Bellway PLC Trading Update

 
TIDMBWY 
 
Bellway p.l.c. 
 
                                Trading Update 
 
                             Tuesday 12 June 2018 
 
Bellway is today issuing a trading update in respect of the period from 1 
February to 3 June 2018. 
 
Highlights 
 
  * For the full year, anticipated volume growth of around 600 homes should 
    enable the Group to complete the sale of in excess of 10,000 homes for the 
    first time in its history. 
 
  * In addition, an expected average selling price in excess of GBP280,000 and an 
    anticipated operating margin of around 22%, should contribute to another 
    year of substantial earnings growth. 
 
  * A responsible, sustainable and customer focussed approach to growth has 
    resulted in Bellway maintaining its status as a five star housebuilder2 for 
    the second year in succession. 
 
  * Market conditions remain favourable, with the Group achieving a 5.4% 
    increase in the reservation rate in the period to 233 per week (2017 - 221 
    per week). 
 
  * The forward sales position is excellent, with the value of the order book 
    7.8% ahead at GBP1,703 million (4 June 2017 - GBP1,580 million). 
 
  * Substantial investment in land, with GBP678 million spent on land and land 
    creditors since 1 August (2017 - GBP586 million), securing future growth at 
    attractive rates of return. 
 
John Watson, Executive Chairman, commented: 
 
"This has been another successful trading period for Bellway, in which the 
demand for new build homes remained strong, enabling the Group to continue 
delivering its long term and sustainable strategy of increasing shareholder 
value through responsible volume growth.  We have retained our status as a five 
star housebuilder2 and reservations are ahead of the same period in the 
previous financial year.  For the full year, Bellway is on target to complete 
the sale of in excess of 10,000 homes for the first time in its history and in 
doing so, achieve another record year of earnings.  Furthermore, we have 
invested a substantial amount in new land, laying the foundations for further 
growth, beyond this financial year." 
 
Market and current trading 
 
The underlying requirement for new homes remains robust and is supported by 
favourable, stable market conditions and the continued availability of Help to 
Buy.  Demand is most pronounced for affordably priced family homes countrywide, 
with divisions operating in locations as dispersed as Scotland, Essex and the 
Midlands all continuing to show strong performance. 
 
The pricing environment is firm, with many sites reporting modest, single digit 
price rises, although the rate of increase has moderated compared to last 
year.  In certain areas, where affordability is a greater constraint, customer 
interest is less pronounced for particularly large or higher priced homes. 
Accordingly, the use of incentives, whilst low by historical standards, is 
generally focussed towards more expensive properties, where sales rates can be 
slower. 
 
Since 1 February, notwithstanding the period of inclement weather in early 
March, the Group has achieved 233 reservations per week (2017 - 221 per week), 
an increase of 5.4% from an average of 251 active outlets (2017 - 235).  This 
is a good performance, particularly given the strength of the comparator 
period, during which reservations were almost 13% ahead of the equivalent 
period in the year before last.  Overall, customer confidence remains strong 
and the cancellation rate is low, at only 11% (2017 - 11%). 
 
The Group is committed to delivering growth in a sustainable and responsible 
manner and retains a focus on build quality, customer care and health and 
safety.  For the second year in succession, Bellway has maintained its status 
as a five star housebuilder2, reflecting our commitment to delivering a high 
quality product.  In addition, eleven of our site managers have recently 
received NHBC health and safety commended awards, which recognise their success 
in this important area.  Proportionate to volume output, this record 
performance represents the highest number of awards of any national 
housebuilder. 
 
Land buying and financial position 
 
The land market continues to provide an ample supply of opportunities at 
attractive margins and healthy rates of return on capital employed.  Good 
quality sites continue to be identified across the country, however, in order 
to maintain strict capital disciplines, activity in London is focussed on the 
more affordable end of the market.  Proposals to acquire new sites are 
carefully appraised to ensure the product mix is appropriate for the location 
and the financial assumptions are robust. 
 
In the period since 1 August, the Group has spent GBP678 million (2017 - GBP586 
million) on land and land creditors.  The average gross margin on land 
contracted over the same period is expected to be in excess of 24%, based on 
anticipated selling prices and costs at the time of acquisition.  Bellway has 
land in place, with the benefit of detailed planning permission, to meet next 
year's volume growth aspirations.  In addition, the Group has agreed heads of 
terms and instructed solicitors on the purchase of a further 6,800 plots. 
 
At 3 June, the Group had net bank debt of GBP278 million3 (4 June 2017 - GBP317 
million), representing modest gearing of approximately 11%4 (4 June 2017 - 
15%).  In accordance with previous guidance, the Group is expected to end the 
year with net cash of around GBP50 million, depending upon the timing of land 
opportunities. 
 
Outlook 
 
The Board expects completions for the year ending 31 July 2018 to exceed those 
achieved last year by around 600 units.  This forecast volume growth, together 
with the previously reported rise in the average selling price, which is 
expected to be in excess of GBP280,000 and an anticipated operating margin of 
around 22% (31 July 2017 - 22.3%), should result in Bellway achieving another 
year of substantial earnings growth. 
 
In addition, the value of the order book at 3 June is 7.8% ahead at GBP1,703 
million (4 June 2017 - GBP1,580 million) and comprises 6,144 homes (4 June 2017 - 
5,819 homes), of which 67% are contracted.  This should contribute to further 
growth in both this year and in the next financial year.  Beyond that, Bellway 
still has potential to expand the existing divisional structure, thereby 
continuing its long term and disciplined strategy of enhancing value for 
shareholders through volume growth, provided market conditions remain 
supportive. 
 
1    All figures relating to completions, order book, reservations, 
cancellations and average selling price exclude the Group's share of its joint 
ventures. 
 
2    As measured by the Home Builders' Federation Customer Satisfaction survey. 
 
3    Net bank debt is cash plus 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

June 12, 2018 02:00 ET (06:00 GMT)