Bellway PLC Trading Update

 
TIDMBWY 
 
Bellway p.l.c. 
 
                                Trading Update 
 
                            Tuesday 7 February 2017 
 
Bellway p.l.c. is today issuing a trading update for the six months ended 31 
January 2017 ahead of its interim results announcement on Tuesday 21 March 
2017. 
 
Highlights 
 
  * Further growth in volume with a 6.5% increase in the number of housing 
    completions to 4,462 (2016 - 4,188). 
 
  * A substantial forward order book with a value of GBP1,121 million (2016 - GBP 
    1,027 million), comprising 4,487 homes (2016 - 4,434). 
 
  * A strong trading performance is expected to result in an operating margin 
    of around 22%. 
 
  * Significant investment in land with GBP380 million spent on land and land 
    creditors (2016 - GBP315 million), supporting the Group's ongoing growth 
    strategy. 
 
Ted Ayres, Chief Executive, commented: 
 
"Bellway has delivered another strong half year result, increasing both the 
number of legal completions and the value of the forward order book.  Market 
conditions remain positive and accordingly Bellway is continuing to invest in a 
controlled manner, both in land and work in progress, in order to achieve 
further disciplined volume growth, thereby creating additional value for 
shareholders." 
 
Market conditions and trading 
 
Customer demand continues to be robust and the purchase of a new home remains 
affordable, supported by a competitive mortgage environment and the continued 
availability of the Government's Help to Buy scheme.  This strong demand, 
together with an ongoing programme of site openings, has helped the Group 
achieve a reservation rate of 166 homes per week (2016 - 156), an increase of 
over 6% compared to the same period last year. 
 
Results 
 
Against this positive market backdrop, Bellway is continuing to pursue its 
established growth strategy and as a result, the number of homes legally 
completed rose by 6.5% to 4,462 (2016 - 4,188).  In addition to achieving this 
growth in volume, the value of the forward order book at 31 January 2017 rose 
by over 9% to GBP1,121 million (2016 - GBP1,027 million) and comprises 4,487 homes 
(2016 - 4,434). 
 
The average selling price of private completions rose by over 4% to GBP291,000 
(2016 - GBP279,053).  For the full financial year, the Group should achieve at 
least this rate of growth in private average selling price (31 July 2016 - GBP 
278,403), following investment in higher value locations over recent years. 
The overall average selling price of completions was GBP256,000 (2016 - GBP 
257,280), slightly dampened by a greater proportion of lower value social 
homes, with this percentage rising, as previously guided, to almost 21% of the 
total (2016 - 13%).  The overall average selling price is still expected to 
rise to around GBP260,000 for the year ending 31 July 2017 (31 July 2016 - GBP 
252,793). 
 
Geographically, all divisions are performing well and whilst the rate of house 
price inflation has moderated, sales prices achieved on reservations have been 
in line with or modestly ahead of expectations.  Sales prices and demand for 
Bellway product in London remain firm, where there continues to be a 
significant requirement for affordable homes. 
 
Housing completions taken from land bought at attractive returns, which have 
been improved by historical house price inflation and strong cost control, 
should result in an operating margin of around 22% for the six months ended 31 
January 2017.  The Group should be able to maintain an operating margin at a 
similar level for the full financial year, provided that current market 
conditions continue. 
 
Further investment to secure future growth 
 
The Board remains mindful of uncertainty with regards to the economic outlook 
following the vote to leave the EU.  The land market does however remain 
attractive and our land teams continue to identify opportunities that meet or 
exceed the Group's minimum financial acquisition criteria in respect of gross 
margin and return on capital employed.  Whilst adopting a cautious approach, 
Bellway has contracted to acquire 6,287 plots in the period (2016 - 5,445 
plots) and has spent GBP380 million on land and land creditors (2016 - GBP315 
million). 
 
In addition, in order to secure future growth in this year and beyond and 
notwithstanding the industrywide challenges with regards to the availability of 
labour, the Group has invested significantly in work in progress. 
 
After taking into consideration this increased investment in land and work in 
progress and following the dividend payment of GBP90.6 million in January 2017, 
Bellway ended the period with net bank debt of GBP175 million (31 January 2016 - 
GBP58.9 million), representing modest gearing of around 9% (31 January 2016 - 
3.5%).  This level of net bank debt is expected to reduce by the end of the 
financial year. 
 
Outlook 
 
The strong order book and investment in work in progress should mean that the 
Group is able to deliver further volume growth of around 5% in the current 
financial year.  In targeting growth this year and over the longer term, the 
Board will maintain its operational focus, prioritising build quality, customer 
care and upholding high standards of health and safety, whilst at the same time 
delivering further sustainable returns for shareholders. 
 
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

February 07, 2017 02:00 ET (07:00 GMT)