Countryside Properties PLC Full year results 2017 0 FULL YEAR RESULTS NOVEMBER 2017
Differentiated strategy driving outstanding growth Mixed tenure model enabling sector leading growth Record completions, revenue and operating profit Both Partnerships and Housebuilding growing strongly Increased Partnerships visibility with further opportunities Note: Group financials are shown on an adjusted basis to include the proportional contribution of the associate and joint ventures and exclude non-underlying items 1 FULL YEAR RESULTS NOVEMBER 2017
Financials Rebecca Worthington 2 FULL YEAR RESULTS NOVEMBER 2017
Group financial highlights Operating profit up 34% Increased scale and operational efficiency improving operating margin Increased asset turn driving ROCE up 370bps Greater cash generation and reduced adjusted gearing 1 to 7% EPS up 71% to 27.8p Total dividend of 8.4p per share OPERATING PROFIT 164.1m 164.1m 122.5m OPERATING MARGIN 15.8% 16.0% 91.2m 2015 14.8% 2015 2016 2016 2017 16.0% 2017 ROCE 30.5% 24.7% 26.8% 30.5% 1 Adjusted gearing includes land creditors as debt 2015 2016 2017 Note: Group financials are shown on an adjusted basis to include the proportional contribution of the associate and joint ventures and exclude non-underlying items 3 FULL YEAR RESULTS NOVEMBER 2017
Summary of Group income Adjusted measures, m FY 2017 FY 2016 change Revenue Operating profit Operating margin Net interest Profit before tax Tax Non controlling interest Profit after tax 1,028.8 164.1 16.0% (9.9) 154.2 (28.5) (0.4) 125.3 777.0 122.5 15.8% (28.4) 94.1 (20.6) (0.3) 73.2 +32% +34% +20bps -65% +64% +38% +33% +71% Note: Group financials are shown on an adjusted basis to include the proportional contribution of the associate and joint ventures and exclude non-underlying items 4 FULL YEAR RESULTS NOVEMBER 2017
Summary of Group results Adjusted measures FY 2017 FY 2016 change Basic EPS DPS 1 Gearing (net cash) Gearing including land creditors Asset turn ROCE 27.8p 8.4p (11.3)% 7.4% 1.9x 30.5% 16.3p 3.4p (2.0)% 15.1% 1.7x 26.8% +71% +147% - - +12% +370bps 1 No dividend was paid for H1 2016 (with a final dividend of 3.4p per share paid for FY2016 being 30% of H2 2016 earnings) due to the proximity to IPO. The Group s dividend policy is to pay 30% of adjusted earnings as a dividend. Note: Group financials are shown on an adjusted basis to include the proportional contribution of the associate and joint ventures and exclude non-underlying items 5 FULL YEAR RESULTS NOVEMBER 2017
Summary balance sheet m FY 2017 FY 2016 change Intangibles 59.5 58.9 +1% Investment in associate and JVs 1 129.0 143.4-10% Stock and WIP 667.1 583.6 +14% Land debtors 26.1 9.4 +178% Land creditors (128.0) (101.3) +26% Overage (44.0) (42.3) +4% Other (101.9) (70.8) +44% Net cash 77.4 12.0 +545% Net assets 685.2 592.9 +16% TNAV 2 627.0 537.4 +17% 1 Includes loans to JVs 2 TNAV is calculated as net assets less intangible assets net of deferred tax 6 FULL YEAR RESULTS NOVEMBER 2017
Net cash 77m at 30 September 2017 m Interest & tax 4 Dividend Other movements 77 At 1 Oct 16 Increase in working capital Cash received from JV s Reported operating profit At 30 Sept 2017 7 FULL YEAR RESULTS NOVEMBER 2017
Adjusted net finance costs breakdown m FY 2017 FY 2016 change Cash items Interest on bank debt Interest receivable Non-cash items Net unwind of discount Impairment of interest receivable Amortisation of debt finance fees Pre IPO Shareholder loan interest 1 Associate and JV interest Adjusted net finance costs 3.0-3.0 3.7 2.0 0.6-6.3 0.6 9.9 5.2 (1.5) 3.7 4.0-0.8 16.5 21.3 3.4 28.4-42% - -19% -8% - -25% - -70% -82% -65% 1 Shareholder loans were repaid in full on IPO in February 2016 8 FULL YEAR RESULTS NOVEMBER 2017
Partnerships financials 825 Private completions FY 2016: 628 646 Affordable completions FY 2016: 508 721 PRS completions FY 2016: 738 343k Private ASP FY 2016: 307k 121k Affordable ASP FY 2016: 111k FY 2017 FY 2016 Total completions Revenue Operating profit Operating margin TNAV 1 ROCE 2,192 476.7m 79.4m 16.7% 116.0m 77.5% 1,874 349.9m 56.8m 16.2% 105.6m 72.1% 1 Assumes Group debt allocated to divisions in line with asset split change +17% +36% +40% +50bps +10% +540bps 9 FULL YEAR RESULTS NOVEMBER 2017
Housebuilding financials 837 Private completions FY 2016: 499 360 Affordable completions FY 2016: 284 515k Private ASP FY 2016: 665k 183k Affordable ASP FY 2016: 157k FY 2017 FY 2016 Total completions Revenue Operating profit Operating margin TNAV 1 ROCE 1,197 552.1m 91.5m 16.6% 511.0m 21.0% 783 427.1m 68.1m 15.9% 431.8m 18.0% 1 Assumes Group debt allocated to divisions in line with asset split change +53% +29% +34% +70bps +18% +300bps 10 FULL YEAR RESULTS NOVEMBER 2017
Continued strong growth and improved returns COMPLETIONS Private Affordable 2,364 2,657 1,274 1,530 1,090 1,127 3,389 1,727 1,662 ADJUSTED REVENUE ( m) 615.8 777.0 1,028.8 FY15 FY16 FY17 FY15 FY16 FY17 OPERATING PROFIT ( m) 16.0% RETURN ON CAPITAL EMPLOYED 14.8% 15.8% 122.5 164.1 24.7% 26.8% 30.5% 91.2 FY15 FY16 FY17 FY15 FY16 FY17 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 FULL YEAR RESULTS NOVEMBER 2017
Operational Highlights Ian Sutcliffe 12 FULL YEAR RESULTS NOVEMBER 2017
Our strategy Growth Industry leading strategic land bank Increasing Partnerships opportunity Strong growth from mixed tenure delivery Returns Operating margin increasing Low capital model Asset turn and earnings growth drive ROCE Resilience Balanced business model Lower reliance on private sales Balance sheet strength 13 FULL YEAR RESULTS NOVEMBER 2017
Current market backdrop Continued strong demand for all tenures of homes Robust current trading at upper end of target range Sales price growth at lower price points, flat prices above 600k Some easing of build cost inflation in the South Strong political support for increased delivery of all tenures Increased growth in Partnerships opportunities 14 FULL YEAR RESULTS NOVEMBER 2017
Accelerated growth and resilience from mixed tenure Partnerships PRS 721 33% 2,192 Homes Private 825 38% PRS 721 21% Group Private 1,662 49% Affordable 646 29% 3,389 Homes Affordable 360 30% Housebuilding 1,197 Homes Private 837 70% Affordable 1,006 30% 15 FULL YEAR RESULTS NOVEMBER 2017
Operational key metrics FY 2017 FY 2016 change Open sales outlets 47 43 +9% Net reservation rate 1 0.84 0.78 +8% Private reservations (homes) 2,030 1,497 +36% Forward order book ( m) 242.4 225.4 +8% Private completions (homes) 1,662 1,127 +47% Private ASP ( 000) 430 465-8% Affordable completions (homes) 1,727 1,530 +13% Affordable ASP ( 000) 135 120 +13% 1 Reservations per open sales outlet per week, net of cancellations 16 FULL YEAR RESULTS NOVEMBER 2017
Structure in place to manage growth and quality Ahead of industry benchmarks on all metrics TOTAL COMPLETIONS 3,389 2,364 2,657 3,389 BUILD QUALITY 0.21 (NHBC RI s per home 1 ) 0.22 0.23 0.21 0.37 Industry benchmark 2015 2016 2017 2015 2016 2017 HEALTH & SAFETY 220 (Accident Incident Rate 2 ) 265 305 220 CUSTOMER SATISFACTION 88.6% (NHBC RAF 3 ) 398 88.6% Industry 82.7% 84.8% benchmark 84.0% Industry benchmark 2015 2016 2017 2015 2016 2017 1 Defects reported per plot at NHBC inspections at key build stages 2 The number of reportable incidents per 100,000 people at risk 3 The percentage of customers returning an NHBC post-completion survey who would recommend us to a friend 17 FULL YEAR RESULTS NOVEMBER 2017
Increased sales outlets and net reservation rate NUMBER OF OPEN SALES OUTLETS 52 50 48 46 44 42 47 OPEN SALES OUTLETS 47 43 41 29 40 OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP 2016 2017 2015 2016 2017 Under construction 1.4 1.2 1.0 0.8 0.6 0.4 0.2 NET RESERVATIONS PER OUTLET PER WEEK - OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP 2016 2017 NET RESERVATION RATE 0.76 2015 0.78 0.84 2016 2017 Target 0.6-0.8 18 FULL YEAR RESULTS NOVEMBER 2017
Record private forward order book 626 homes in forward order book up 24% ASP lower at 388k reflecting mix change Overall record value at 242.4m up 8% Partnerships order book of 390 homes, up 36% Housebuilding order book of 236 homes, up 9% FORWARD ORDER BOOK PROGRESSION ( m) 1 Partnerships 100.3 2016 124.9 2017 Housebuilding 125.1 117.5 Group 225.4 242.4 2016 2017 2016 2017 1 Excludes any forward sales of affordable or private rental sector homes 19 FULL YEAR RESULTS NOVEMBER 2017
ASP reduction driven by change in mix CHANGE IN AVERAGE SELLING PRICES UNDERLYING HOUSE PRICE INFLATION Partnerships North 18% 250 5.1% 1,662 (15)% Partnerships South 6% Housebuilding (ex Millgate) 472 457 6.9% 1,126 (3)% Millgate 1,262 7.0% GROUP (8)% Percentage change in ASP 430 ASP ( 000) 331 < 250k 251k - 600k 0.1% 0.5% 163 42 601k - 1m 1m+ GROUP Partnerships Housebuilding Private completions HPI% Note: Help to Buy was used on 56% of private completions (27% of total completions) 20 FULL YEAR RESULTS NOVEMBER 2017
Partnerships operational highlights Continued strong mixed tenure led growth New West Midlands region Growing pipeline of future work Several major site starts in 2018 Acceleration of existing sites Move to off-site construction 21 FULL YEAR RESULTS NOVEMBER 2017
Partnerships visibility of future work Visibility of around nine years work, 57% in outer London and South East Continued mix of estate regeneration and brownfield renewal Strong, historical bid win rate of 40% maintained 7,030 new plots secured in 2017 Opportunity to intensify existing sites LAND BANK PLUS PREFERRED BIDDER 14,504 6,623 7,881 At 30 Sept 2016 (2,007) Utilised Land Bank 7,030 Bids won (304) Other Preferred Bidder 19,223 4,468 14,755 At 30 Sept 2017 22 FULL YEAR RESULTS NOVEMBER 2017
Partnerships South Nine major site starts during 2018 Acton, Phase 9 68 homes 27m GDV June 2018 Alma 993 homes 312m GDV October 2017 New Avenue 464 homes 174m GDV January 2018 Becontree 170 homes 51m GDV November 2017 Fresh Wharf 911 homes 177m GDV April 2018 Maidenhead 1,262 homes 214m GDV December 2018 St Leonard s 71 homes 44m GDV November 2017 Beam Park 2,807 homes 513m GDV July 2018 Rochester 1,105 homes 215m GDV January 2018 Date indicates start on site 23 FULL YEAR RESULTS NOVEMBER 2017
Continued growth in Partnerships opportunities Over 40,000 plots identified Significant further opportunity led by London Estate Regeneration Expansion into the West Midlands Region Strong political support from local and national Government Competitive environment not changed significantly Increased opportunities on partnering with Housing Associations land BID PIPELINE Total plots 33,515 22,122 11,393 At 30 Sept 2016 Up 21% Total plots 40,560 24,293 16,267 At 30 Sept 2017 Bids in progress Future bids 24 FULL YEAR RESULTS NOVEMBER 2017
Housebuilding operational highlights Another year of strong growth Increased sales outlets and active sites Strategic land bank maintained ASP s managed to strongest demand Scale efficiency from four growing regions Some easing of supply chain pricing 25 FULL YEAR RESULTS NOVEMBER 2017
Housebuilding strategic land bank maintained 19,826 plots in London and South East, 27% owned 16 sites acquired in FY, with 2,896 plots 83% of land bank strategically sourced with typical 10% OMV discount 73% of land bank controlled under options or conditional contracts Planning gained on 1,136 plots All sites with implementable planning under construction LAND BANK 19,322 10,115 9,207 At 30 Sept 2016 (1,197) Utilised With planning 2,896 Acquired (1,195) Other Without planning 19,826 9,408 10,418 At 31 Sept 2017 26 FULL YEAR RESULTS NOVEMBER 2017
Progress on our differentiated strategy Growth Strategic land Partnerships land Mixed tenure Maintained at 19,826 Increased by 4,719 to 19,223 Total completions up 28% Returns Operating margin Low capital model ROCE Increase 20bps Asset turn up to 1.9x Group ROCE 30.5% Resilience Balanced business Lower private sales reliance Balance sheet Housebuilding 54%, Partnerships 46% Private sales 49% of total completions 88% under 600k 7.4% adjusted gearing 27 FULL YEAR RESULTS NOVEMBER 2017
Q&A 28 FULL YEAR RESULTS NOVEMBER 2017
Appendix 29 FULL YEAR RESULTS NOVEMBER 2017
Joint ventures and associate Our share of results m Partnerships Housebuilding Group Revenue Expenses Operating profit Finance costs Income tax 57.9 (47.2) 10.7 - - 125.1 (102.2) 22.9 (1.5) (2.4) 183.0 (149.4) 33.6 (1.5) (2.4) Profit for the period 10.7 19.0 29.7 30 FULL YEAR RESULTS NOVEMBER 2017
Glossary / clarification of financial information TERM Active site Asset Turn Awaiting start Controlled plots Future identified Future unidentified GDV 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 adjusted operating profit Group and segmental adjusted operating profit Group and segmental revenue, gross profit, overheads and adjusted operating profit (unless otherwise stated) have been presented after applying the proportional contribution of the joint ventures and associate Group and segmental adjusted operating profit includes the Group s share of joint ventures and associate 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 Legacy site 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. 31 FULL YEAR RESULTS NOVEMBER 2017
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 adjusted operating profit and gross profit and includes the share of joint ventures and associate overheads; segmental overheads and adjusted operating profit include an allocation of central overheads costs on a proportion of segmental revenue basis for the given year. Private Rental Sector 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 32 FULL YEAR RESULTS NOVEMBER 2017
Investor Contact Victoria Prior Investor Relations & Strategy Director Tel: 01277 697425 E-mail: victoria.prior@cpplc.com www.countryside-properties.com 33 FULL YEAR RESULTS NOVEMBER 2017