Bellway PLC Trading Statement

 
TIDMBWY 
 
Bellway p.l.c. 
 
                   Annual General Meeting and Trading Update 
 
                            Friday 11 December 2020 
 
Bellway p.l.c. ("Bellway" or the "Group") is holding its Annual General Meeting 
today, at 8.30 am and is issuing a Trading Update relating to the 17-week 
period from 1 August 2020 to 29 November 2020. 
 
Highlights 
 
  * There is strong underlying demand for new homes, with a 6% increase in the 
    reservation rate to 210 per week (1 August 2019 to 24 November 2019 - 199 
    per week). 
  * The forward sales position is substantial, with an order book comprising 
    6,186 homes (24 November 2019 - 5,770 homes) and a value of GBP1,766.7 
    million3 (24 November 2019 - GBP1,488.6 million). 
  * Housing completions for the full year to 31 July 2021 are now expected to 
    increase by around 25% (31 July 2020 - 7,522). 
  * The Group has made disciplined investment in high quality land to drive 
    volume and margin recovery in the years ahead, with 4,163 plots contracted 
    (1 August 2019 to 24 November 2019 - 3,229 plots) across 24 sites (1 August 
    2019 to 24 November 2019 - 20 sites) at attractive rates of return. 
  * Strong balance sheet, with net cash of GBP242.9 million2 (24 November 2019 - 
    net bank debt of GBP45.7 million) and substantial capacity to invest further 
    in land.  Land creditors remain low, at around GBP295 million (24 November 
    2019 - GBP242 million). 
  * As previously announced, the Board is recommending a final dividend of 
    50.0p per share in respect of the year ended 31 July 2020 (31 July 2019 - 
    100.0p per share) and expects to increase future dividend payments, 
    commensurate with the recovery in earnings. 
 
Jason Honeyman, Chief Executive, commented: 
 
"Bellway's priority remains the health, safety and wellbeing of our colleagues 
and contractors, whose collective efforts are enabling the Group to proceed 
responsibly along the road to recovery. 
 
Bellway is in a robust position and notwithstanding the recent widespread 
'lockdown' restrictions throughout the country, sales demand is encouraging, 
and the order book is strong.  We have substantial cash resources, considerable 
ability to continue investing in land and with our solid operational structure, 
we are determined to return the Group to its strategy of delivering long-term 
and sustainable growth." 
 
Market and current trading 
 
Consistent with the reintroduction of more widespread 'lockdown' measures 
throughout November, particularly in England, the Group has continued to 
prioritise the safety and wellbeing of our colleagues, customers and supply 
chain partners.  All our selling outlets continue to operate with strict 
COVID-19 safety procedures, and this has enabled them to remain open throughout 
the whole trading period, on an appointment only basis, in line with Government 
guidance.  We also retain a strong online and telephone sales presence. 
 
The lending environment remains generally supportive, although it is still 
taking longer to obtain valuations and progress mortgage applications.  In 
addition, outwith Help-to-Buy, the absence of higher loan-to-value lending 
makes it difficult to access the housing ladder for those with no more than a 
5% deposit.  The transition to the new Help-to-Buy rules has resulted in a 
short-term hiatus in the availability of the scheme, with this resulting in an 
understandable moderating effect on the reservation rate in recent weeks. 
 
Interest rates remain low, aiding affordability and the temporary stamp duty 
holiday continues to provide valuable support to the whole housing market, with 
consequential benefits to the wider economy. 
 
In the context of this overall trading environment, the underlying demand for 
good quality new homes remains encouraging, with reservations averaging 210 per 
week during the period (1 August 2019 to 24 November 2019 - 199 per week), an 
increase of 6% compared to last year.  The cancellation rate remained low at 
just 14% (1 August 2019 to 24 November 2019 - 13%) and the pricing environment 
was firm across the country, with sales prices achieved on reservations in line 
with expectations. 
 
Sales rates were more pronounced at the start of the financial year, given the 
pent-up demand arising from the Spring national 'lockdown'.  As expected, while 
still resilient, the reservation rate slowed during November to an average of 
164 per week (28 October 2019 to 24 November 2019 - 233 per week), a result of 
the reintroduction of more widespread 'lockdown' measures.  This represents a 
decline of 30% compared to the same period last year, during which trading was 
particularly strong.  Visitors to the Bellway website during this same period 
were significantly ahead, a reflection of the strong underlying customer 
sentiment. 
 
Forward sales 
 
The order book is substantial and with the strong sales demand, it has grown by 
18.7% to GBP1,766.7 million3 (24 November 2019 - GBP1,488.6 million).  This 
represents 6,186 homes (24 November 2019 - 5,770 homes), of which 61% are 
contracted. 
 
The robust forward sales position, together with the higher number of 
completions already achieved in the period and our focussed investment in 
work-in-progress, will result in volume output in the current financial year 
being weighted towards the first half trading period.  As a result, the Board 
now expects that the number of homes sold for the half year ending 31 January 
2021 will be similar to the equivalent period in the prior year (31 January 
2020 - 5,321). 
 
Longer term, risks remain with regards to the change in Help-to-Buy and stamp 
duty rules, together with the potential for ongoing economic uncertainty, both 
as a result of the disruption caused by COVID-19, together with the expiry of 
the 'Brexit' transition period on 31 December 2020.  Notwithstanding this, the 
Board is cautiously optimistic and now expects that Bellway will increase 
volume by around 25% for the year ending 31 July 2021 (31 July 2020 - 7,522), 
providing a solid platform for continued growth thereafter, subject to 
continuing market demand. 
 
Land buying and financial position 
 
The positive summer and autumn trading performance has provided reassurance and 
confirmed the strong underlying demand for new homes.  Bellway has therefore 
continued its programme of land acquisition, with our land teams tasked with 
identifying attractive investment opportunities, following a brief pause in the 
prior financial year during the initial national 'lockdown'. 
 
While adopting a disciplined approach, Bellway has contracted to acquire 4,163 
plots (1 August 2019 to 24 November 2019 - 3,229 plots) across 24 high quality 
sites (1 August 2019 to 24 November 2019 - 20 sites), with a contract value of 
GBP184.0 million (1 August 2019 to 24 November 2019 - GBP184.8 million).  The 
average forecast gross margin on land contracted is around 23%, based on 
expected costs and selling prices at the time of entering into the land 
contracts.  The total cash spend on land, including payment of land creditors, 
was GBP176.6 million (1 August 2019 to 24 November 2019 - GBP225.4 million). 
 
The sites acquired are geographically spread across the country and will enable 
Bellway to offer its customers an affordable product, with less reliance on 
Help-to-Buy.  This responsible but front-footed approach to investment will 
contribute to the recovery in both volume and operating margin in the years 
ahead. 
 
Funding and liquidity 
 
The Group has a strong balance sheet, with net cash of GBP242.9 million2 at 29 
November 2020 (24 November 2019 - net bank debt of GBP45.7 million), representing 
an ungeared4 position (24 November 2019 - gearing of 1.5%).  This is in the 
context of committed, undrawn bank facilities of GBP495 million, which expire in 
tranches up to 31 December 2023.  In addition, committed land obligations 
remain low, at around GBP295 million (24 November 2019 - GBP242 million). 
 
While retaining a cautious approach towards gearing, the Group has entered into 
a contractual agreement to issue a sterling US Private Placement ('USPP') for a 
total amount of GBP130 million, as part of its ordinary course of business 
financing arrangements.  Final closing and issuance of the associated notes is 
subject to various closing conditions that are customary for the USPP market. 
It is expected that the debt, which has maturity dates in seven and ten years, 
will be fully drawn from 17 February 2021, and has a weighted average fixed 
coupon of 2.7%.  The financial covenants mirror those already included within 
the Group's existing banking agreements.  The issuance will provide a 
diversified source of finance, securing longer term access to capital as the 
net assets of the Group continue to grow.  Together with the committed bank 
facilities, the USPP will provide Bellway with significant capacity to invest 
in compelling land opportunities that meet or exceed its minimum financial 
acquisition criteria. 
 
Dividend 
 
The proposed final dividend of 50.0p per share (31 July 2019 - 100.0p), if 
approved at today's AGM, will be paid to shareholders on 8 January 2021.  The 
Group is in a resilient position, with a robust balance sheet, strong order 
book and a well-established operating structure.  The Board is therefore 
optimistic that it will be able to increase future dividend payments, 
commensurate with the recovery in earnings. 
 
A Trading Update will be issued on Tuesday 9 February 2021 following the 
conclusion of the six-month trading period ending 31 January 2021. 
 
1    All figures relating to completions, order book, reservations, 
cancellations and average selling price exclude the Group's share of its joint 
ventures. 
 
2    Net cash is cash plus cash equivalents, less bank debt. 
 
3    Order book is the total expected sales value of reservations that have not 
legally completed. 
 
4    Gearing is net bank debt divided by total equity. 
 
For further information, please contact: 
 
Bellway p.l.c. 
 
Jason Honeyman, Group Chief Executive 
 
0191 217 0717 
 

Keith Adey, Group Finance Director 
 
0191 217 0717 
 
Media enquiries 
 
Paul Lawler, Group Head of Communications 
 
[e-mail] 
 
07813 392 669 
 
Smithfield 
 
Ged Brumby 
 
[e-mail] 
 
07540 412 301 
 
Rob Yates 
 
[e-mail] 
 
07715 375 443 
 
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

December 11, 2020 02:00 ET (07:00 GMT)