Bellway PLC Trading Update

 
TIDMBWY 
 
Bellway p.l.c. 
 
                                Trading Update 
 
                             Friday 5 August 2016 
 
Bellway is today issuing a trading update for the year ended 31 July 2016 ahead 
of its preliminary results announcement on Tuesday 18 October 2016. 
 
Highlights 
 
  * Housing revenue is expected to increase by around 27% to GBP2.2 billion (2015 
    - GBP1,735.1 million). 
 
  * Further volume growth with a 12.5% increase in the number of housing 
    completions to 8,721 (2015 - 7,752). 
 
  * A record pre-exceptional operating margin[1], which is expected to rise by 
    around 150 basis points to approach 22%. 
 
  * A substantial forward order book comprising 4,644 homes (2015 - 4,568 
    homes) with a value of GBP1,117.1 million (2015 - GBP1,087.9 million) provides 
    a solid foundation for the next financial year. 
 
  * Strong balance sheet with net cash of GBP26 million (2015 - net bank debt of 
    GBP38.5 million). 
 
[1] Pre disposal of Barking Riverside which is treated as an exceptional item 
and is excluded from operating profit. 
 
Ted Ayres, Chief Executive, commented: 
 
"The Group has delivered an outstanding trading performance, achieving new 
records for Bellway in respect of both volume and operating margin.  We have 
invested in high quality land and have maintained a significant forward order 
book, thereby ensuring that the Group is well placed to continue its sizeable 
contribution to meeting the UK's requirement for new homes in the year ahead. 
It is still too early to assess the effect of the EU referendum result, however 
trading in recent weeks has been encouraging and Bellway, with its strong 
balance sheet and robust land bank, can be flexible and respond 
opportunistically to any changes in market conditions." 
 
Market and current trading 
 
Customer confidence and trading conditions have remained strong throughout the 
year, notwithstanding the wider economic uncertainty in the weeks preceding and 
following the EU referendum, in late June.  This has been supported by an 
environment of low interest rates and the continued presence of Help to Buy, 
contributing to good availability of affordable mortgages. 
 
The Group has taken an average of 169 reservations per week (2015 - 153 per 
week), an increase of over 10% compared to last year.  Since the result of the 
EU referendum, there has been some modest caution from a small number of 
visitors to our developments at the higher value end of the London market, 
where Bellway has only limited exposure.  Overall, visitor numbers are still 
strong and the cancellation rate remains at a historic low. 
 
Bellway has continued with its plans to open a nineteenth trading division in 
Durham, utilising land and reallocating internal resources, primarily from our 
very successful neighbouring North East division, which was previously 
operating at full capacity.  The new division opened on 1 August and will 
provide the Group with an ability to deliver additional output at minimal extra 
overhead, thereby ensuring Bellway is well placed to cost effectively deliver 
its long term growth strategy. 
 
Results 
 
The Group completed the sale of 8,721 homes (2015 - 7,752), an increase of 
12.5% compared to last year's record.  The average selling price of completions 
rose by almost 13% to GBP252,700 (2015 - GBP223,821), influenced in part by a lower 
proportion of social housing completions, which represented 16% of the total 
(2015 - 20%).  As a result of the growth in volume and average selling price, 
housing revenue has risen by around 27% to GBP2.2 billion (2015 - GBP1,735.1 
million). 
 
In line with previous guidance, the pre-exceptional operating margin is 
expected to rise by around 150 basis points to approach 22%.  This excludes the 
benefit of the GBP17.3 million exceptional profit arising on the disposal of the 
Group's interest in Barking Riverside. 
 
Notwithstanding the rapid rate of growth, this record operating performance has 
been achieved whilst maintaining a focus on quality, with 43 of the Group's 
site managers awarded NHBC Pride in the Job Awards (2015 - 33), the highest 
number Bellway has ever achieved. 
 
Land buying and financial position 
 
The land market has remained attractive throughout the year and Bellway has 
therefore continued to selectively acquire those sites that meet its minimum 
hurdle rates in respect of gross margin and return on capital employed. 
Accordingly, the Group has contracted to acquire 9,555 plots (2015 - 9,128) 
across 88 sites (2015 - 88 sites).  Following the EU referendum result, the 
Group is proceeding cautiously with a number of site acquisitions pending the 
outcome of the Autumn selling season. 
 
Notwithstanding cash expenditure of some GBP670 million on land and land 
creditors (2015 - GBP620 million), the Group ended the year with net cash of GBP26 
million (2015 - net bank debt of GBP38.5 million). 
 
Outlook 
 
Whilst it is too early to determine the extent to which the EU referendum may 
have an effect on longer term customer confidence, the underlying demand for 
new homes remains strong, supported by lenders' willingness to provide ongoing 
access to affordable mortgage finance. 
 
Bellway is in a solid position and has built up a healthy forward order book 
comprising 4,644 homes (2015 - 4,568 homes) at a value of GBP1,117.1 million 
(2015 - GBP1,087.9 million), with this increase achieved whilst also delivering 
significant volume growth.  Together with a strong balance sheet and an 
expanding structure of nineteen trading divisions, this ensures that Bellway 
retains the flexibility and operational capacity to adapt to changes in market 
conditions.  If required, the Group can moderate the rate of land investment in 
the short term to preserve maximum value for shareholders.  Notwithstanding 
this, the Group is well placed to continue its long term growth strategy, 
whilst maintaining a focus on return on capital employed. 
 
FOR FURTHER INFORMATION PLEASE CONTACT: 
 
TED AYRES, CHIEF EXECUTIVE AND KEITH ADEY, FINANCE DIRECTOR FROM 7:00 AM 
ONWARDS ON 0191 217 0717. 
 
Certain statements in this announcement are forward-looking statements which 
are based on Bellway p.l.c.'s expectations, intentions and projections 
regarding its future performance, anticipated events or trends and other 
matters that are not historical facts.  Such forward-looking statements can be 
identified by the fact that they do not relate only to historical or current 
facts.  Forward-looking statements sometimes use words such as 'aim', 
'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 
'believe', or other words of similar meaning.  These statements are not 
guarantees of future performance and are subject to known and unknown risks, 
uncertainties and other factors that could cause actual results to differ 
materially from those expressed or implied by such forward-looking statements. 
Given these risks and uncertainties, prospective investors are cautioned not to 
place undue reliance on forward-looking statements.  Forward-looking statements 
speak only as of the date of such statements and, except as required by 
applicable law, Bellway p.l.c. undertakes no obligation to update or revise 
publicly any forward-looking statements, whether as a result of new 
information, future events or otherwise. 
 
 
 
END 
 

(END) Dow Jones Newswires

August 05, 2016 02:00 ET (06:00 GMT)