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 £3 billion
(2017 – £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 £99 million (2017 – £16.0
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 £3 billion (2017
– £2,558.6 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 £284,900 (2017 – £260,354). 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 £784 million on land
and land creditors (2017 – £655 million), the Group ended the year
with net cash of £99 million2 (2017 – £16.0
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
£1,301.1 million (2017 – £1,296.3 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.
-
All figures relating to completions, order book, reservations,
cancellations and average selling price exclude the Group’s share
of its joint ventures.
-
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.