Bellway PLC Trading Update

 
TIDMBWY 
 
Bellway p.l.c. 
 
                                Trading Update 
 
                            Wednesday 8 August 2018 
 
Bellway is today issuing a trading update for the year ended 31 July 2018 ahead 
of its preliminary results announcement on Tuesday 16 October 2018. 
 
Highlights 
 
  * Bellway has broken through the 10,000 homes barrier for the first time in 
    its history, completing the sale of 10,307 new residential dwellings (2017 
    - 9,644 homes), an increase of 6.9%. 
 
  * Substantial revenue growth of around 16% to almost GBP3 billion (2017 - GBP 
    2,558.6 million), together with an anticipated operating margin of around 
    22% (2017 - 22.3%), should lead to another year of significant earnings 
    growth. 
 
  * Strong sales demand during the year, with a 7.0% increase in the 
    reservation rate to 200 per week (2017 - 187 per week). 
 
  * The growth in volume has been achieved whilst maintaining a sizeable 
    forward order book, comprising 4,841 homes (2017 - 4,749 homes). 
 
  * Strong balance sheet with net cash of GBP99 million (2017 - GBP16.0 million), 
    provides the Group with financial strength and flexibility. 
 
Jason Honeyman, Chief Executive, commented: 
 
"Bellway has responded positively to the favourable market conditions, 
completing the sale of over 10,000 new homes for the first time in its history, 
whilst retaining a clear focus on quality and customer care.   In doing so, the 
Group has set a new earnings record and yet, having invested significantly in 
land, has ended the year with a strong net cash position.  Trading has been 
robust and notwithstanding wider political and economic uncertainty in the UK, 
Bellway has both the financial and operational strength to respond 
opportunistically to future changes in market conditions." 
 
Market and current trading 
 
There remains an underlying requirement for additional, good quality and 
affordably priced new housing.  This is supported by the availability of Help 
to Buy and an environment of low interest rates, which despite the recent Bank 
of England decision, remain close to a historically low level. 
 
The Group has taken an average of 200 reservations per week (2017 - 187 per 
week) throughout the year, an increase of 7.0%.  As previously reported, 
trading in the first half of the financial year was particularly strong, driven 
by a continued programme of site openings.  The sales rate since 1 February has 
followed the usual seasonal pattern, increasing to 222 reservations per week 
(2017 - 209 per week), and a year-on-year rise of 6.2%.  Over the same second 
half trading period, the Group achieved a private reservation rate of 168 per 
week (2017 H2 - 168 per week), a robust performance given the strength of the 
comparator period, during which private reservations were 16.7% ahead of the 
equivalent six months in the year before last. 
 
The pricing environment is stable, with many sites still able to achieve low, 
single digit increases, predominantly for affordably priced homes, located in 
areas of strong demand.  As the year has progressed, the rate of house price 
inflation has moderated.  In addition, higher value homes across the country 
have, at times, experienced slower sales rates and occasionally required a 
greater use of incentives, albeit the Group has intentionally limited its 
exposure at this upper end of the market. 
 
Notwithstanding the more moderate rate of house price growth, cost increases 
across the Group are still being offset by house price gains.  Nevertheless, 
the net inflationary enhancement to the margin, which has augmented results 
over recent years, is beginning to abate. 
 
Overall, trading conditions are favourable and customer confidence appears 
robust, with this reflected in the cancellation rate, which remains low at just 
11% for the full year (2017 - 11%). 
 
Results 
 
In the context of this trading environment, Bellway has grown total revenue by 
around 16% to a record of almost GBP3 billion (2017 - GBP2,558.6 million).  In 
achieving this growth, the Group has completed the sale of 10,307 new homes 
(2017 - 9,644 homes), an increase of 663 compared to the prior financial year 
and broadly equivalent to the output of an additional, mature operating 
division.  The proportion of private completions rose to 80% of the total (2017 
- 78%) and this has had a positive influence on the overall average selling 
price, which rose by around 9.4% to a new high of GBP284,900 (2017 - GBP260,354). 
The Board expects there to be further, more moderate growth in the average 
selling price in the year ahead. 
 
As previously reported, the operating margin for the full financial year is 
expected to be around 22% (2017 - 22.3%) and this, together with the rise in 
revenue, will result in substantial full year earnings growth. 
 
Land buying and financial position 
 
The land market remains favourable and continues to provide attractive 
opportunities.  We remain selective and disciplined in our approach to land 
buying, using return on capital employed as a key assessment metric. 
Accordingly, the Group has contracted to purchase 12,962 plots (2017 - 11,613 
plots) across 100 sites (2017 - 97 sites), with a focus on acquiring land in 
desirable locations with high demand, where the product is affordable in the 
context of localised market conditions.  On average, the land acquired is 
expected to achieve a gross margin of around 24%, based on an assessment of 
selling prices and costs at the time of acquisition. 
 
In addition to this land buying activity, and as a result of the efforts of our 
planning teams with regards to a number of previously owned sites, the Group 
now has detailed planning permission in place on all plots that are expected to 
contribute to next year's anticipated growth target. 
 
Notwithstanding cash expenditure of some GBP784 million on land and land 
creditors (2017 - GBP655 million), the Group ended the year with net cash of GBP99 
million2 (2017 - GBP16.0 million). 
 
Outlook 
 
In addition to the strong growth in the number of completions, the Group has 
maintained a sizeable forward order book at 31 July, comprising 4,841 homes 
(2017 - 4,749 homes), with a value of GBP1,301.1 million (2017 - GBP1,296.3 
million).  This solid position should enable the Group to deliver further, more 
moderate growth in the year ahead. 
 
Bellway retains an ability to be agile and respond positively to opportunities 
as they arise.  Provided market conditions continue to remain attractive, the 
Group has the operational and financial strength to further expand the 
divisional network, thereby supporting additional growth in the years ahead. 
 
 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. 
 
FOR FURTHER INFORMATION PLEASE CONTACT: 
 
JASON HONEYMAN, 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

August 08, 2018 02:00 ET (06:00 GMT)