Annual Report 2019 Strategic Report Directors’ Report Financial Statements Building Better
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Building better Annual Report 2019 Strategic report Directors’ report Financial statements Building better... 1 Board of Directors 42 Independent Auditor’s report 46 Our business model 12 Directors’ report 44 Consolidated income statement 50 Our business model in action 14 Statement of Directors’ responsibilities 45 Consolidated statement of comprehensive income 51 Stakeholder engagement 20 Consolidated statement Housing market review 22 of changes in equity 51 Our strategy 24 Company statement of changes in equity 51 Chief Executive’s review 26 Statements of financial position 52 Chief Operating Officer’s review 30 Consolidated cash flow statement 53 Chief Financial Officer’s review 34 Notes 54 Principal risks and uncertainties 38 Corporate responsibility 40 We are a respected national homebuilder with a regional focus on family homes Scotland Completions ASP (£000) Consented landbank Active sites 841 266 2,531 21 Glasgow +14% 0% -2% +24% Edinburgh North Shields North Completions ASP (£000) Consented landbank Active sites Newton Aycliffe 1,328 227 5,368 33 Wakeeld Newton- +11% -3% +18% +10% le-Willows Derby Midlands & South Completions ASP (£000) Consented landbank Active sites Worcester 1,329 262 5,734 29 +8% +3% +6% +16% Basingstoke Front cover: Main image: Mulberry Fields, Southwater, West Sussex Bottom right: The new Miller Homes marketing suite more information at www.millerhomes.co.uk/corporate Left: Sovereign Park, Shrewsbury, Shropshire Strategic report Directors’ report Financial statements Building better... Teams Homes Number of staff Average selling price (ASP) 1,009 £249,000 +11% 0% Investors in People Employee engagement Number of homes sold Consented landbank Gold 94% 3,498 13,633 +10% +9% For more information see page 2 For more information see page 4 Experiences Results HBF 5 star rating for customer satisfaction Operating profit 5 stars £168m +11% Number of online reservations Web visitors Operating margin Return on capital employed 478 2.4m 20.0% 31.5% +129% +52% -0.2% -1.9% For more information see page 6 For more information see page 8 Miller Homes Annual Report 2019 1 Building better… continued Debbie Whittingham Area Sales & Marketing Director, Yorkshire & Teesside 2 Miller Homes Annual Report 2019 Strategic report Directors’ report Financial statements Building better teams “I joined Miller Homes from within the industry just over a year ago. I was aware of the company’s excellent reputation and being part of the Miller Homes team has more than met my expectations. I have been very impressed by the positive culture, collaborative approach and genuine pride in producing a quality product and providing the highest level of service to our customers, as well as the opportunities that exist for career development for staff at all levels.” Miller Homes Annual Report 2019 3 Building better… continued Tim Hartwell Group Head of Design 4 Miller Homes Annual Report 2019 Strategic report Directors’ report Financial statements Building better homes “W e recently undertook a comprehensive review of our product portfolio to ensure our housetypes satisfy the lifestyles and requirements of today’s homebuyers whilst also providing efficiencies and scope to adapt to any future changes in the market. We have placed emphasis on maximising living space and creating greater opportunities for personalisation, which has ultimately resulted in an enhanced product range that will appeal to a wide range of buyers.” Miller Homes Annual Report 2019 5 Building better… continued Laura Martin Assistant Site Manager, Scotland East 6 Miller Homes Annual Report 2019 Strategic report Directors’ report Financial statements Building better experiences “O ur customers are at the heart of everything we do as we know that buying a home is probably the most significant purchase in their lifetime. Technology helps us to keep our customers up to date with every stage of their journey and we also understand the importance of the personal touch. We make sure they are directly involved in the more exciting aspects, one of which is meeting the site team and visiting their home for the first time during its construction.” Miller Homes Annual Report 2019 7 Building better… continued Chris Endsor Chief Executive Officer 8 Miller Homes Annual Report 2019 Strategic report Directors’ report Financial statements Building better results “2 019 was another successful year, culminating in the eighth consecutive year of growth for the Group. We achieved a record operating profit of £168m and opened a new regional office in Teesside ahead of plan, enabling us to increase our operational capacity to 5,000 units per annum. It was extremely satisfying to achieve an excellent set of financial results while at the same time maintaining high levels of customer satisfaction and employee engagement.” Miller Homes Annual Report 2019 9 Building better results continued Key performance indicators Revenue (£m) Average selling price (£000) Gross margin (%) £841m £249,000 25.0% +13% 0% -0.7% 841 249 25.0 2019 2019 2019 747 249 25.7 2018 2018 2018 674 239 25.3 2017 2017 2017 565 231 25.3 2016 2016 2016 500 227 22.8 2015 2015 2015 Definition Definition Definition This represents revenue which is predominantly generated This represents revenue from new home sales divided by This represents gross profit divided by revenue. through the sale of both private and affordable new homes the total number of core completions. In line with standard It measures the Group’s underlying profitability and to a lesser extent from the sale of land, where it is accounting practice, this excludes revenue from homes before administrative expenses. capital efficient to sell a portion of larger sites. sold through joint ventures, the profit on which is shown Performance within “share of result in joint ventures”. It measures Performance The gross margin in 2018 was a record for the Group movements in revenue per unit caused by house price Revenue rose by 13% in 2019 due entirely to increased and the 2019 performance should be viewed in that inflation, location or mix changes. revenue from new home sales. This reflected a 13% context. The reduction in 2019 principally reflects the increase in core completions with no change in ASP. Performance impact of cost inflation with house price inflation being ASP was in line with 2018 at £249,000. This reflected an broadly neutral. increase in the private ASP to £284,000 (2018: £281,000) which was offset by an increase in the proportion of lower value affordable homes which rose to 20% (2018: 18%) of core completions. Operating margin (%) Return on capital employed (%) Free cashflow (£m) 20.0% 31.5% £84m -0.2% -1.9% +3% 20.0 31.5 84 2019 2019 2019 20.2 33.4 82 2018 2018 2018 19.5 33.0 75 2017 2017 2017 18.2 30.3 29 2016 2016 2016 15.7 27.5 33 2015 2015 2015 Definition Definition Definition This represents operating profit divided by revenue. This represents operating profit adjusted for any credit This represents cash generated in the year excluding It measures the Group’s underlying profitability after or charge to operating profit in respect of shared equity cashflows from financing activities, investing activities administrative expenses. loan receivables, expressed as a percentage of average (other than movement in loans to joint ventures), underlying capital employed, which is the average of corporation tax paid, interest paid and transaction costs. Performance the opening and closing balances of underlying capital This is the second consecutive year that the Group Performance employed for each financial year. Underlying capital has achieved an operating margin of 20%. The slight The cash generated in the year was slightly ahead of 2018 employed is the sum of net debt and net assets less reduction in 2019 reflects lower gross margins, offset in spite of increased land spend. intangible assets, deferred tax and shared equity loan by improved overhead recoveries. receivables. This excludes the impact of non-operating assets and measures returns from core operations to demonstrate efficient use of shareholders’ capital. Performance The reduction in ROCE in the year reflects lower capital turn which is largely a function of the significant level of land investment made in the year. 10 Miller Homes Annual Report 2019 Strategic report Directors’ report Financial statements NF Denotes non-financial KPIs Private sales rate (per site per week) Consented landbank (plots) NF Strategic landbank (plots) NF 0.64 13,633 20,035 -4% +9% +16% 0.64 13,633 20,035 2019 2019 2019 0.67 12,524 17,331 2018 2018 2018 0.70 13,738 16,561 2017 2017 2017 0.67 13,062 12,802 2016 2016 2016 0.59 11,600 16,153 2015 2015 2015 Definition Definition Definition This represents the number of reservations (net of This represents land from the Group’s owned and This represents land which the Group has secured via cancellations) for private homes (including those sold controlled landbanks. The owned landbank is land where an option to purchase at a future date on receipt of an via joint ventures) divided by the average number title has been acquired or, if the purchase is by way of implementable planning consent. The land currently does of sales outlets and further divided by the number a conditional contract, the conditions have been satisfied. not benefit from a planning consent although it may have of weeks in each financial year. The controlled landbank is land where an option has been been allocated for residential development in the relevant secured to purchase the land, or where the conditions of local plan. Performance a conditional contract have yet to be satisfied. All land in The private sales rate decreased by 4% in 2019 Performance the consented landbank benefits from at least an outline which was caused by slightly weaker consumer The strategic landbank increased by 16% in 2019 planning consent, or a resolution to grant planning consent.