Bellway PLC Trading Statement

 
TIDMBWY 
 
Bellway p.l.c. 
 
                                Trading Update 
 
                           Thursday 7 February 2019 
 
Bellway p.l.c. is today issuing a trading update for the six months ended 31 
January 2019 ahead of its interim results announcement on Wednesday 27 March 
2019. 
 
Highlights 
 
  * Ongoing delivery of the Group's growth strategy, with total revenue 
    expected to rise by over 12% to almost GBP1.5 billion (2018 - GBP1,324.4 
    million). 
 
  * Further volume growth, with the number of housing completions rising by 
    5.6% to 5,007 (2018 - 4,741). 
 
  * The average selling price has risen by 6.5% to GBP293,800 (2018 - GBP275,945). 
 
  * A record sales performance, with the weekly reservation rate rising by 2.8% 
    to 183 (2018 - 178), the highest ever achieved by the Group in a first half 
    trading period. 
 
  * A strong balance sheet, with modest net bank debt of GBP26.6 million3 (2018 - 
    GBP131.4 million). 
 
Paul Hampden Smith, Chairman, commented: 
 
"Bellway has delivered another strong trading performance, achieving growth in 
both volume and average selling price in the six month period.  Further, 
disciplined investment in high quality land, together with a sizeable forward 
order book, ensure that the Group is well placed, over the longer term, to 
continue increasing its contribution to the supply of much needed new homes. 
While the forthcoming exit from the EU is providing a degree of wider economic 
uncertainty, Bellway's balance sheet is solid and the Group retains its ability 
to respond positively to opportunities in the land market as they arise." 
 
Market conditions and trading 
 
Demand for affordably priced new homes remains strong, supported by an 
environment of low interest rates and the availability of responsible, higher 
loan-to-value mortgages, provided through the Government's Help to Buy scheme. 
 
Against this backdrop, customer interest in Bellway homes remains high. 
Evolving customer trends mean that digital sales platforms are growing in 
importance and as such, the recent investment in our new website has resulted 
in online visitor traffic increasing by 15%.  This, together with our ongoing 
programme of site openings, enabled the Group to achieve a 2.8% increase in the 
average weekly sales rate, which, net of cancellations rose to 183 reservations 
per week (2018 - 178).  This compares to a strong comparator period, during 
which reservations were 7.2% ahead of the equivalent six month period in the 
year before last.  The private sales rate remained strong at 136 reservations 
per week (2018 - 136 per week), in line with the same period in the prior 
financial year.  This is a robust performance given the ongoing discussions 
around our forthcoming exit from the EU, which has inevitably had some bearing 
on customer confidence in the wider economy. 
 
This slight moderation in sentiment is reflected in the cancellation rate, 
which whilst still low, has risen marginally to 13% (2018 - 11%).  In addition, 
the measured use of incentives has continued on certain sites.  These have been 
generally focussed towards higher value plots, where the Group has limited 
exposure and where sales rates tend to be a little slower.  Whilst 
part-exchange continues to be an important selling incentive, its use is well 
controlled, having been utilised in 7% of completions (2018 - 7%), similar to 
the prior period. 
 
Overall, although the rate of house price inflation continues to moderate, the 
pricing environment remains firm, with modest increases still achievable on 
many affordably priced sites across the country. 
 
Results 
 
In the context of this trading environment, Bellway has delivered another 
robust financial performance, with total revenue expected to grow by over 12% 
to almost GBP1.5 billion.  This has been driven by a 5.6% increase in the number 
of housing completions, which rose to 5,007 (2018 - 4,741), a strong result, in 
part driven by further investment in work in progress. 
 
In addition, the Group achieved a 6.5% rise in the average selling price, which 
rose to GBP293,800 (2018 - GBP275,945).  The increase was mainly driven by previous 
investment in areas of high demand, where average selling prices tend to be 
higher.  In addition, the overall average selling price has been positively 
influenced by a greater number of completions from our flagship development at 
Nine Elms, Battersea.  This site contributed 125 homes (2018 - 53) at an 
average selling price of GBP828,500 (2018 - GBP562,285). 
 
For the full financial year, the Board still expects the average selling price 
to be slightly in excess of GBP290,000 (31 July 2018 - GBP284,937). 
 
The operating margin in the first half of the financial year is expected to 
moderate to around 21.5% (2018 - 22.2%), as the benefit of historical house 
price inflation captured since land acquisition begins to diminish. 
Notwithstanding the continuing reduction in house price inflation, the 
operating margin for the current, full financial year should be maintained at 
around this level (31 July 2018 - 22.1%), followed by further, gradual 
moderation in FY20. 
 
Land buying and financial position 
 
The land market remained attractive throughout the trading period and Bellway 
has continued to selectively acquire sites on terms that meet its minimum 
hurdle rates in respect of gross margin and return on capital employed. 
Accordingly, the Group has contracted to acquire 5,980 plots (2018 - 6,726 
plots) across 45 sites (2018 - 56 sites) at an anticipated gross margin of 
around 24% based on today's selling prices.  The Group has temporarily slowed 
the rate of investment on a number of site acquisitions, pending the outcome of 
the UK's exit from the EU. 
 
Bellway continues to be highly cash generative thereby facilitating continued 
reinvestment in land.  Notwithstanding cash expenditure of some GBP403 million on 
land and land creditors (2018 - GBP403 million), the Group had modest net bank 
debt of GBP26.6 million3 (2018 - GBP131.4 million), representing gearing of around 
1%4 (2018 - 5.7%). 
 
Outlook 
 
Bellway commences its second half trading period in a solid position.  In 
addition to the 12% revenue growth and notwithstanding the 5.6% growth in the 
number of legal completions, the order book is strong, with a value of GBP1,171.3 
million (2018 - GBP1,297.4 million), comprising 4,587 units (2018 - 4,629 units). 
 
This, together with further controlled investment in work in progress should 
ensure that volume output for the full year exceeds last year's record of 
10,307 new homes, although the rate of growth achieved will be determined by 
the strength of the traditionally strong spring selling season.  Early signs 
suggest that customer demand and reservations will follow their usual seasonal 
trend, however, the Board remains cautious given the uncertainty regarding the 
UK's forthcoming exit from the EU and the extent to which this will affect 
wider customer confidence. 
 
Longer term, the underlying requirement for affordably priced new homes remains 
strong.  Bellway is well positioned to capture this demand with its strong 
balance sheet, flexible capital structure and operational capacity to continue 
its strategy of disciplined volume growth. 
 
1        All figures relating to completions, order book, reservations, 
cancellations and average selling price exclude the Group's share of its joint 
ventures. 
 
2        All comparatives are to the prior year equivalent six month period 
ended 31 January 2018 or as at 31 January 2018 ('2018') unless otherwise 
stated. 
 
3        Net bank debt is cash and cash equivalents less bank debt. 
 
4        Gearing is calculated as net bank debt divided by total equity. 
 
FOR FURTHER INFORMATION PLEASE CONTACT: 
 
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, 2019 02:00 ET (07:00 GMT)