DEVELOPING THE HOMES AND CREATING THE PLACES THAT LONDON NEEDS
FINAL RESULTS 31 MARCH 2019
DEVELOPING THE HOMES AND CREATING THE PLACES THAT LONDON NEEDS
1 OUR INVESTMENT CASE
Proven Market Strong Knowledge strategy opportunity partnerships and experience
Focused on London with an Chronic shortage of homes A respected partner to our A highly motivated team increasing commitment to in London and strong build stakeholders, encouraging with extensive experience the delivery of build to rent to rent investor demand new opportunities to work of planning and complex homes together construction in London
Substantial Reduced Quality Growing pipeline risk and service business
Development pipeline Forward funded build to Delivering quality homes Ability and desire to of 4,900 homes rent transactions reducing to a diverse customer increase output to meet representing £1.6 billion debt and improving risk mix with a 99 per cent significant housing need of future revenue profile recommendation rate in in London 2018
1 2 OUR BUSINESS MODEL
OUR KEY RESOURCES AND RELATIONSHIPS
RESOURCES RELATIONSHIPS
Land Our people Land owners Our customers Knowledge Respected brand Local authorities Build to rent investors Construction expertise Strong balance sheet Housing associations Supply chain
WHAT WE DO AND HOW WE CREATE VALUE
LAND PLANNING DESIGN CONSTRUCTION SALES ACQUISITION
Buying the right Using our Developments that Controlling the Reducing risk, land in the right knowledge to work fit in with local process with driving capital locations across with partners and communities and in-house expertise returns and London optimise policy meet the needs to deliver a quality delivering compliant schemes of customers product excellent customer on programme service
3 AMBITION AND STRATEGY
OUR AMBITION
There is a chronic shortage of new homes in London. Our goal is to grow our output of homes, principally through our strategic focus on build to rent, and in so doing help address this shortage in one of the world’s greatest cities.
OUR STRATEGY
Growing our Broadening our operational capacity geographic focus
OPERATE EFFICIENTLY ACCESS TO LAND
A key build to rent Reducing exposure to Driving our responsible developer and partner market risk and debt business agenda
DRIVING GROWTH REDUCING RISK OPERATE RESPONSIBLY
3 4 KEY MESSAGES
Record total revenue up Strategic shift towards build to rent accelerated 12% to £354 million
Greater emphasis on lower risk, less capital intensive developments
Gearing reduced to 37% (September 2018: 52%)
Build to rent partnerships entered into with M&G and Invesco
Development pipeline of 4,900 70% of pipeline homes valued at £1.6 billion build to rent led developments
5 KEY PERFORMANCE INDICATORS
Profitability and efficiency Growth and risk Operational
Total profit 2019 £40.1m Development 2019 £1.6bn Customer 2019 99% before tax 2018 £46.0m pipeline 2018 £1.3bn recommendation 2018 100% 2017 £34.1m 2017 £1.5bn rate 2017 99% £40.1m £1.6bn 99%
Adjusted 2019 13.1% Average open 2019 £552k Accident 2019 0.16 operating margin 2018 16.7% market price 2018 £539k frequency rate 2018 0.11 13.1% 2017 13.4% in pipeline 2017 £527k 0.16 2017 0.12 £552k Shareholder value
Earnings 2019 Employee 2019 2019 44.6p Forward £224m 89% 2018 retention rate per share 2018 49.8p sales £344m 2018 90% 2017 £546m 2017 44.6p 2017 36.8p £224m 89% 90%
NextGeneration th Dividend 2019 17.0p Gearing 2019 37.0% 2019 4 sustainability th per share 2018 17.0p 2018 44.6% 2018 6 benchmark th 2017 15.7p 37.0% 2017 7.0% 2017 17 17.0p 4th
5 6 GROUP INCOME STATEMENT
2015 2016 2017 2018 2019
Total revenue £173.5m £245.6m £291.9m £316.2m £354.3m
Total gross profit £53.9m £63.1m £63.2m £79.5m £79.3m
Administrative expenses (£16.7m) (£19.2m) (£20.8m) (£24.2m) (£27.6m)
Selling expenses (£9.2m) (£9.4m) (£5.1m) (£6.5m) (£9.8m)
Total operating profit £28.0m £34.5m £37.3m £48.8m £41.9m
Net finance costs (£2.9m) (£2.3m) (£3.2m) (£2.8m) (£1.8m)
Total profit before tax £25.1m £32.2m £34.1m £46.0m £40.1m
Adjusted gross margin 32.4% 26.5% 22.3% 26.5% 23.7%
Adjusted operating margin 17.5% 15.0% 13.4% 16.7% 13.1%
Earnings per share 33.2p 39.3p 36.8p 49.8p 44.6p
Dividend per share 11.1p 14.2p 15.7p 17.0p 17.0p
7 REVENUE AND MARGIN ANALYSIS
Revenue analysis Margin analysis
2019 Total revenue Adjusted gross 2019 £m profit margin
4% Individual sale 231.7 28.3%
31% Build to rent 108.7 13.2%
Other income 13.9 28.7% 65% 354.3 23.7%
Total revenue Adjusted gross 2018 £m profit margin 2018 Individual sale 244.2 28.4%
Build to rent 67.7 18.1% 1% 21% Other income 4.3 45.1% 316.2 26.5%
78% Affordable housing revenue and profit is categorised within either individual sale or build to rent depending on the tenure of each development
Individual sale Build to rent Other income
7 8 GROUP BALANCE SHEET
2015 2016 2017 2018 2019
Non current assets £1.9m £2.1m £2.2m £3.4m £3.5m
Inventories £277.2m £285.6m £339.4m £373.8m £320.6m
Total cash £39.7m £20.9m £39.8m £13.8m £33.4m
Other current assets £11.5m £31.4m £42.9m £55.7m £103.1m
Total borrowings (£92.6m) (£38.2m) (£54.1m) (£116.9m) (£127.0m)
Other liabilities (£117.3m) (£114.8m) (£165.9m) (£98.7m) (£80.7m)
Net assets £120.4m £187.0m £204.3m £231.1m £252.9m
Net assets per share 200p 250p 271p 306p 333p
Total net debt (£52.9m) (£17.3m) (£14.3m) (£103.1m) (£93.6m)
Gearing 44% 9% 7% 45% 37%
9 FINANCIAL SUMMARY
Gearing reduced to Record total revenue of £354.3 million up 12% (2018: £316.2 million) 37%
Gross profit margins at or above target for each sector
Increased proportion of lower risk, lower margin build to rent
Total profit before tax reduced to £40.1 million (2018: £46.0 million)
Total dividend Original £50 million target impacted by market factors and delayed contracts maintained at 17.0 pence
9 10 MARKET ANALYSIS
INDEXED TREND IN NUMBER OF JOBS, PEOPLE AND ANNUAL TREND IN HOUSEHOLD TENURE, HOMES IN LONDON 1997 TO 2017 (1997 = 100) LONDON, 1981 TO 2017
150 45%
140 35% 130
120 25%
110 15% 100
90 5% 80 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 1981 1986 1991 1996 2001 2006 2011 2016
Jobs People Homes Owned with mortgage Social Owned outright Private rented
Source: GLA, ONS, MHCLG Source: GLA, MHCLG
INSTITUTIONAL INVESTMENT VOLUMES INTO CUMULATIVE BUILD TO RENT STARTS AND BUILD TO RENT IN UK COMPLETIONS IN LONDON, 2009 TO 2018
£4.0bn 30k 25k £3.0bn 20k
£2.0bn 15k
Investment 10k Number of Homes of Number £1.0bn 5k
0 0 2015/16 2016/17 2017/18 2018/19 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Starts Completions
Source: CBRE Q1 2019 Source: Molior London
11 MARKET CONTEXT
UK build to rent investment Continued growth in both jobs and doubled incomes in London year to March 2019 (CBRE)
Employment and population growth outpacing new homes
Significant tenure shift towards private rented homes
Build to rent increasing, buy to let decreasing
£75 billion Substantial scope in the future scale of of build to rent build to rent investment investment by 2025 (Knight Frank upgraded forecast)
11 12 BUILD TO RENT STRATEGY
Reducing risk and improving Increasing shift to build to rent underpinned by three key factors return on capital
1) Higher return on capital with no debt and limited equity invested
2) Significant investor demand in need of our skillset
3) Growing rental demand attracted by better facilities, service and flexibility
Strategy 70% of current pipeline expected to be build to rent led developments validated by more uncertain sale market
13 BUILD TO RENT PERFORMANCE
Over 300 Strong progress on existing build to rent projects build to rent homes handed over
Mobilising to start on site at Parkside, Nine Elms with build contract imminent
Equipment Works sold for £105.5 million on a forward fund deal
M&G and Invesco selected as strategic forward fund partners
Further Partnerships will speed up contracting process in future 1,422 currently in progress
13 14 INDIVIDUAL SALES
Stronger sales
Continuing to generate sales despite rate under a subdued market £600,000
Bow Garden Square fully reserved since the end of FY 2019
Sales to individual investors no longer significant in our plans
Targeting owner-occupiers for most individual sale schemes
Current market conditions expected to Greater take up of continue through 2019 Help to Buy
15 DEVELOPMENT PIPELINE
Development pipeline of Acquisitions in Greenford and Stratford in last six months 4,900 homes (2018: 4,000)
Average price of individual sale homes in pipeline circa £550,000
Around 950 homes going through the planning process
Planning refused at LEB Building as expected and we will appeal
Expected value of Actively identifying new opportunities, especially build to rent £1.6 billion (2018: £1.3 billion)
15 16 PEOPLE AND CULTURE
Employee satisfaction
Unique skillset in London development surveyed at that appeals to our partners 98%
Supportive culture reflected in employee satisfaction
Leading the way in recognising mental health issues in construction
Launch of new Telford Homes Academy in February 2019 100% of
Training our people to develop their employees careers and support our growth would recommend Telford Homes to others
17 CORPORATE RESPONSIBILITY
Customer recommendation Quality of developments recognised rate in 2018 through multiple award wins 99%
Immense efforts to ensure customers are happy with their homes
Frequent praise from our development partners
Fourth in sustainability rankings and most improved housebuilder once again
Gold award Tangible benefits evident from our in 2018 NextGen ‘Building a Living Legacy’ strategy Sustainability Benchmark Report
17 18 OUTLOOK
Recognised
No change to profit expectation for skillset FY 2020 announced in February 2019 and excellent reputation
Beyond FY 2020 continue to expect profits to grow reflecting build to rent focus
Substantial progress made in our build to rent strategy and more expected
Robust long-term outlook based on lower risk, less capital intensive model
Structural Underpinned by demand from build to rent investors and rental customers imbalance between housing supply and demand
19 Figures within this presentation include the Group’s share of joint venture results on a proportionally consolidated basis. For further information please refer to the latest Annual Report.
19 20 CASE STUDIES
THE PAVILIONS, N1 CARMEN STREET, E14
Build to rent homes on a compromised site. Swift land acquisition completed within a few weeks.
• Residential development of 156 homes • Residential development of 206 homes
• Secured planning despite challenging • 150 homes sold to M&G Real Estate for negotiations build to rent shortly after site purchase
• Sold to L&Q for build to rent • 56 affordable homes sold to Poplar HARCA
• Completed in 2018 • Due for completion in 2019
21 THE FORGE, E6 NEW GARDEN QUARTER, E15
Unconditional site purchase without planning. Joint venture with Notting Hill Genesis.
• Secured planning for 192 new homes • Mixed-use development of 471 new homes, commercial space and a new public park • 125 homes sold to M&G for build to rent • Secured detailed planning consent • 67 affordable homes sold to East Thames • 112 homes sold to Folio London for build to rent • Due for completion in 2019 • Due for completion in 2019
21 22 CASE STUDIES
PARKSIDE, NINE ELMS, SW11 CITY NORTH, N4
Significant build to rent development in Major mixed-use development including new partnership with Greystar. access to Finsbury Park station.
• 890 build to rent homes with • 355 new homes and 109,000 sq.ft extensive resident amenities of commercial space
• Close to the new US Embassy • Joint venture with the Business Design Centre
• Planning secured and full build contract • Due for completion in 2020 to be agreed imminently
23 BOW GARDEN SQUARE, E3 GREENFORD, UB6
Mixed-use scheme in partnership with Part of Greystar’s 1,965 home scheme in LB Ealing. Poplar HARCA. • 194 homes for individual sale and 84 affordable • 109 new homes which enabled the delivery homes for shared ownership of a new primary school, nursery and mosque • On the banks of the Grand Union Canal • Evening Standard and RESI Awards winner 2019 • Due for completion in 2022 • Completed in 2019
23 24 CASE STUDIES
EQUIPMENT WORKS, E17 INTERNATIONAL WAY, E15
Mixed-use developmemt of 337 homes A proposed mixed-use development of around and 18,830 sq.ft of commercial space. 380 homes.
• 257 homes sold to Greystar and • Adjacent to Stratford International station Henderson Park for build to rent and Westfield Stratford City
• 80 affordable homes sold to • Subject to securing a planning consent Notting Hill Genesis • Our third land acquisition involving LCR • Due for completion in 2021
25 Telford Homes Plc Telford House Queensgate Britannia Road Waltham Cross Hertfordshire EN8 7TF
Tel: 01992 809 800 www.telfordhomes.london
Jon Di-Stefano Katie Rogers Chief Executive Officer Chief Financial Officer [email protected] [email protected]
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