U.S. Markets open in 2 hrs 28 mins

Edited Transcript of UANC.L earnings conference call or presentation 28-Nov-19 9:30am GMT

Full Year 2019 Urban&Civic PLC Earnings Call

Dec 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Urban&Civic PLC earnings conference call or presentation Thursday, November 28, 2019 at 9:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Alan Peter Dickinson

Urban&Civic plc - Non-Executive Chairman

* David Lewis Wood

Urban&Civic plc - Group Finance Director & Director

* Nigel Hugill

Urban&Civic plc - CEO & Director

* Robin Butler

Urban&Civic plc - MD & Director

================================================================================

Conference Call Participants

================================================================================

* Erik Salz

JP Morgan Chase & Co, Research Division - Analyst

* John Michael Cahill

Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst

* Miranda Sarah Cockburn

Panmure Gordon (UK) Limited, Research Division - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Alan Peter Dickinson, Urban&Civic plc - Non-Executive Chairman [1]

--------------------------------------------------------------------------------

Okay. Good morning, everybody. Welcome to all of you in the room. And I believe we're online as well, so welcome to all of those online. This is the Annual Results Presentation of Urban&Civic plc for 2019. As ever, I will be brief.

I just wanted to reflect, it's 5.5 years now since Urban&Civic was first listed. 225p, was it, Nigel, or thereabouts?

--------------------------------------------------------------------------------

Nigel Hugill, Urban&Civic plc - CEO & Director [2]

--------------------------------------------------------------------------------

Yes, 225p.

--------------------------------------------------------------------------------

Alan Peter Dickinson, Urban&Civic plc - Non-Executive Chairman [3]

--------------------------------------------------------------------------------

Following the reverse takeover of Terrace Hill. And looking back, much has changed. I think the main observation I'll make is the group has grown up, is grown up. On near 30% private equity shareholder at the outset, GI Partners has been replaced by a very welcome and strong array of institutional shareholders. We've applied for and been granted premium listing. But most importantly, the thing that I think is critical is that our business model, which was unheard of really in 2014, has been proven. And this last financial year, I think, is when that became absolutely crystal clear.

I'm going to leave my colleagues to go through all the details. But I just want to list, first of all, EPRA NAV up 9.6%. Glad to see that Property Week said it soars by 9.6% this morning, which is very good comment, I agree with that, in a flat market for house prices.

Secondly, the wholesale, large site discount can and does unwind and releases into the P&L. And as we see the plot sales come through, that happens. But we're replenishing that store value, and no better illustration than the planning consent on Waterbeach this year.

Finally, I just want to say the pipeline is strong and in large part because landowners, other stakeholders want to work with Urban&Civic validating that business model. And that is why I say the model has been proven this year, which is the most welcome bit of news I think we had.

Nigel, would you like to tell us more?

--------------------------------------------------------------------------------

Nigel Hugill, Urban&Civic plc - CEO & Director [4]

--------------------------------------------------------------------------------

Thanks very much, Chairman. Thanks so much for coming. Thanks to everybody that's listening. Same format as usual, I will start and finish. David will go through figures in the characteristic detail and Robin through projects. Rob and I are going to try and bring out some of the points that people have raised over the year, a number of which the Chairman has just alluded to. In particular, one of the things that I just want to spend a little time on is how do you seem to be doing so well in circumstances where all the land market indices are, at best, static? How is it that you appear to defy gravity in that regard? So we're just going to spend a little bit of time on how those land markets work.

This is the cover for the report accounts for the current year. The sharper eyed amongst you will notice that the dog walker stridently through -- walking stridently through our new nature corridor is not wearing any socks. Our design team thought that was very amusing. There will be retribution.

So quickly, as the Chairman said, so the EPRA relates -- translates per share into a 9% increase, triple net up about 7.5%, the plot sales up 5% on a number, 3% on value, which just reflected a slightly different mix that were more small units than we had thought. Changed valuation assumptions, we should address that head on because that goes into the figures. So basically, if you think about the way that CBRE value our strategic portfolio, there are 2 components to it. One is the value of the contracted plots. The other is the value of the uncontracted plots. They increase the value of the first because they had to because the comparable evidence was stronger than they had assumed, but they took off some at the back end. So the net on that was about GBP 25 million down, translates into 17p a share against the previous assumptions that they've used last March and last September. And that also goes through into the large site discount.

Of course, the big offset for that was the fact that we got a planning consent at Waterbeach, which will be the largest single planning consent in the U.K. this year, almost certainly.

So the translating for that through to EPRA plus large site discount, 495p a share. As I said, that was impacted from those changed assumptions, but clearly, again, strong direction of travel. So dividend 2.5p final. We've been telling people that we were trying to do 10% a year in the normal course. It seemed right to be at the top end of that this year.

This is a chart you've seen before, which is just show -- which shows our areas. One of the things that Robin -- there are really only 3 things from this chart for today, one of which Robin is going to talk to, which is the advantages of regional concentration. Second one is the fact that if you look at that list, Chairman said that we've been listed for 5 years. We've obviously been -- it's almost exactly 10 years since we set up. It's a pretty extraordinary list of stakeholders that we've built up over that time. It also goes to the fact that the institutional nature of money going into master development has been very pronounced this year. Separate from our own performance, you have seen some quite strong money coming into the area, a number of institutions are just below the disclosable level in our stock. And also, you've seen people like Wellcome who've got a big consent in Cambridgeshire and notably L&G who bought at Horsham and have announced their partnership with Oxford University. So the money that's going in is entirely institutional.

Here's the key gradients that we put in every time so that you can compare. The big thing is that we're through GBP 100 million for the first time on our forward minimums. So our pro rata share is GBP 101.6 million. That forward sales figure drops because of the fact that we're getting through -- a bit more through into the maturity of our contracts. I'd expect that to settle down at about 3 years forward. So you can expect to see that about 3 years forward -- going forward. You can also expect the others to continue to go up.

So just talk a little bit about the land market. The -- those of you that look at housebuilder results will see that they've mostly continued to describe a benign land market. And the reason I talk about a benign land market is because it is benign. And the reason it's benign is because of the fact that government policies are really working. And the policy that, in particular, is the increased number of planning consents. And it's harder to get planning consents. There are some of my Catesby colleagues in the room who wouldn't thank me for saying that it's easy because it's absolutely not, but -- and it takes longer, and it costs more and the barriers to entry are higher and all those good things. But it is the case that last year, there were 370,000 planning consents. And in 2010, there were 170,000. And you see that this profile of building, these are the best statistics. These are MHCLG statistics that were announced only a couple of weeks ago. They're built from the bottom up. So they showed 241,000 net housing additions in the current year, of which 214,000 were new build. That's the highest for 30 years.

So if you -- and if you switch that back into -- and these are England-only figures, and if you switch that back into population growth for a minute, so the population growth is about 400,000 a year, which if you translate that into new houses, it's about 160,000 new houses requirement. So anything building from that is beyond that which you would need for population there.

There's 160,000 reach for population growth, 240,000 actually built. But then this, this is the crucial thing which we've talked about before, which is, if you look on the right-hand side of that chart, as you are facing it, you'll see that the blue lines across are the government's housing targets. But if you add up all those blue lines, they come up to 273,000. So if you look, you'll see that on those -- across on those bars, everywhere other than London, the South East and some parts of the East of England were actually building more than the required 273,000. So in most of England, we are currently building the target of 300,000 everybody says can't be met. So the restriction is only in those Southern areas. I'm very bad at doing this without moving about.

But if you look at the East Midlands, you see 3 of our existing sites are in actually quite balanced areas. And the other one, Alconbury, which is in East of England, is more constrained, supply constrained, but not -- it's really on the -- it's on the margin. It's clearly much better than somewhere like Peterborough, but it's not as restricted, for example, as Wintringham or Cambridge. So our 4 sites are not in particularly supply-constrained areas, but you can see where the shortfalls are. And those shortfalls will continue in those other areas. And you can also see that we're under the South East and at Waterbeach, which is in East of England, and at Wintringham, our next -- what I call our next generation of sites are all in more supply-constrained areas.

And you can argue about London. The figure for London is very high. But if I tell you that the population in South East England is 9.1 million and the population is -- in London, is 8.9 million, you'll see that there's an extra inflated element in London, which we can talk about afterwards if you want to.

This is our famous hockey stick, and well here this -- which the -- where we were at this time last year is in the back of the presentation. But there've been 3 big leaps, and Robin is going to talk about those. So there's 3 big leaps at Waterbeach, in Wintringham and at Rugby are ones which Robin will talk to. But again, just look at the third -- what I call, the first- and second-generation projects. First-generation projects, on the right-hand side, all coming through. Second-generation are coming in behind. We made progress on everything this year apart from Calvert, which I'll touch upon a bit later. But the best corporate advert that we have for the business is our first-generation projects. People go to those projects and they say, "We had no idea they were as big as this and no idea that they were as good as that." And ones who -- any of you in the room that haven't been and indeed listening that haven't been recently, I would encourage you to come next year because of the fact you will be astonished at the scale of the progress that's been made.

So just finishing up before I hand over to David. The debate over large sites and their contribution to that shortfall that I was talking about before is essentially over. It is out now, accepted by local authorities in South East England that the only way they're going to hit their housing number is with extra big sites. And so we are -- and we are that -- so it's now on the practicalities of putting those together and the quality and pace of delivery. That's absolutely home ground for us. We are further through that process than anybody else. We've got 9 sites. The best -- the next biggest would maybe be 3. So we're 20% currently of new planning consents over 3,000 units in the U.K. So we've got this -- really for a relatively small business, we've got the -- going back to what the Chairman has said, we've got this very strong position in a sector which can only get bigger. And in the process, what we are doing is building our own prime. So the reason, and Robin will talk about this, the reason that we're able to capture the growth that we are is because of the fact that essentially, we get a participation in relation to house prices. Broadly, our licenses give us 1/3 of in sales value. We get that participation in house prices when we are creating the environment in which those prices improve, in lower-value locations like Corby and Newark and the pace of sales increases in other places. So Rugby, for example, we are outselling. There are 18 different outlets for new houses in Rugby. It is not short of housing supply. But we're outselling other projects on an equalized basis by about 50%. And that so the -- and the element that -- the strong element that we have, which will resonate in Robin's presentation, is the fact that what you see with us is what you get. And that is -- our second-generation of sites that are coming through are absolutely benefiting. People now trust us to deliver schools. They trust us to deliver roads. And in the process, we're making money for our shareholders.

So David?

--------------------------------------------------------------------------------

David Lewis Wood, Urban&Civic plc - Group Finance Director & Director [5]

--------------------------------------------------------------------------------

Thank you, Nigel. Good morning, everyone. Okay. So the last 12 months, we produced continued sales growth at our strategic sites as well as increased land promotion sales at Catesby, which along with planning consent at Waterbeach, have driven improvement across all our EPRA NAV metrics. These highlights show that the group continues to deliver robust and sustained growth, and I'll start in the top row.

Plot completions were up 49.4% over the last year and U&C share of cash generation was also up 63%. I'll compare these numbers to the expectations set out in last year's presentations later.

EPRA net asset value growth continues to maintain, growing at 8.6% over the year on EPRA net asset basis. That's 7.5% on a net -- or triple net basis. EPRA net asset plus wholesale discount has also risen but by a slightly lower 3.9%, which is largely due to changes in value assumptions, as Nigel mentioned.

In the bottom left-hand box, you will note that gearing measures on a wholly owned and look-through basis have increased over the year as loans are drawn down to fund infrastructure spend at our strategic sites as well as funding development costs at Manchester New Square, our joint venture that is due to start phase completions next year.

In the bottom middle and in line with prior periods, reported gross profits have not yet stabilized. We are still growing plot sales. Dividends continue to grow with our sustained progress, up 11.4% this year.

I'll turn my attention to plot sales. This slide has made a number of appearances now and shows not only how sales and cash generation have increased rapidly since our first sale at Alconbury in 2016 but also notes our expectations for the next year. In the year 2018/'19, we have made 665 plot completions at our strategic sites, which have generated GBP 42.4 million of cash in total. Of this total, U&C share is GBP 34.3 million, which reflects the fact that we do not wholly own all of our sites.

In terms of the numbers of plots sold, this was up 4.7% over expectations set out in last year's presentation and 3% over our cash generation targets. We expect this robust performance to continue through 2019/'20, when we anticipate receiving gross proceeds in excess of GBP 60 million from our license or land sales, equivalent to 1,200 plots. I say equivalent as we may start to sell land outright as well as continuing with our usual license arrangements. Going forward, I will be clear as to how many of the plot completions relate to actual home occupations and how many relate to land sales.

I've provided a site-by-site analysis of the 665 figure in the appendices. Following a number of requests, I'll give you an illustration as to how cash builds at our strategic land sites over time. I'll start by saying that this slide is an illustration, and different sites, of course, have different economics. If we start on the left-hand side, you will see that on day 1, we contract with our first housebuilder. At this time, a typical house may sell for GBP 300,000, and Urban&Civic would receive, say, 1/3 of these proceeds, or GBP 100,000, to cover servicing costs and our profit. The housebuilder would receive 2/3, which would cover their profit and house construction costs. From that day 1 exchange, it takes about 2 years to sign up another 2 housebuilders and see the first housebuilder achieve a full year of sales. You can see in the after 2 years column that I have assumed that the first housebuilder has sold 40 homes generating GBP 4 million of gross proceeds. For the next 2 years, I've assumed 3 housebuilders and then 5 housebuilders will be building and selling and that sales rates maintain at 40 homes per -- 40 sales per outlet per year. This would mean that after 4 years, a site could generate GBP 20 million of gross proceeds. If you extend this analysis to Urban&Civic's current strategic site ownerships, as shown in the box at the bottom, the gross proceeds could generate -- that could be generated equates to GBP 73 million. This, of course, is before we reinvest any proceeds into further servicing of parcels or repay infrastructure loans. This is a very simplified example, and the business is not at the year 4 position across all of our sites, and you can see that in this bridge.

The gray box shows you that we're not quite at the GBP 100,000 per plot of cash generation used in my illustration. You will note that we actually generated GBP 63,800 per plot this year rather than the GBP 100,000. This is largely due to lower overage receipts in respect of Priors Hall preacquisition overages.

The main difference between this chart and those of prior periods is that we haven't seen a significant contribution from commercial sales in the last 12 months. Despite the lack of commercial sales, the group's cash and gearing positions remained stable as residential sales have accelerated and Catesby proceeds have contributed more strongly to the cash reserves this year. Loans, which have mainly been provided by Homes England and local authorities, continue to fund a significant proportion of the group's infrastructure and development spend, as shown in the middle 2 bars. So how does this look like on the group's balance sheet? The actual structure of our balance sheet hasn't changed very much. We are still a collection of property interest, associated debt and working capital. This is what you can see in the bottom left-hand shaded area. I would remind you that statutory IFRS net asset value does not include trading property revaluations. These are only taken into account by EPRA measures. I'll explain the movement in EPRA NAV shortly.

This slide shows you the concentration of our property portfolio as well as the component parts of CBRE's valuation for the strategic sites where plot completions are taking place. In the top left-hand doughnut, you can see that the strategic land holdings now account for 85% of the property portfolio. This should trend upwards once the 351 apartment scheme in Manchester is completed and sold. We classify this joint venture as commercial in this analysis.

Let me take you through our borrowings. Although not detailed on this slide, we have put in place 4 new facilities this year, totaling GBP 85.8 million. In addition to these facilities, we're currently putting in place a GBP 60.6 million infrastructure facility at Waterbeach, which will not only accelerate infrastructure delivery but will also reduce group's upfront capital requirement for this project. These new facilities are at rates and durations that ensure the group continues to benefit from relatively long-term, low-cost finance, especially if you exclude the shorter-term and more expensive Manchester new square borrowing.

Back to the slide. On the right-hand side, you can see our average all-in cost of borrowing amounts to 3.8% and the weighted average maturity is now 6.7%. Homes England facilities account for 69% of group's drawn borrowings, and they continue to be long-dated, provide for roll-up of interest and typically only require repayment from realized distributed proceeds. With our share of undrawn facilities totaling GBP 54.8 million, which I have detailed in the appendices again, and gearing of 19.9% on an EPRA NAV basis, the group continues to be -- have supportive banking arrangements.

On to the summarized income statement. Although residential sales are still growing, prior periods benefited significantly from commercial property disposals and investment property revaluations, and that makes comparison on a like-for-like basis quite tricky. The first point to make, and I'll limit myself to 2, is that the gross profits, including our share of residential sales within Rugby joint venture, have marginally fallen this year. This is the result of the prior year benefiting from the sale of our hotel at Stansted and the Skelton leisure scheme.

The second point I'd like to make is that below gross profit, profit before tax is lower as a result of further reclassifications of property from investment trading during the year. This means that the lower proportion of those valuations are recognized through the income statement, more being recognized through EPRA.

So how does this look for the group's EPRA NAV? The 8.6% on a per share basis improvement in EPRA NAV over the last 12 months is reflective of sales and development progress at our strategic sites as well as Catesby planning successes and corresponding sales. As you can see from the bridge and focus on the circled areas, revaluations alone have contributed 28.1p to the 28.5p movement. 18.5p of this relates to the revaluation of our Waterbeach property interests having achieved consent this year. 16.7% of sales profits, which is the second circle from the left, has predominantly been generated through a combination of strategic site sales overages and Catesby land promotion disposals. Overheads are the other significant components in this chart. I detailed the effect of deferred tax in arriving at EPRA triple net asset value movement in the footer.

So you can see -- in summary, you can see that the group continues to deliver robust growth in plot sales as well as EPRA net asset value and dividend growth, and whilst at the same time, maintaining gearing within our self-imposed limit of 30%. This stable platform provides us with the opportunity to deliver future growth, and Robin will take you through the development progress now.

--------------------------------------------------------------------------------

Robin Butler, Urban&Civic plc - MD & Director [6]

--------------------------------------------------------------------------------

Good morning, everyone. Thank you, Dave. Next year, we might splash out and get 4 chairs maybe to spend it in this reason. So at this time, I'm not going to slavishly go through all the sites going through absorptions and so on because we don't really have time anymore to do it because of the growing number of sites. All of that information is in the back appendices. Safe to say one overarching point that the absorptions against target are nearly 5% up from where we're expecting them to be.

I'm going to bring out these 5 points here, which are partly in response, as Nigel mentioned, to feedback we've had and partly new sort of dynamics within the business, of taking the business on to the next stage of maturity.

Firstly, Nigel already mentioned this regional critical mass point. It's a sort of sophistication of the master developer role and how that really drives absorptions. When you have a specific domination in an area, Cambridgeshire being a good example, you have familiarity with local authorities, highways agencies, just agencies generally within the area, utility providers, it allows you to mobilize much more quickly than would be the case as a new entrant. So I'll illustrate that with Wintringham in a minute.

Platform and resourcing. One of the questions that's raised is how many more can you do? We spent a lot of time and energy this year putting in new systems into the business, internal systems to manage risk, manage delivery, manage cash flows, CSR, and so on; and particularly in relation now to new initiatives of marketing to drive marketing across the sites, linking it with the way the housebuilders market as well, which means, actually, as we roll out onto new sites, we can mobilize more quickly, and the cost of mobilization is more efficient and is lower and generally staffing requirements for new sites are at the mezzanine and more junior level.

Build to rent. We've tentatively started to dip our toe in the water on build to rent. To be clear, none of the figures that you see today and the valuations don't really assume build-to-rent absorption. So this is an additional element. And our first deal, we hope to sign shortly at Rugby. And that will be for about 150 build-to-rent units provided by a housebuilder. We see that as complementary rather than competing

And Modular. There's been a lot written about modular. We've been around and seen all of the major modular providers mostly with a great deal of disappointment. Mostly, it's too expensive and doesn't provide actually the house types that the housebuilders require. We think we may have a link up now with somebody, which we're going to trial at Rugby for a small toe in the water. If it's successful in terms of cost and delivering quality, then that could well be rolled out into the build-to-rent, possibly into Civic Living and would allow us to be competitive pricing-wise on those delivery costs.

And largely, cementing relationships with the housebuilders. One of the questions raised is how do you blood in new housebuilders? How do you select them? So at the moment, we've got 19 different housebuilding contracts, different housebuilders we deal with, 28 in total. So there's 9 effectively who are doubling up on more than 1 site. We've got 11 further ones agreed. So by this time next year, we expect to be contracted on 39. And what we typically tend to do, and that's 20 -- that would be 25 different housebuilders, on a typical site, when we go out to tender, we probably got 4 housebuilders selected. In that mix, there might be 2 existing relationships, maybe 1 or 2 new housebuilders coming in, particularly looking at SMEs as well. And so gradually, you've got a mix of replicating and expanding with your existing partners and introducing new entrants as well. And in fact, the photograph just above Nigel's head there, which you may not be able to see -- that's better, is of the SME housebuilder conference we did in the summer jointly with Homes England. We literally didn't know whether 5 SME housebuilders would turn up or 50. It actually was the latter. It was hugely successful. And they are very, very keen to engage on our sites, particularly to the point that Nigel made earlier, they regard our sites as largely risk-free in terms of delivery other than their own construction risk and market risk. We present them with something, we take off the 106 obligations, we take off the decontamination. We provide them with something that genuinely is up and ready.

So then taking those principles onto 2 sample sites, Rugby and Wintringham, and then I'll just count quickly to the rest. So Rugby is a really good demonstration here of, firstly, continuing momentum and then bolting on a number of those elements I've just described.

So you're familiar with the 3 housebuilders going in Zone 1. We'll also then have the build-to-rent deal, hopefully, happening in the next couple of months. We'll also be building modular here, we hope, albeit a small element, about 20 units in first instance. The secondary school, which is going into the C station building at the back there, we don't need to do that until 1,800 units. We're accelerating that now. And the reason we're doing that is because it will produce, again, greater takeup, great absorption rates, greater housebuilder demand. We're doing that with a GBP 35 million loan from the Department for Education.

And then if you then look at the other end of Rugby, so in the distance, you've got that key Phase 1 I've just shown you. This is the link road, just being completed and opened, 1.5 miles. So you can get from your lunch at The Tuning Fork, which many of you had, through to the station in about 10 minutes outside of the rush hour. This road is about 1.5 miles long.

So what we've done is we tie in Redrow. And again, in the fish eye circle there is Redrow who just opened and launched their first houses. So that's the second front coming forward. And then we have another deal behind Redrow, which effectively would allow us 2 housebuilders going on the second front. So in total, at Rugby, we'll have this time next year at least 5 housebuilders going, plus the build-to-rent, plus possibly modular as well. So we could have [6, 7], which is clearly going to this notion of bringing things together and accelerating further.

So Wintringham, which is quite an extraordinary story, is really a good demonstration of the regional critical mass point. May 2017, we bought the site with Nuffield, and the first houses will be occupied before May of 2020. So that's under 3 years from an unconsented site to first occupations. And I know Nigel would say it, but I don't normally say it, but I think that's probably unmatched by anybody else, I think, in the U.K. And the reason for that is this concept of regional critical mass and the internal systemized elements we've got. We are now much more efficient at rolling out, mobilizing both in cost terms, but also in terms of people terms. And secondly, on the ground here, the development directors and the team would just be familiar with the utility providers, with the local authority, with the County Council, it allows a speed of mobilization which simply doesn't exist for our competitors who don't have the same element of critical mass.

And the school in the corner there, which is just in the distance as well, this is our -- will be our fourth primary school. We got Newark and this one under construction, 2 currently open at Rugby and Alconbury. Again, it's going to be a very, very strong build. We're building a separate reputation really for the quality of the educational facilities. And the one at Rugby, which I referred to earlier, is also going to be of very strong quality as well.

And then quickly through the rest. Alconbury moved along very nicely into its next phase of maturity around the cricket pitch, where we've got Crest and Hopkins now building out, we got Civic Living, and we've just tendered the fourth parcel ramp by the cricket pitch there, very much along the lines that we're talking about. Looks like it's gone to somebody who will be a new entrant to the business, although we've now taken land potentially also at Wintringham as well. So new entrants to the business during the course of this year.

The bottom corner there, celebration of the opening of the cricket pitch where we've got John Major; and Charlotte Edwards, who's the ex-England captain; we're with Lydia Greenway, another England cricketer; and the Chairman dusted off his whites for the day as well it looks like.

--------------------------------------------------------------------------------

Nigel Hugill, Urban&Civic plc - CEO & Director [7]

--------------------------------------------------------------------------------

The first time we've seen him smile.

--------------------------------------------------------------------------------

Robin Butler, Urban&Civic plc - MD & Director [8]

--------------------------------------------------------------------------------

Priors Hall has been a real lesson in life for 2 reasons: one, because we've got a lot of sins in the past, which we spent our time eradicating. We inherited a lot of elements that have been badly done, so no street lighting, for example, poor drainage. We knew exactly that was all costed in. That's always going to be taxing. But in doing so also, we planted nearly 50,000 trees there during the course of the year, and we've put in 8 playgrounds. And also, we've got to manage the process now of having nearly 3,000 residents on-site. All of that has been a very good education of how the future might look across our other sites.

Seven housebuilders going, a good blend of nationals, regionals and SMEs, again, seeing how these interact. And there is a notion now that actually we can slot SMEs in amongst the absorption, again, additional absorption in a way that we didn't originally thought.

And again, a signature element across all our sites, generally a café and a U&C office. And this is now opened at Newark and now opened at Corby as well. Very much along the theming of The Tuning Fork with a local operator. Will be very successful.

So turning to Newark there. Pace of delivery actually really good, although it's been rather flooded over the last few weeks. Bellway have taken a second parcel. Avant going along well there. And again, as I mentioned, we've opened a café and office here, as you can see in the corner here. And the first primary school, again, under construction again. So that's opening September '21.

Big news in the last 10 weeks would be the consent at Waterbeach through the JR period, 6,500 units, pretty much started on work the following week and with the enabling works, but the major construction starting first quarter 2020. And obviously, we'll have a lot more to say about that during the course of this current year.

Turning to pipeline. Tyttenhanger is -- we don't want to be too overoptimistic on these things because, obviously, this is Green Belt extraction. We'll need central government authorization. But the engagement we've had from the local authority, both officer and member level, has been very strong, very positive. And if anything, it would seem that they want to go to the upper end of the level that we're talking about in terms of range of units, which is at 4,000 to 6,000. It's feeling like the upper end of that. So at the moment, we're in as good a spot as we could be. And that is a very good example of Nigel's supply-constrained locations. This is absolutely right in. There's no doubt that demand from housebuilders for this would be extremely strong should we get to that position.

Manydown, finally, finally, finally, we are very close to signing the arrangements with the County Council and the Local District Council of Basingstoke with our partners, Wellcome, in which case, we'd hope to move forward looking like getting planning in first quarter, second quarter next year. Again, a very, very good supply-constrained location, absolutely. Possibly one of the most reversionary towns in terms of the commuter belt around London where values are now and where they should be with the proper scheme.

And lastly, just finishing up, as David said, Manchester New Square is regarded as commercial. Put this in one slide because it's the last major asset other than the hotel that we have left on the commercial side. Joint venture with the Greater Manchester Pension Fund. It's on-site for completion. The 3 buildings in the phasing during spring and autumn next year. It's on time, on budget. We've got 145 units of the 351 units reserved or exchanged. And we should get Help to Buy confirmation through early next year, which will clearly then boost the sales up.

Nigel is now going to do Catesby.

--------------------------------------------------------------------------------

Nigel Hugill, Urban&Civic plc - CEO & Director [9]

--------------------------------------------------------------------------------

Thanks very much. We had good contribution from Catesby, GBP 6.7 million to EPRA, GBP 5.3 million profit after-tax and GBP 1.4 million, which was the net EPRA addition. Capital invested in the balance sheet GBP 29 million, although GBP 12.9 million of that is aggregated at EPRA uplifts, which get realized over the course. A few sleepless nights in that we had 2 cases at or potentially going to the Supreme Court, and we all know how unreliable that can be. But we were able, in this instance, we were successful in both. As I said before, it's not getting any easier, but actually the performance out of Catesby is pretty consistent. We've got a good pipeline of about 10,000 units, which is as big, really, as it's ever been.

Briefly on Calvert. Calvert is the only project that we haven't really made any progress on in the year. It's the only one that is dependent upon external policy infrastructure. You might have seen that Grant Shapps was making rather unsympathetic noises about the Oxford to Cambridge expressway, which is either -- would be either the mustard or the [hail] green rooting into Oxford. I think we can rely on that not taking place. So it's very complicated into Oxford itself, and the environmental impacts would be quite negative. So I think they're not going to do that. In which case, the consequences for us are -- it means that the likelihood of Calvert ever becoming a metropolitan scale development has really -- would really disappear from that. That would still be the scope for a strategic development, which is 5,000 units. In my definition, metropolitan would be 25,000 plus. And that will rely on High Speed 2 going ahead. If High Speed 2 doesn't go ahead, then there won't be a development at Calvert. If it does, actually, it's quite likely, not only will the Oxford to Cambridge rail, which is the black line that you can see across, so not only is that likely to be expedited, it's also in relation to High Speed 2. They will probably reserve a station interchange, which wasn't on the agenda before. But -- so we await that. We've obviously been making our case in relation to that. As it says here, 2 out of 3 might not be bad. I think there will be something that goes ahead. If there are 2, there won't be a third one. The money in the books for this at the moment is about GBP 300,000.

So sustainability is something that we've had a lot of interest in this year. It seems like we've lost one of our capitals, so the handshake should say economic. And what we've been working on, it's quite difficult in relation to the -- it's a smorgasbord of metrics at the moment for sustainability measurement. We're putting together a specific and bespoke set for master development. So in the report and accounts, you'll see these 5 capitals being illustrated by what's been done at Alconbury. We're consulting back with a number of shareholders and people in this room about that, and sustainable -- all sustainability advice is gratefully accepted. So if you've got your experts, please get in contact with me or James. So we're going to put that through so that by the next year, we've got a specific set of indicators and metrics against which we can measure ourselves and you can measure us going forward.

It's because of the fact that, as I've said before, for us, it's more -- it's -- the base case is bringing out what is done already. So we -- it is necessarily the case with a master developer in the way that we've gone about things, doing things right, we already have this very big dividend. So it's a question of how we properly articulate that and also provide measurements against the way that, that improves going forward.

So just to give you illustrations of that. 140,000 coming up for trees we've planted, 70,000 in the last year. I'm old fashioned, so 154 hectares. We've got about 380 acres of land remediated. I'm happy to work in kilometers, so 28 kilometers of cycle paths that we've built just on our own sites. And actually, Waterbeach will lift that by at least 50% because we're putting in some cycle ways that go into the site as well. So these are things that we do already as a matter of course, and so it's a question of how we properly demonstrate that and so that other people can see that very directly.

It's clearly a business differentiator for us. We are spending this money. Master development as we do it is necessarily infrastructure-led. So it must be the case that we are creating these new environments by spending money at the front end. And that is of itself both goes to the value of the houses that we sell in the way I was describing before, but it also goes to us winning business going forward. It is a major differentiator for us. We would not have got a planning consent at a very skeptical Liberal Democrat council in South Cambridgeshire who consented Waterbeach, we would not have got that planning consent if we couldn't demonstrate that we were making a positive contribution towards reducing coal. We were able to do that, and that was a big element in them giving us that consent.

Just finishing off. So I mean, as I said before, the argument on big sites is over in relation to South East England. And now what's increasingly seen, like I said, the necessity for those large sites is now being replaced by us by the virtue of showing that those projects can demonstrate economic and educational and environmental benefits that infill sites simply cannot do. And so that's the crucial element for us that Chairman was kind in his opening statements, that's the crucial push that we have. So we have the ability to create value on the one hand, but also create new business opportunities. And that puts us in this very unusual position. So what we've now really pleased about is we've got this platform advantage, and you're seeing that coming through. So we've got the pace of the Wintringham being -- coming through. We've got the original consent of Wintringham in 20 weeks. The pace at which the housebuilders has been prepared to know that we're going to build those schools. We know -- they know that it's going to be ready. So that's -- and we're looking at speeding that up even more. So we get that on the one hand. We get the quality of the environments that we're creating by building our own prime, and then we get the new business opportunities. So we've got Wintringham coming through. The Waterbeach will be first sales in 2021. We'll get a planning consent at Manydown in 2020. And we've got a fair amount. We haven't got anything quite ready to come out of the oven, but we've got a fair amount in the kitchen.

So then building that new prime that creates that value, and in the process, the other important aspect is that the housebuilders are building -- selling faster on our sites than others. And we've got, again, the unequivocal attributes at Rugby where, broadly, they're selling about -- they tell us about 50% faster than any other sites.

So in relation to predicting outlook, with an election in 2 weeks' time, it's pretty hard. But I doubt that there are many chief executives that you've encountered who are predicting a near doubling of sales in the current year, and that's where we are at the moment. And I could fall flat on my face. But actually, the minimums provide a safety net. So before I hit the ground, I'd probably stop my nose crushing. But that's where we are at the moment. That's what we are currently expecting. That will be a combination of licenses and sales. But we await 2 weeks' time with expectation and the knowledge that actually we're pretty well set up for next year in any event.

So we're happy to take questions on this or on politics or on anything else.

--------------------------------------------------------------------------------

Alan Peter Dickinson, Urban&Civic plc - Non-Executive Chairman [10]

--------------------------------------------------------------------------------

Particularly politics.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Miranda Sarah Cockburn, Panmure Gordon (UK) Limited, Research Division - Analyst [1]

--------------------------------------------------------------------------------

Miranda Cockburn from Panmure Gordon. Two questions. Just, can you give a bit more detail as to your thought process for outright sales versus the license agreements and what make you go choose one versus the other?

And second, then, it's probably too early, but have you actually got to any situations where the minimums have kicked in, sort of in terms of timing or amounts? Or is that just too early?

--------------------------------------------------------------------------------

Nigel Hugill, Urban&Civic plc - CEO & Director [2]

--------------------------------------------------------------------------------

I'll do the first one. David can do the second one. So we're increasingly agnostic about the difference between licenses and outright sales. There were 2 basic reasons for doing licenses in first instance. One was to make sure that we were participating in the uplifts of the environments that we were creating. So essentially, by getting 1/3 of in-sales value. That was higher -- that was going to be higher than an outright sale. And the second element was to make sure that we had a good leverage into the quality because effectively, we're partners rather than disposing of that land.

Now the second one of those is rather less than it was because we've basically got cross customers across most of our sites, so they would know what was expected when they get any more.

The first one is also interesting because for the listed housebuilders we've talked about in the past, the minimums are increasingly close to the participation rates. So that's to say that the guarantees that we get are quite close to the participation rates. So in circumstances where you've got flat house prices, then actually we might as well do sales as minimums. And there are some of the listed housebuilders that would continue to prefer that. So that's why, from our perspective, as long as we're getting the same value, actually paradoxically under the CBRE valuations, it sometimes actually would increase the valuation because it would bring forward the receipts than they do on discounted basis. There are 2 cases where we've had minimums.

--------------------------------------------------------------------------------

David Lewis Wood, Urban&Civic plc - Group Finance Director & Director [3]

--------------------------------------------------------------------------------

Yes. They're relatively -- the reason why we haven't really made a big thing in the presentation and there's some various sort of bits and pieces is that they're not really due to reduced sales rates. We've had 2 test cases, if you like, where we've had slow starts from the housebuilders, where the clock has started ticking and they haven't actually got on to site for a considerable period of time. So their sales have naturally fallen behind their sales minimums. So they're relatively modest, Miranda.

--------------------------------------------------------------------------------

Nigel Hugill, Urban&Civic plc - CEO & Director [4]

--------------------------------------------------------------------------------

So we basically only get -- there've been a couple of times where it's -- they haven't sold the minimum amount in the first year. We haven't had any circumstances where they've sold less than the contracted amount [subsequent].

--------------------------------------------------------------------------------

David Lewis Wood, Urban&Civic plc - Group Finance Director & Director [5]

--------------------------------------------------------------------------------

The good thing about that is that it's tested the agreements and they effectively were paid. I think going forward, some of the bigger parcel sales have bigger numbers of minimums attached to them. We've talked about 40 in my example. Some of them, if you were double the size, they'd be double the sort of minimum plots. That will be interesting to see if those sales rates drop on those large parcels. Effectively, you might see more minimums being called upon. But at the moment, we haven't had any 1 in that position.

--------------------------------------------------------------------------------

Nigel Hugill, Urban&Civic plc - CEO & Director [6]

--------------------------------------------------------------------------------

But again, if you look at something like Redrow, that building at 1.1, 1.2 weeks, so that translates through to about 70 a year.

--------------------------------------------------------------------------------

John Michael Cahill, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [7]

--------------------------------------------------------------------------------

John Cahill from Stifel. Two questions, please. First one for David. Your loan to value has gone from, broadly speaking, 20%, heading towards 30% during the period. Will the sales of the apartments in Manchester on their own be sufficient to get the loan to value back down towards that 20% level?

--------------------------------------------------------------------------------

David Lewis Wood, Urban&Civic plc - Group Finance Director & Director [8]

--------------------------------------------------------------------------------

Yes. First off, so the construction contract on Manchester New Square is about GBP 80 million, just north of GBP 80 million. And all of that is pretty much debt funded, either through senior finance or mezzanine finance. And we treat those as borrowings in these calculations. So by the time you've worked through the -- that effectively joint venture thing, that will bring that back down. So yes is the simple answer.

--------------------------------------------------------------------------------

Nigel Hugill, Urban&Civic plc - CEO & Director [9]

--------------------------------------------------------------------------------

And then you've got to remember that all the borrowings essentially will be from Homes England.

--------------------------------------------------------------------------------

John Michael Cahill, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [10]

--------------------------------------------------------------------------------

And the second question is that the master developer model in the South East, where you're located, has been so successful, in part by the willingness of the housebuilders to delegate their land curation to the likes of yourselves; and you've built the business on that basis. But as you've said in the statement, in other regions of the U.K., government policy is now starting to have an effect and stimulate housing supply, taken care of largely by the bulk volume housebuilders. Can we be confident that the conditions that are specific to the South East will endure irrespective of what comes in 2 weeks, but will endure in the long term?

--------------------------------------------------------------------------------

Nigel Hugill, Urban&Civic plc - CEO & Director [11]

--------------------------------------------------------------------------------

I think, yes, there is another set of analysis, which we're happy to take you through, which shows the structural shortfall in South East building over a much longer period. And if you take Tyttenhanger as an example, in Hertsmere, so Hertsmere is 79% Green Belt. It's tremendously difficult to hit those housing numbers with that large size. And actually, what is -- it's the other way around, really, that you are seeing North of London local authorities looking to meet those targets. There's a real bond fight going on in and around Guildford, for example, where the local plan has not yet been adopted, and there were 5 QCs at the most recent meeting. So I mean I'm confident that the structural elements of that -- basically, if it was going to crack, it would have cracked already. If you look at the other -- if you look at the figures elsewhere, it shows to you there's basically no supply. No restriction on supply of buildable land outside of South East because of current policy. I think you might see a bit of tightening on that because in somewhere like Rugby, they don't feel inclined to grant new planning consents because of the fact they've got sufficient in the pipeline.

--------------------------------------------------------------------------------

Robin Butler, Urban&Civic plc - MD & Director [12]

--------------------------------------------------------------------------------

I think one of the other points as well is it's difficult to underestimate the reputational elements now coming forward with housebuilders. Housebuilders want to bid on our land because they know they won't have any particularly outstanding obligations. You take decontamination as one, but also Section 106 bringing school -- bringing forward schools and so on. That's a massive point for the majors, but also for the SMEs as well who really don't want to -- and the problem is that they don't get that clarity and cleanness generally on sites.

--------------------------------------------------------------------------------

Erik Salz, JP Morgan Chase & Co, Research Division - Analyst [13]

--------------------------------------------------------------------------------

Erik Salz, JPMorgan. You mentioned something about modular construction, and it's too expensive and you weren't impressed by what you've seen so far. Can you just elaborate a little bit more why it's too expensive and why were you not impressed?

--------------------------------------------------------------------------------

Robin Butler, Urban&Civic plc - MD & Director [14]

--------------------------------------------------------------------------------

I think it's too expensive at the moment because it's an immature system. It's been very effective in high-rise hotels, students and so on because there's effectively a replication of the modules that they use. The problem in housebuilding is that on a typical site, you might have 30, 40, 50 different house types. And they may only be different house types where you're changing the way that the eave looks or the way that the window fenestration changes. It's quite difficult for a modular provider to deal with that. So what they try and do effectively is build it around the same carcass, but that's quite restrictive. And they haven't yet, I don't think, cracked. And it's a bit chicken and egg. They need some bulk orders to actually allow that to pull through and get the experience.

And secondly, the quality frequently is quite varied. So some modular contractors are, in effect, really just building houses in a traditional form inside a factory. Others are doing them flat pack. There are now something coming through, which is one that we are dealing with, who has an ability to do it genuinely on a modular basis. And effectively, it is restricted in terms of the actual labor that's going into it. So they will be able to scale that up and hopefully mobilize it. We're not there yet. the costs are still too high with this. But the discussions are ongoing. I think we may get there with this 1 provider on both quality. We'll still be probably limited on, initially, on the number of actual housing types we're going to use. But that's why we're doing a small 20-unit site, first of all, with maybe 4 or 5 house types.

--------------------------------------------------------------------------------

Erik Salz, JP Morgan Chase & Co, Research Division - Analyst [15]

--------------------------------------------------------------------------------

Maybe one other question about the large site discount and alterations in valuation assumptions. Can you just elaborate a little bit more what those alterations were?

--------------------------------------------------------------------------------

Nigel Hugill, Urban&Civic plc - CEO & Director [16]

--------------------------------------------------------------------------------

Yes. Of course. If you go back to that starting position, which is the way that our -- so that our strategic sites in the books at the moment about GBP 550 million. And CBRE value the contracted elements, and then they value the uncontracted. In uncontracted, they discount it pretty heavily. So the contracted elements are about 40% of the balance sheet, including the investment. Uncontracted, about 60%. So it's necessarily the case that if you increase the value of the former and reduce the value of the latter, that the large site discount goes down. So that's what's happened. That's what's happened this year.

As Robin would be quick to point out, in circumstances where you turn uncontracted plots into contracted plots, which is what we're doing, then, of course, they will have to switch them from one category to another. So actually, we will -- the reason that we're -- we'd certainly take the trade on the Waterbeach planning consent because those come back just as soon as we contract them. And we've got -- I can't really remember, 9 or 11 discussions going on as we speak, 11 discussions as we speak.

Okay. Are there any other questions? No? Thank you very much, indeed.