by floating security Increased flexibility Interest Cost Expected adjusted interest cost of c. 12m for 2016 Land discount interest is the unwind of discounted land creditor payments under IFRS Shareholder Loan interest reflects structure of private equity ownership and ceased post IPO Interest summary ( m) Bank & other interest Amortised fees Unwind of land creditors discount Finance income Total interest incl. share of JV and associate interest¹ Shareholder Loan interest Total interest 1 Group interest excluding shareholder loan interest H (1.5) ANALYST UPDATE JUNE 2016

28 Net debt of 8.7m at 31 March 2016 m 59.5 (130) 81 (14) Profit after tax (22) (5) At 1 Oct 15 Non-cash items Other 8.7 At 31 Mar 16 IPO Proceeds 16 IPO Costs 23 Investment In JVs Increase in working capital 28 ANALYST UPDATE JUNE 2016

29 Increased site numbers driving growth ACTIVE SITES SALES OUTLETS MANCHESTER LIVERPOOL Housebuilding 31 Partnerships 38 CAMBRIDGE AMERSHAM CHELMSFORD H FY 2015 H sites under construction Private sales rate (average sales per outlet per week) HORSHAM LONDON MAIDSTONE 29 ANALYST UPDATE JUNE 2016

30 Average Selling Price growth Like-for-like sales up 12% in HY 2016, driven by locations Underlying growth a combination of HPI and regeneration effect Acton has seen 20% CAGR over past 3 years suggests half due to regeneration Strongest growth in the 400k- 600k price range Actively manage planning to achieve this target range Less than 5% of private completions over 1m for current year ASP PROGRESSION ( 000) Housebuilding 500 Group Partnerships e 2017e 2018e 2019e 2020e 30 ANALYST UPDATE JUNE 2016

31 Growth delivered by robust supply chain Long established relationships supported through the cycle Build cost inflation environment easing Averaging around 4.5% p.a. Mainly driven by labour inflation Materials prices stable 90% compliance to group procurement Partnering agreements with key subcontractors secures build and reduces resources on larger sites 496 approved active subcontractors at March 2016 Increasing use of standardised house types and design details GROWTH IN APPROVED SUBCONTRACTORS Mar 13 Mar 14 Mar 15 Mar ANALYST UPDATE JUNE 2016

32 Organisational capacity for growth Six regional businesses established Significant expansion of the regional teams Recruitment, retention and reward key issues 60 key staff in LTIP 70% participation in SAYE Overhead efficiency for increased scale EMPLOYEE NUMBERS 1,100 1, A M J J A S O N D 2014 J F M 2015 A M J J A S O N D J F ANALYST UPDATE JUNE 2016

33 Summary Ian Sutcliffe 33 ANALYST UPDATE JUNE 2016

34 Outlook and current trading Strong visitor levels and reservations continued into H2 No adverse impact from stamp duty changes or EU referendum seen to date Underlying sales values continue to rise in line with H1 Use of Help to Buy increasing Over 90% forward sold for FY16 Build cost increases mitigated by lower material costs Partnerships bid opportunities continue to grow Firmly on track for FY16 and medium term targets 34 ANALYST UPDATE JUNE 2016

35 Firmly on track to deliver our medium term targets HOUSEBUILDING Completions Operating margin 1 ROCE FY units 15.6% 16.6% Medium term targets 1,200+ units 18%+ 20%+ PARTNERSHIPS FY15 Medium term targets Completions Operating margin 1 ROCE 1,711 units 13.9% 69.4% 2,400+ units 15% 50%+ GROUP FY15 Medium term targets Completions Operating margin 1 ROCE 2,364 units 14.8% 24.7% 3,600+ units 17%+ 28%+ 1 Underlying operating margin for ANALYST UPDATE JUNE 2016

36 Appendix 36 ANALYST UPDATE JUNE 2016

37 Housebuilding financials 193 Private completions H1 2015: Affordable completions H1 2015: k Private ASP H1 2015: 662k 148k Affordable ASP H1 2015: 137k H H change Revenue Gross profit Gross margin Operating profit Operating margin TNAV 1 ROCE 174.0m 40.2m 23.1% 27.7m 15.9% 372.2m 16.3% 126.0m 30.9m 24.5% 19.0m 15.1% 244.3m 11.4% +38% +30% -140bps +46% +80bps +52% +490bps 1 Assumes Group debt allocation to divisions in line with asset split 37 ANALYST UPDATE JUNE 2016

38 Partnerships financials 251 Private completions H1 2015: Affordable completions H1 2015: k Private ASP H1 2015: 210k 102k Affordable ASP H1 2015: 109k H H Revenue Gross profit Gross margin Operating profit Operating margin TNAV 1 ROCE 138.8m 30.6m 22.0% 23.1m 16.6% 115.1m 50.6% 126.2m 22.5m 17.8% 16.3m 12.9% 45.0m 42.2% 1 Assumes Group debt allocation to divisions in line with asset split change +10% +36% +420bps +42% +370bps +155% +840bps 38 ANALYST UPDATE JUNE 2016

39 Overage accounting House price at agreed contract date 100k HPI moves expected sales value up 120k P&L movements P&L expected at contract 100k Revenue 90k COGS 10k 120k Gross profit = 10% Gross margin P&L recognised at completion 120k Revenue 100k COGS 20k 120k Gross profit = 17% Gross margin Balance sheet movements Balance sheet at contract date 0k Overage Balance sheet movement at point of new valuation (assuming 50/50 share) 10k Stock 10k Overage Balance sheet movement Pay out 10k cash to local authority and reduce overage to zero 39 ANALYST UPDATE JUNE 2016

40 Partnerships case study: Beam Park, Dagenham Secured via GLA bid process 71 acre site on former Ford plant 15 year development with L&Q New railway station provided with TfL 9m grant 46,000 sq ft of commercial and retail space First completions expected ,781 Units 900m GDV 35m Peak funds 34% Affordable 40 ANALYST UPDATE JUNE 2016

41 Partnerships case study: Western Avenue, Huyton Selected by Knowsley Borough Council A 6 year development An extension to the existing partnering relationship with the council. We are already progressing 5 mixed-tenure sites. 20 acre former school site in established residential area Accessible and popular market location 6 miles from Liverpool city centre Low rise family housing product 286 Units 55m GDV 8m Peak funds 10% Affordable First completions expected July ANALYST UPDATE JUNE 2016

42 Glossary / clarification of financial information TERM Active site / Current Asset Turn Awaiting start Controlled plots Future identified Future unidentified GDV Group and segmental revenue, gross profit, overheads and underlying operating profit Group and segmental underlying operating profit Legacy site DEFINITION A site becomes active when construction costs of more than 50,000 have been incurred and remains active until the last plot on the site has been completed Asset Turn is calculated as Revenue divided by the average TNOAV Sites which are owned or controlled by the Group but where construction work has not yet started These are plots that are not currently owned by the Group but which are controlled by conditional contracts or option agreements Sites which have been identified for future development and where negotiations are underway but where the site is not yet owned or controlled Sites which have been included in the medium term financial plan but where the site is yet to be identified GDV is the Group s estimate of the total revenue that could potentially be generated from development of a particular site Group and segmental revenue, gross profit, overheads and underlying operating profit (unless otherwise stated) have been presented after applying the proportional contribution of the joint ventures and associates Group and segmental underlying operating profit includes the Group s share of joint ventures and associates operating profit and has been adjusted for those items which are either material or infrequent in nature and which management do not relate to the Group s underlying performance such as those costs incurred in connection with business combinations, capital markets transactions, restructuring and the share based payment charges that have been incurred in connection with the Group current management incentive plan These are sites that the Group owned or controlled at the time of the Oaktree acquisition where the potential returns were no longer in line with acceptable minimums. A fair value adjustment was made to these sites at the time of the acquisition commensurate with delivering a 15% gross margin. 42 ANALYST UPDATE JUNE 2016

43 Glossary / clarification of financial information TERM OMV On site Open Sales site Order book Overheads PRS TNOAV Under construction site With planning DEFINITION Open Market Value Sites where construction work has started and construction costs of more than 50,000 have been incurred A site becomes an open sales site once a sales office is opened or from the first reservation being taken, whichever is the earlier. It remains an open sales site until the last plot on the site has been reserved. For private sales this represents the number and value of future sales where reservations have already been taken at the date of the order book. For affordable sales this represents the balance of the units and value on the contract. Group overheads is calculated as the difference between Underlying Operating Profit and Gross Profit and includes the share of joint venture and associate overheads; Segmental overheads and underlying operating profit include an allocation of central overheads costs on a proportion of Segmental revenue basis for the given year. Private Rental Site TNOAV is defined as Tangible Net Operating Asset Value and is calculated as Net Assets excluding intangible assets and borrowings Sites where construction costs of more than 50,000 has been incurred but which have not yet opened as sales sites Sites with planning include sites where detailed or outline planning has been achieved or there is a resolution to grant (RTG) planning permission 43 ANALYST UPDATE JUNE 2016