Bellway PLC Trading Update

 
TIDMBWY 
 
Bellway p.l.c. 
 
                                Trading Update 
 
                           Thursday 8 February 2018 
 
Bellway p.l.c. is today issuing a trading update for the six months ended 31 
January 2018 ahead of its interim results announcement on Tuesday 20 March 
2018. 
 
Highlights 
 
  * Housing revenue is expected to rise by in excess of 14% to around GBP1.3 
    billion (2017 - GBP1,142.9 million). 
 
  * Further volume growth, with a 6.3% rise in the number of housing 
    completions to 4,741 (2017 - 4,462). 
 
  * The average selling price has risen by almost 7.8% to a record GBP276,000 
    (2017 - GBP256,140). 
 
  * A 7.2% rise in the weekly reservation rate has contributed to a strong 
    forward sales position, with the value of the forward order book growing by 
    15.7% to GBP1,297 million (2017 - GBP1,121 million). 
 
  * Significant investment in land with 6,726 plots contracted (2017 - 6,287 
    plots) on sites with attractive rates of return, supporting the Group's 
    continued growth ambitions. 
 
John Watson, Executive Chairman, commented: 
 
"Bellway is continuing to make a sizeable contribution to the supply of much 
needed new homes and has delivered a further increase in both volume and 
average selling price in the six month trading period.  Significant investment 
in land, together with ongoing plans to expand the divisional structure, should 
lead to a further increase in output and hence result in additional value 
creation for our shareholders." 
 
Market conditions and trading 
 
Market conditions continue to be favourable and customer demand for new homes 
remains strong.  Notwithstanding the modest increase in the Bank of England 
base rate in November, mortgage rates remain low by historical standards, 
ensuring that the cost of financing a new Bellway home remains affordable. 
This, together with positive Government support, including new measures such as 
SDLT relief for most first time buyers, continues to provide financial support 
to purchasers and hence improve accessibility to mortgage finance. 
 
In this positive trading environment, interest from customers remains high, 
with website traffic and visitors to sales outlets both ahead of last year. 
Reservations have followed their usual seasonal trend, with the quieter, albeit 
positive, summer period followed by an increase in activity over the autumn 
months.  The Group has taken 178 reservations per week (2017 - 166), an 
increase of 7.2% compared to the same period last year and the cancellation 
rate, a barometer of customer confidence, remains low at under 11% (2017 - 
under 12%). 
 
Results 
 
The number of homes legally completed rose by 6.3% to 4,741 (2017 - 4,462), 
with all geographic regions in which the Group operates performing well.  The 
average selling price of homes sold rose by almost 7.8% to GBP276,000 (2017 - GBP 
256,140), principally as a result of investment in higher value locations 
throughout the country, where stronger demand and robust pricing has influenced 
land acquisition over recent years.  In addition, the overall average selling 
price has been further enhanced by the completion of 53 homes (2017 - nil) from 
our flagship development at Nine Elms in Battersea, where the average selling 
price in the period was GBP562,000. 
 
For the full financial year, continued changes in mix, together with the 
further contribution of higher value apartments at Nine Elms, should mean that 
the overall average selling price will rise to in excess of GBP280,000 (31 July 
2017 - GBP260,354). 
 
As a result of the strong trading performance, housing revenue for the six 
months ended 31 January is expected to increase by over 14% to around GBP1.3 
billion (2017 - GBP1,142.9 million).  The operating margin for the first half of 
the year is expected to rise, to slightly above 22% (2017 - 22.0%), and the 
Group should be able to achieve an operating margin of around 22% for the full 
financial year (31 July 2017 - 22.3%), provided that current market conditions 
continue. 
 
Further investment to secure future growth 
 
The land market remains appealing and the Group has had a very successful 
period identifying further good quality opportunities at attractive rates of 
return.  To that extent, Bellway has contracted to acquire 6,726 plots (2017 - 
6,287 plots), with a total value of GBP401 million (2017 - GBP405 million), across 
56 sites (2017 - 52 sites).  The anticipated gross margin on those sites 
contracted is expected to be in excess of 24%, based on today's selling prices. 
 
The prospect for further investment in additional, good quality land remains 
strong and the Group has a strong future pipeline of potential acquisitions, 
with heads of terms agreed on some 5,750 plots (2017 - 5,300 plots).  All sites 
owned by the Group are being actively progressed through the planning system in 
order that construction can commence as quickly as possible and Bellway can 
continue increasing its output of new homes. 
 
Financial position 
 
The balance sheet remains strong, with net bank debt3 of GBP131 million (2017 - GBP 
175.1 million), representing modest gearing4 of under 6% (2017 - 8.9%).  In 
accordance with the usual seasonal trading pattern, net bank debt3 is expected 
to reduce by the end of the financial year. 
 
Outlook 
 
As a result of the strong trading performance, the forward order book, 
comprising 4,629 homes (2017 - 4,487 homes), has risen in value by 15.7% to GBP 
1,297 million (2017 - GBP1,121 million).  Whilst growth this financial year will 
in part be determined by the outcome of the spring selling season, given the 
strength of the forward order book, the Board expects that the Group will be 
able to replicate the rate of volume growth achieved in the first half and in 
doing so, complete the sale of around an additional 600 homes for the year 
ending 31 July 2018. 
 
Beyond this year, whilst the exit from the EU provides a degree of uncertainty 
across the wider economy, the fundamental parameters supporting the housing 
market remain strong.  Previously announced plans to open a new twentieth 
division, located in Scotland, are progressing well and in addition, the Board 
continues to appraise expansion opportunities in other areas of the country. 
Provided capital can be invested in areas of strong demand, Bellway is well 
placed to deliver additional volume growth beyond this financial year, both 
from its existing structure and through the opening of new divisions. 
 
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 2017 or as at 31 January 2017 ('2017') 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: 
 
JASON HONEYMAN, CHIEF OPERATING OFFICER 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 08, 2018 02:00 ET (07:00 GMT)