TIDMBWY
RNS Number : 6724O
Bellway PLC
14 June 2022
Bellway p.l.c.
Trading update
Tuesday 14 June 2022
Bellway p.l.c. ("Bellway" or the "Group") is today issuing a
trading update in respect of the period from 1 February to 5 June
2022.
Highlights
-- Strong sales demand in the period, with an average of 253
reservations per week (2021 - 239 per week, 2020 - 158 per week),
an increase of 5.9% compared to the equivalent period in the prior
year.
-- Ongoing positive price momentum continues to offset build
cost inflation.
-- Further investment in high quality land opportunities, with
13,496 plots(7) contracted since 1 August (2021 - 16,582 plots,
2020 - 10,079 plots), secures a platform for growth at attractive
rates of return in the years ahead.
-- Strong balance sheet and net cash of GBP160 million(2) (6
June 2021 - net cash of GBP408 million, 31 May 2020 - net debt of
GBP157 million) provides financial resilience and capacity to
invest for further growth.
-- As announced at the Interim Results, the interim dividend has
been increased to 45.0p per share (2021 - 35.0p, 2020 - nil), and
will be paid on Friday 1 July 2022.
-- Recognition as a five-star(5) homebuilder for the sixth
consecutive year. The appointment of a new Customer Experience
Director further cements our commitment to our Customer First
approach.
-- Substantial forward sales position, with the value of the
order book rising by 27.3% to GBP2,404 million(3) (6 June 2021 -
GBP1,889 million, 31 May 2020 - GBP1,568 million) and comprising
8,152 homes (6 June 2021 - 6,763 homes, 31 May 2020 - 6,038
homes).
-- Consistent with previous guidance, housing completions for
the full year are still expected to grow by around 10% to more than
11,100 homes (31 July 2021 - 10,138 homes, 31 July 2020 - 7,522
homes) at an anticipated average selling price in excess of
GBP305,000 (31 July 2021 - GBP306,479, 31 July 2020 - GBP293,054).
The underlying operating margin is expected to be around 18.5%(6)
(31 July 2021 - 17.0%, 31 July 2020 - 14.5%).
Jason Honeyman, Group Chief Executive, commented:
"Bellway has delivered another strong trading performance and
despite the wider macroeconomic uncertainty, the Group continues to
perform well. Demand is strong, reservations are ahead of last year
and our order book remains substantial. Customer satisfaction is
high and we enjoy continued success as a five-star(5) homebuilder,
as recognised in the HBF's Customer Satisfaction survey.
"The positive sales market and the further investment we have
made in land provides a strong platform to enable the Group to
continue its growth strategy in the years ahead."
Market and current trading
The demand for our high-quality new homes remains strong,
supported by our well-designed, locally elevated 'Artisan
Collection' product range and our continued investment in land in
popular locations. The pricing environment is favourable and
although modest interest rate rises and increasing fuel costs are
contributing to a rise in the cost of living, our affordable and
energy efficient new homes provide an attractive proposition for
customers.
Since 1 February, the overall reservation rate rose by 5.9% to
an average of 253 per week (2021- 239 per week, 2020 - 158 per
week). The average private weekly reservation rate was 198 per week
(2021 - 193 per week, 2020 - 120 per week), an increase of 2.6%,
with this achieved from an average of 240 outlets (2021 - 266).
Customer confidence is strong and the cancellation rate since 1
August remains low at 13% (2021 - 13%, 2020 - 15%).
Although the reservation rate has increased, the utilisation of
Help-to-Buy continues to fall, having been used by customers in 16%
of transactions (2021 - 22%, 2020 - 39%), with uptake most
pronounced on apartment schemes in, and around, London, where the
Group has reduced its exposure over recent years. While
comparatively more expensive, the availability of responsible,
higher loan-to-value mortgage lending is gradually improving. This,
together with expected outlet growth in the next financial year,
will help to mitigate the withdrawal of Help-to-Buy for completions
beyond March 2023.
The continued positive trading conditions have led to a further
strengthening of our already substantial forward order book, which
has risen in value by 27.3% to GBP2,404 million(3) (6 June 2021 -
GBP1,889 million, 31 May 2020 - GBP1,568 million) and comprises
8,152 homes (6 June 2021 - 6,763 homes, 31 May 2020 - 6,038 homes).
This strong forward sales position supports further investment in
work-in-progress and underpins our previously announced growth
ambitions in respect of this financial year and next.
Production and cost control
As noted at the time of our Interim Results, cost issues persist
across the wider sector, with rising energy prices, global supply
chain constraints and increasing wage costs all resulting in upward
pressure. Overall, build cost inflation has been offset by house
price gains and we expect this trend to continue, with our strong
forward sales position supporting our drive to optimise prices on
future reservations.
Concerns with regards to material availability have generally
eased over the course of this calendar year, although there can
remain ad hoc shortages at a regional level, with bricks, blocks
and roof tiles often on extended lead-in times. Good on-site
disciplines and familiarity with our standard house type range help
to ease these production constraints. We are also working
collaboratively with our subcontractors and suppliers to manage
supply chain volatility and challenges to construction
programmes.
Further investment in land supports growth
Bellway has continued its programme of land investment and our
experienced land teams have contracted to acquire some 13,496
plots(7) since 1 August 2021 (2021 - 16,582 plots, 2020 - 10,079
plots), across 76 sites(7) (2021 - 94 sites, 2020 - 56 sites), at
attractive rates of return. The value of those plots contracted is
GBP926 million(7) (2021 - GBP923 million, 2020 - GBP651 million)
and the average gross margin, based upon revenue and cost at the
time of acquisition, is around 23%.
The planning system remains slow, constrained by a COVID related
backlog, with this continuing to have a dampening effect on outlet
openings across the wider sector. Notwithstanding this, Bellway's
strengthened land bank, arising from our proactive, yet disciplined
investment in land over the past 24 months, is expected to lead to
growth in outlet numbers in the next financial year.
Financial position
As at 5 June, the Group had net cash of GBP160 million(2) (6
June 2021 - net cash of GBP408 million, 31 May 2020 - net debt of
GBP157 million), representing an ungeared(4) position (6 June 2021
- ungeared, 31 May 2020 - gearing of 5%). The Board expects Bellway
to end the year with net cash of around GBP200 million(2) (31 July
2021 - GBP330.3 million, 31 July 2020 - GBP1.4 million), depending
upon the timing of land opportunities.
As announced at the Interim Results, in addition to supporting
ongoing growth, our strong balance sheet has facilitated a 28.6%
increase in the interim dividend to 45.0p per share (2021 - 35.0p,
2020 - nil), and this will be paid on Friday 1 July 2022.
Putting customers first
As previously reported, we are delighted to have retained our
status as a five-star(5) homebuilder for the sixth consecutive
year, with 93.6% of customers stating that they would recommend a
Bellway product to a friend, when responding to the HBF's Customer
Satisfaction survey, eight weeks after their moving date.
We have recently appointed a new Customer Experience Director,
whose task is to further enhance the customer journey, from the
initial reservation process, right through to the post-completion
service that we offer.
More broadly, we welcome the introduction of the New Homes
Ombudsman later this calendar year and believe this will contribute
to a further improvement in standards across the industry.
Building safety
Bellway has always taken its responsibilities seriously with
regards to building safety, having previously commenced a programme
of remediation works to deal with historical building safety
issues. In that regard, since 2017 and up to 31 January 2022, the
Group has already set aside a total of GBP186.8 million, in
relation to apartment buildings over 11 metres in height, which
were generally built within our 10-to-12 year warranty period.
On 7 April 2022, we announced that this commitment would be
extended to include buildings constructed by the Group since 5
April 1992 and further pledged to reimburse any costs incurred to
date by the Building Safety Fund and the ACM Fund. Our estimate of
the cost of these additional commitments remains unchanged at
around GBP300 million, in addition to the GBP186.8 million already
set aside since 2017.
The additional cost is significant and, notwithstanding that all
buildings secured regulatory consent at the time of construction,
it demonstrates our comprehensive and responsible approach towards
building safety. The amount is expected to be recognised as an
adjusting item for the year ending 31 July 2022 and is in addition
to our contribution to the Residential Property Developer Tax,
which is broadly charged at 4% of taxable profits from April
2022.
We have appointed a Managing Director to lead our new Building
Safety division, whose remit includes the proficient remediation of
legacy schemes, in a cost-effective manner. This division will be
separately resourced so as not to detract from day-to-day
operations and growth prospects elsewhere in the Group.
Outlook
As a result of the ongoing strong trading performance and in
line with previous guidance, the Board continues to expect the
Group to deliver volume growth of around 10% this year, to over
11,100 homes (31 July 2021 - 10,138 homes, 31 July 2020 - 7,522
homes). The average selling price is expected to be over GBP305,000
(31 July 2021 - GBP306,479, 31 July 2020 - GBP293,054) and the
underlying operating margin is expected to be around 18.5%(6) (31
July 2021 - 17.0%, 31 July 2020 - 14.5%). In addition, the Board
still expects the Group to deliver further volume growth, in
financial year 2023, to an annual output of around 12,200
homes.
More broadly, and while recognising the macroeconomic risks,
Bellway is in a robust position. It benefits from a substantial
order book, a strengthened land bank and a well-capitalised balance
sheet. Bellway's responsible approach to business will continue to
benefit our stakeholders over the longer term and ensures that the
Group is well placed to generate further value for shareholders 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/debt is cash plus cash equivalents, less debt financing.
3 Order book is the total expected sales value of reservations that have not legal completed.
4 Gearing is net debt divided by total equity.
5 As measured by the Home Builders' Federation using the eight
week NHBC Customer Satisfaction survey.
6 The underlying operating margin is the operating profit
(before net legacy building safety expense) divided by total
revenue.
7 Includes the Group's share of land contracted through joint
venture partners comprising nil plots (2021 - 600 plots, 2020 - 203
plots), with a contract value of GBPnil (2021 - GBP32.7 million,
2020 - GBP15.3 million) across no sites (2021 - one site, 2020 -
one site).
For further information, please contact:
Bellway p.l.c.
Jason Honeyman, Group Chief Executive
0191 217 0717
Keith Adey, Group Finance Director
0191 217 0717
Media enquiries
Paul Lawler, Group Head of Communications
paul.lawler@bellway.co.uk
07813 392 669
Ged Brumby, Edelman Smithfield
ged.brumby@edelmansmithfield.com
07540 412 301
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.
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