Bellway PLC Trading Update
05 August 2016 - 4:00PM
UK Regulatory
TIDMBWY
Bellway p.l.c.
Trading Update
Friday 5 August 2016
Bellway is today issuing a trading update for the year ended 31 July 2016 ahead
of its preliminary results announcement on Tuesday 18 October 2016.
Highlights
* Housing revenue is expected to increase by around 27% to GBP2.2 billion (2015
- GBP1,735.1 million).
* Further volume growth with a 12.5% increase in the number of housing
completions to 8,721 (2015 - 7,752).
* A record pre-exceptional operating margin[1], which is expected to rise by
around 150 basis points to approach 22%.
* A substantial forward order book comprising 4,644 homes (2015 - 4,568
homes) with a value of GBP1,117.1 million (2015 - GBP1,087.9 million) provides
a solid foundation for the next financial year.
* Strong balance sheet with net cash of GBP26 million (2015 - net bank debt of
GBP38.5 million).
[1] Pre disposal of Barking Riverside which is treated as an exceptional item
and is excluded from operating profit.
Ted Ayres, Chief Executive, commented:
"The Group has delivered an outstanding trading performance, achieving new
records for Bellway in respect of both volume and operating margin. We have
invested in high quality land and have maintained a significant forward order
book, thereby ensuring that the Group is well placed to continue its sizeable
contribution to meeting the UK's requirement for new homes in the year ahead.
It is still too early to assess the effect of the EU referendum result, however
trading in recent weeks has been encouraging and Bellway, with its strong
balance sheet and robust land bank, can be flexible and respond
opportunistically to any changes in market conditions."
Market and current trading
Customer confidence and trading conditions have remained strong throughout the
year, notwithstanding the wider economic uncertainty in the weeks preceding and
following the EU referendum, in late June. This has been supported by an
environment of low interest rates and the continued presence of Help to Buy,
contributing to good availability of affordable mortgages.
The Group has taken an average of 169 reservations per week (2015 - 153 per
week), an increase of over 10% compared to last year. Since the result of the
EU referendum, there has been some modest caution from a small number of
visitors to our developments at the higher value end of the London market,
where Bellway has only limited exposure. Overall, visitor numbers are still
strong and the cancellation rate remains at a historic low.
Bellway has continued with its plans to open a nineteenth trading division in
Durham, utilising land and reallocating internal resources, primarily from our
very successful neighbouring North East division, which was previously
operating at full capacity. The new division opened on 1 August and will
provide the Group with an ability to deliver additional output at minimal extra
overhead, thereby ensuring Bellway is well placed to cost effectively deliver
its long term growth strategy.
Results
The Group completed the sale of 8,721 homes (2015 - 7,752), an increase of
12.5% compared to last year's record. The average selling price of completions
rose by almost 13% to GBP252,700 (2015 - GBP223,821), influenced in part by a lower
proportion of social housing completions, which represented 16% of the total
(2015 - 20%). As a result of the growth in volume and average selling price,
housing revenue has risen by around 27% to GBP2.2 billion (2015 - GBP1,735.1
million).
In line with previous guidance, the pre-exceptional operating margin is
expected to rise by around 150 basis points to approach 22%. This excludes the
benefit of the GBP17.3 million exceptional profit arising on the disposal of the
Group's interest in Barking Riverside.
Notwithstanding the rapid rate of growth, this record operating performance has
been achieved whilst maintaining a focus on quality, with 43 of the Group's
site managers awarded NHBC Pride in the Job Awards (2015 - 33), the highest
number Bellway has ever achieved.
Land buying and financial position
The land market has remained attractive throughout the year and Bellway has
therefore continued to selectively acquire those sites that meet its minimum
hurdle rates in respect of gross margin and return on capital employed.
Accordingly, the Group has contracted to acquire 9,555 plots (2015 - 9,128)
across 88 sites (2015 - 88 sites). Following the EU referendum result, the
Group is proceeding cautiously with a number of site acquisitions pending the
outcome of the Autumn selling season.
Notwithstanding cash expenditure of some GBP670 million on land and land
creditors (2015 - GBP620 million), the Group ended the year with net cash of GBP26
million (2015 - net bank debt of GBP38.5 million).
Outlook
Whilst it is too early to determine the extent to which the EU referendum may
have an effect on longer term customer confidence, the underlying demand for
new homes remains strong, supported by lenders' willingness to provide ongoing
access to affordable mortgage finance.
Bellway is in a solid position and has built up a healthy forward order book
comprising 4,644 homes (2015 - 4,568 homes) at a value of GBP1,117.1 million
(2015 - GBP1,087.9 million), with this increase achieved whilst also delivering
significant volume growth. Together with a strong balance sheet and an
expanding structure of nineteen trading divisions, this ensures that Bellway
retains the flexibility and operational capacity to adapt to changes in market
conditions. If required, the Group can moderate the rate of land investment in
the short term to preserve maximum value for shareholders. Notwithstanding
this, the Group is well placed to continue its long term growth strategy,
whilst maintaining a focus on return on capital employed.
FOR FURTHER INFORMATION PLEASE CONTACT:
TED AYRES, 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
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