TIDMBWY
RNS Number : 7412T
Bellway PLC
17 October 2017
National housebuilder Bellway announces today, Tuesday 17
October 2017, its preliminary results for the year ended 31 July
2017.
Highlights
Operational strength delivers further growth and shareholder
returns
Year ended Year ended Movement
31 July 31 July
2017 2016
Revenue GBP2,558.6m GBP2,240.7m +14.2%
Gross profit GBP661.6m GBP574.8m +15.1%
Gross margin 25.9% 25.7% +20bps
Operating profit GBP571.6m GBP492.0m +16.2%
Operating margin 22.3% 22.0% +30bps
Profit before taxation GBP560.7m GBP497.9m +12.6%
Earnings per share 370.6p 328.7p +12.7%
Proposed total dividend per share 122.0p 108.0p +13.0%
Excellent financial performance
-- Another year of volume growth, with the number of completions
rising by 10.6% to a record 9,644 homes (2016 - 8,721),
significantly contributing to the increase in operating profit,
which rose by 16.2% to GBP571.6 million (2016 - GBP492.0
million).
-- Earnings per share ('EPS') has risen by 12.7% to 370.6p (2016
- 328.7p) and this has facilitated a 13.0% rise in the proposed
total dividend per share to 122.0p (2016 - 108.0p).
-- Strong capital disciplines resulted in return on capital
employed ('RoCE') being maintained at a high level of 27.6%(1)
(2016 - 28.2%), notwithstanding the significant investment made in
land and work in progress in order to deliver future growth.
-- Strong balance sheet with net cash of GBP16.0 million(1)
(2016 - GBP26.5 million).
Strong operational focus
-- The Group contracted to acquire 11,613 plots (2016 - 9,555
plots), securing an excellent foundation upon which to facilitate
future volume growth.
-- A focus on customer care has resulted in Bellway regaining
its status as a five star homebuilder(3) , one of only two
mainstream national housebuilders to achieve this accolade.
-- A responsible and sustainable approach to growth, with an
emphasis on quality, has resulted in our site managers being
awarded ten Health and Safety Awards (2016 - five) and 49 Pride in
the Job Awards (2016 - 43) by the NHBC, recognising their success
in these important areas.
Positive current trading and outlook
-- The order book at 1 October 2017 has grown by 17.4% to
GBP1,361.5 million (2 October 2016 - GBP1,159.3 million) and
comprises 5,034 homes (2 October 2016 - 4,701 homes).
-- The outlook remains positive and the Board expects the Group
to grow volume by at least 5% and the overall average selling price
to increase to around GBP280,000 in the current financial year.
(1) Bellway uses a range of statutory performance measures and
alternatives performance measures when reviewing the performance of
the Group against its strategy. Definitions of the alternative
performance measures, and a reconciliation to statutory performance
measures, are included in note 11.
(2) All figures relating to completions, order book,
reservations, cancellations and average selling price exclude the
Group's share of its joint ventures.
(3) As measured by the Home Builders' Federation Customer Satisfaction survey.
FOR FURTHER INFORMATION, PLEASE CONTACT KEITH ADEY, FINANCE
DIRECTOR OR JASON HONEYMAN, CHIEF OPERATING OFFICER FROM TUESDAY 17
OCTOBER - FRIDAY 20 OCTOBER ON 0191 217 0717.
Executive Chairman's Statement
Introduction
The Group, comprising nineteen trading divisions, has delivered
another excellent set of results, surpassing the records set last
year in respect of volume, operating margin and profit. Earnings
per share has risen by 12.7% to 370.6p (2016 - 328.7p) and RoCE
remains high at 27.6%(1) (2016 - 28.2%).
At the same time as achieving these outstanding results and
adding further value for shareholders, Bellway remains committed to
growing the business in a safe, responsible and sustainable manner.
In doing so, the Group has increased its contribution to the supply
of much needed new homes whilst upholding high standards in both
customer care and health and safety.
Bellway has invested significantly in land, maintaining its
rigorous and disciplined investment criteria and with a strong
balance sheet and focus on operational delivery, I am confident
that the Group is well positioned to deliver further growth, this
year and beyond.
Strong market parameters support the growth strategy
The parameters supporting growth are strong as there continues
to be an imbalance between the supply and demand for high quality
new homes. Interest rates are low, with the Bank of England base
rate reducing to 0.25% at the start of the year, ensuring that
financing a new home remains affordable. The availability of
sustainable mortgage finance is also good, supported by a
responsible lending environment and the Government's Help to Buy
scheme.
The land market remains attractive, providing good quality
opportunities at attractive rates of return and the planning
environment is generally favourable. Bellway has both the financial
and operational capacity to capitalise on these investment
opportunities. Whilst the skills shortage facing the entire
construction sector is a moderator to the industry's overall
ability to deliver growth, it is not preventing Bellway from
continuing to increase its output of new homes.
Given the strong market conditions, the Board continues to see
the opportunity for disciplined volume growth, with a focus on
RoCE, as providing a significant opportunity to add value for
shareholders.
A long term approach to creating shareholder value
The Board believes value generation is best evaluated through
capital growth, in the form of increased net asset value per share
('NAV'), together with the payment of a regular dividend.
Measured over a medium term, in the three years from 31 July
2014, the strategy has resulted in total growth in value of 925.5p
per share(1) , comprising NAV growth of 667p per share(1) and
cumulative dividend payments of 258.5p per share(1) . This
represents an annualised accounting return of 22.3%(1) relative to
the 31 July 2014 NAV of 1,118p per share(1) .
For the year ended 31 July 2017, the strong trading performance
has resulted in NAV rising by 17.3% to 1,785p(1) (2016 - 1,522p).
Furthermore, the growth in earnings has enabled the Board to
recommend a 14.2% increase in the final dividend to 84.5p per share
(2016 - 74.0p), increasing the proposed total dividend for the year
by 13.0% to 122.0p per share (2016 - 108.0p). If approved, the
total dividend will be covered by earnings three times(1) (2016 -
three times).
For the foreseeable future, and assuming the opportunity for
growth remains unchanged, Bellway will continue to reinvest
earnings into financially attractive land opportunities and
maintain a dividend cover of around three times earnings. The
compounding effect of additional NAV and dividend growth will
facilitate further long term value creation for shareholders.
Board changes
As previously announced, Jason Honeyman was appointed to the
Board as Chief Operating Officer on 1 September 2017. Jason
commenced employment with Bellway in January 2005 as Managing
Director of the Thames Gateway division, becoming Southern Regional
Chairman in December 2011.
Jason has considerable experience in the housebuilding sector,
having overseen the successful management of our southern divisions
since 2011. Given the expansion of the Group, his appointment to
this new role adds further strength to the operational management
team and will support the delivery of the ongoing, disciplined
growth strategy.
In addition to Jason's appointment, I have temporarily taken the
position of Executive Chairman during Ted Ayres' period of absence
from the organisation due to illness.
People and supply chain
A responsible and long term approach to managing the business is
enabling Bellway to increase the number of homes sold, whilst
maintaining a focus on both build quality and customer care. It is
the hard work, dedication and efforts of both those who work for,
and with, Bellway that has enabled the Group to do this, whilst
also achieving this record set of results. I would like to place on
record the Board's gratitude to all those who have contributed to
this outstanding performance.
John Watson
Executive Chairman
16 October 2017
Operating Review
Trading performance
Demand for new housing remained strong across the country, with
the Group taking an average of 187 reservations per week (2016 -
169), an increase of 10.7%. Site visitor numbers were ahead of the
prior year and website traffic continued to rise.
As is normally the case, sales were strongest in the second half
of the year, with the usually robust spring market boosted further
by new site openings and investment in work in progress.
Accordingly, the weekly reservation rate for the second half of the
year increased by 14.8% to 209 (2016 - 182), seemingly unaffected
by the General Election and the wider uncertainty arising from the
ongoing EU negotiations. The cancellation rate remained low, at
just 11% for the full year (2016 - 11%), reflecting strong
underlying customer confidence.
The Government's Help to Buy scheme continued to be an important
selling tool, used widely across the Group in 35% (2016 - 30%) of
completions. In London, where the maximum equity loan percentage
can be up to 40% of the property value, Help to Buy was used in 32%
of completions.
The pricing environment remained positive, with modest low,
single digit house price inflation benefiting the average selling
price on most sites across the country.
The table below shows the number and average selling price of
homes completed in the year, analysed geographically, between
private and social homes:-
Homes sold (number) Average selling price (GBP000)
Private Social Total Private Social Total
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
North 3,897 3,651 758 536 4,655 4,187 233.3 220.6 97.9 92.2 211.3 204.2
South 3,670 3,694 1,319 840 4,989 4,534 362.6 335.6 149.1 131.3 306.2 297.7
Group 7,567 7,345 2,077 1,376 9,644 8,721 296.0 278.4 130.4 116.1 260.4 252.8
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
The number of homes sold increased by 10.6% to 9,644 (2016 -
8,721), with the proportion of social completions increasing to
21.5% of the total (2016 - 15.8%), as previously guided and in
accordance with planned construction programmes.
The average selling price rose by 3.0% to GBP260,354 (2016 -
GBP252,793) and the private average selling price rose by 6.3% to
GBP296,018 (2016 - GBP278,403), with this increase attributable to
previous investment in higher value locations, together with the
benefit of some modest house price inflation.
The northern divisions increased output by 11.2% to 4,655 homes
(2016 - 4,187 homes), benefiting from strong market conditions and
completions from developments in good quality locations, where
demand is higher. This was particularly the case in our Yorkshire
division, which has increased its output by over 75% to 467 homes
(2016 - 266 homes), as a result of a strong operational focus and
investment in land and work in progress.
Growth is also being achieved from our newer, fledgling
divisions, such as those located in Coventry and County Durham,
opened in February 2016 and August 2016 respectively. Previous,
controlled investment in these areas, enabled these two new
divisions to contribute a combined output of 327 homes, whilst
retaining significant capacity to add further volume and profit
growth in the years ahead.
Output in the south grew by 10.0% to 4,989 homes (2016 - 4,534
homes), with strong anchor divisions such as Thames Gateway and
Essex, both with a presence in London, delivering over 800
completions each.
London continues to make a meaningful contribution to the
Group's performance, representing 10% of completions (2016 - 14%)
and 14% of housing revenue (2016 - 21%). It has, however, formed a
lower proportion of the Group's overall output, reflecting timing
of construction programmes and investment in land elsewhere in the
country.
The Residence, Bellway's relatively high value, flagship
development located in Battersea is trading well, contributing 137
completions. The outlook on this development is positive, with 72%
of the apartments in this scheme either exchanged or completed at
prices in line with or above the most recent site appraisal.
In general, Bellway prefers to acquire land in more affordable
locations within the capital, where market conditions remain
attractive. Sites such as Barking Riverside, where the Group still
has a retained interest in some 2,800 plots, have performed
particularly well, contributing 182 completions in the year at an
average selling price of GBP245,204.
Overall, the Group retains its ability to be flexible in its
approach to land acquisition, investing in those areas around the
country where returns are strongest and most resilient.
Construction and material costs
Growth in output in the construction sector and the wider
industry skills shortage continued to place upward pressure on
sub-contractor costs, particularly for trades such as bricklayers
and scaffolders. Whilst there is some reliance upon overseas
labour, predominantly in the south east and London, there is no
evidence that this valuable resource has diminished as negotiations
to leave the EU progress.
The availability of building materials is generally good,
however, there are often localised incidences of under supply of
certain products, such as roof tiles and particular facing
bricks.
The Group is deploying a number of initiatives to counter the
effect of cost increases, subcontract and supply chain constraints
and to improve overall operational efficiency. These include
regularly reviewing construction schedules, lead-in times and build
progress whilst forming strong partnerships with our subcontractors
and supply chain. In addition, a greater degree of product
standardisation, with additional emphasis on design, should result
in future cost savings, with Group house types now being plotted on
most new sites in seven of our divisions. An independent quality
review has also helped re-emphasise the importance of achieving
quality standards on the first attempt, thereby reducing costly
remedial work, and improved benchmarking between sites and
divisions is resulting in added focus being placed on cost
control.
Planning and investing in land for growth
Although the satisfaction of pre-commencement conditions
presents challenges to the industry, in general, the planning
backdrop is positive and the number of planning permissions granted
across the UK continues to rise.
The National Planning Policy Framework still has a positive
effect in relation to encouraging local authorities to prepare a
local plan and provide land for housing supply. In addition, whilst
the detail is still outstanding, the Housing White Paper, published
in February, includes proposals to ensure 'ambitious' local plans
are put in place across England, to help prioritise brownfield land
for development and to standardise the method for calculating
housing need. These measures, amongst others, should improve the
efficiency of the planning process and increase the delivery of new
homes.
In the context of this supportive planning environment, the
availability of good quality land remains strong, with key
financial metrics in respect of gross margin and return on capital
employed being met or exceeded.
Set against this backdrop, Bellway has continued to invest in
land opportunities located in sustainable locations where there is
strong local demand. The Group has entered into land contracts with
a value of GBP767 million (2016 - GBP641 million) in order to
acquire 11,613 plots (2016 - 9,555 plots) across 97 sites (2016 -
79 sites). Geographically, 43% of those sites contracted were in
the north of the country and 57% were in the south, with this
balanced approach to investment helping to spread risk.
The table below analyses the Group's land holdings at 31
July:-
2017 2016
Owned and controlled plots 37,855 34,979
Comprising:-
DPP: plots with implementable detailed
planning permission 25,655 24,879
Pipeline: plots pending an implementable
DPP 12,200 10,100
------------------------------------------- ------- -------
Strategic plots with a positive
planning status 6,900 6,300
As a result of this land buying activity and the ability of our
land teams to progress sites through the planning system, the Group
has 25,655 plots with the benefit of an implementable detailed
planning permission ('DPP'). The Group now has all land in place
with the benefit of DPP in order to meet this year's planned growth
target.
The increase in the number of plots in part reflects the success
the Group has had at converting plots from the Group's land
'pipeline', by obtaining DPP on land in which the Group already had
a contractual interest. The Group acquired or obtained a DPP on
10,420 plots during the year, of which 5,093 originated from this
'pipeline' section of the land bank.
The Group has an interest in 12,200 plots within the 'pipeline',
on owned or contracted sites, which already have the benefit of an
outline planning permission, or where DPP is expected to be
obtained within the next three years. A typical example includes a
former commercial site in Hemel Hempstead, close to good transport
links into the centre of London, contracted on an unconditional
basis by our North London division in May 2017. Bellway is actively
seeking to obtain DPP on a 184 unit scheme which should deliver a
RoCE(1) in excess of 20%. Brownfield sites acquired in this manner
help to secure a medium term source of land for the Group and are
often able to deliver attractive returns.
Overall, the Group's owned and controlled land bank, including
those plots with DPP and those within the 'pipeline', comprises
37,855 plots (2016 - 34,979 plots), representing a notional land
supply of 3.9 years (2016 - 4.0 years).
As well as investing in land that meets the Group's immediate
needs, Bellway is benefiting from the appointment of three
strategic land directors in the prior year, not only securing
longer term land interests throughout the country, but also
successfully obtaining DPP during the year on 1,843 plots (2016 -
676 plots) that originated in the strategic land bank. Furthermore,
the Group entered into option agreements to purchase an additional
26 sites (2016 - 9 sites), helping to replenish the strategic land
bank, with this longer term source of land supply providing a
particularly useful 'top up' as the Group continues to grow in
size.
As a result of this activity, the number of plots in the
strategic land bank has increased to 6,900 (2016 - 6,300), with
those reported representing only those that have a positive
planning prognosis, being either identified for residential
development in an emerging local plan or subject to a current
planning application.
Taking pride in customer care
We aim to ensure that customers enjoy a positive experience when
purchasing a new Bellway home and that their expectations with
regards to build quality and service are at least met, if not
exceeded. All new homes undergo a thorough quality inspection
procedure before handover, thereby minimising the likelihood of
subsequent issues and disruption to customers. In addition, our
site managers undergo regular training, with 48% of individuals in
these roles having achieved NVQ Level 6 qualification or above.
Many of our subcontractors also participate in ongoing briefing
sessions in order to maintain the ongoing focus with regards to
quality.
As a result of this approach, we are delighted that 49 of our
site managers received NHBC Pride in the Job Awards (2016 - 43),
recognising their commitment in this area. Not only is this an
increase on the prior year, but proportionate to volume output,
this record performance represents the highest number of awards of
any national housebuilder, reflecting the quality and high
standards that these valued employees have achieved.
We continually review our processes not only to ensure that new
homes are built to a high standard, but also to make sure that our
product design and layout evolves to meet expectations arising from
modern living trends. We regularly seek feedback from our customers
to assess our performance and, in the independent Home Builders'
Federation Customer Satisfaction survey, Bellway was awarded a five
star builder status(3) , one of only two mainstream national
housebuilders to achieve this accolade. In addition, we assess our
performance against a number of key measures including build
quality, standard of finish and home condition. We use the results
of these surveys to calculate an average overall customer care
score which has remained consistently high at 85.2% (2016 -
85.7%).
We recognise the continuing importance of customer care and that
further improvements can always be made. Notwithstanding our
recognition as a five star builder(3) , we have recently created a
new Customer Experience Committee, the remit of which is to
identify initiatives and drive further improvements in both build
quality and service in the years ahead.
Building new homes safely
Construction works can be inherently risky and hence ensuring
the health and safety of both operatives and members of the public
is of the utmost importance to the Group. Sites are audited
frequently by both our in-house safety team and external
consultants to ensure that we maintain the highest of standards. We
measure the number of reportable incidents arising from these
inspections and as a result of our continued focus in this area,
our NHBC reportable incident rate has fallen by 9.9% to 0.690 (2016
- 0.766), with a low score reflecting fewer reportable health and
safety contraventions. There has also been a reduction in the lost
time arising from accidents, with the seven day reportable incident
rate reducing by 4.2% to 426.36 incidents per 100,000 site
operatives (2016 - 445.19).
Our efforts in this area of the business have been recognised
with ten of our site managers receiving NHBC Health and Safety
Awards (2016 - five), with this strong performance representing 18%
of the total awards issued across the industry. Five of these site
managers have also gone on to win highly commended awards,
including a national 'best site' award.
Investing in our people
Given the opportunity for growth, Bellway has continued to
expand its workforce, employing an average of 2,544 employees
during the year (2016 - 2,366), an increase of 7.5%. Housebuilding
has a positive net effect on the economy and we estimate that we
supported 26,000 to 28,000 jobs, both directly and indirectly
through subcontract labour and the Group's supply chain.
Notwithstanding this growth in employee numbers, the industry
continues to face a skills shortage, with the demand for labour
exacerbated by ongoing growth in the sector. We implemented a
number of initiatives during the year to assist with the attraction
and retention of talent, including an enhanced Bellway induction
programme and improvements to our core benefits.
In addition, recognising the longer term skills shortage, we
have created a set of structured apprenticeship programmes which
are due to launch in the current financial year and have continued
to increase the number of apprentices and graduates within the
business by 11% to 92 people (2016 - 83). We have also taken steps
to not only increase the number of training hours undertaken, but
to better capture and report all types of training across the
Group. As a result, the average training days per employee has
risen to a record 4.2 days.
Bellway4Good
Bellway is committed to being a responsible homebuilder and we
have continued to develop our approach to corporate responsibility
('CR') under the Bellway4Good banner, with the primary focus on our
three pillars of the environment, construction and society &
economy.
This is the third year that we have set ourselves a range of CR
targets to drive forward performance across the business and we are
pleased to report some key successes. We continued our energy
efficiency work and have increased the percentage of construction
compounds fitted with energy saving devices to 94% (2016 - 84%),
whilst also launching a trial energy saving campaign for divisional
offices. We also continued our focus on removing waste from
landfill by further improving the waste diversion rate to 97.8%
(2016 - 95.9%). We remain committed to ensuring timber purchased by
Bellway is from sustainable sources and we are very pleased to
report that we achieved the top rank in the World Wildlife
Foundation's 2017 Timber Scorecard.
We have continued to refocus our charitable activity towards
supporting the fundraising efforts of our employees. Along with the
selection of Cancer Research UK as our national charity partner, we
committed to matching every GBP1 raised by our employees with a
Bellway donation of GBP2. We are delighted with how successful the
partnership has proved, allowing Bellway and our employees to raise
and donate GBP385,913 to help fund the search for a cure to cancer.
We also top-up employee fundraising for other charities and good
causes and across our wider charitable activity, Bellway's total
donations, including those to our national charity partner, made
through a combination of employee fundraising, matched funding and
direct donations amounted to GBP521,920 (2016 - GBP284,704), of
which GBP229,047 (2016 - GBP74,704) was raised by our employees and
colleagues in our supply chain.
We have also taken the next step in quantifying the wider
benefits that our business delivers, both locally in our operating
divisions and also in the wider UK economy, through the publication
of Bellway's first Economic and Social Impact Report. As a result
of this work, we estimate that we have committed to invest GBP118
million in community infrastructure projects over the past year, in
addition to our contribution to public finances through direct and
indirect taxation and significant spend on local and national
supply chains.
Current trading and outlook
In addition to achieving volume growth of 10.6%, the Group ended
the financial year with an order book of 4,749 homes (2016 - 4,644
homes), with a value of GBP1,296.3 million (2016 - GBP1,117.1
million). In the first nine weeks of the new financial year,
trading has remained strong, with the Group achieving 171
reservations per week (2016 - 162), an increase of 5.6%. As a
result, the order book at 1 October rose by 17.4% to GBP1,361.5
million (2 October 2016 - GBP1,159.3 million), representing 5,034
homes (2 October 2016 - 4,701 homes).
This strong forward sales position, together with investment in
land and work in progress and plans to open a new, twentieth
trading division in the north of the country this financial year,
should enable Bellway to deliver further growth in volume in the
year ahead. The Board therefore expects that subject to market
conditions, the Group will grow volume by at least 5% and complete
the sale of around an additional 500 homes, equivalent to the
output of an established operating division. In addition,
anticipated completions from higher value developments such as The
Residence in Battersea, should enable the Group to deliver
additional revenue growth by further increases in the average
selling price, which depending upon the progress of construction
programmes, is expected to rise to around GBP280,000.
Bellway has significant capacity for further volume growth, both
from its existing divisional structure and as a result of its
ability to open new divisions in areas of strong demand. This
capacity, together with a strong balance sheet, is enabling the
Group to continue its disciplined growth strategy and deliver
further value for shareholders.
Jason Honeyman
Chief Operating Officer
16 October 2017
Financial Review
Operating performance
The continued delivery of the Group's disciplined growth
strategy has resulted in housing revenue increasing by 13.9% to
GBP2,510.9 million (2016 - GBP2,204.6 million), driven principally
by the number of housing completions rising by 10.6% to 9,644 homes
(2016 - 8,721 homes). This, together with other revenue of GBP47.7
million (2016 - GBP36.1 million), has resulted in total revenue
rising by 14.2% to GBP2,558.6 million (2016 - GBP2,240.7
million).
The ongoing focus on growth has had a compounding effect on
revenue. Over the past three years, the number of legal completions
has increased by almost 41% and this, together with improvements in
the average selling price, has resulted in revenue rising by over
72%, thereby demonstrating the effect that the strategy is having
on the performance of the Group.
The gross margin has risen slightly to 25.9% (2016 - 25.7%),
with good quality land opportunities, a strong focus on operations
and the benefit of historical house price inflation assisting the
Group in maintaining this high level.
In order to boost its operational capability and support
continued growth, Bellway has invested significantly in its
regional structure over recent years, both in new divisions and by
strengthening teams within more established divisions.
Notwithstanding this planned investment, administrative expenses
have fallen to under 3.6%(1) of revenue (2016 - 3.7%), reflecting
improved absorption of the overhead base as the Group delivers more
output and maintains its culture of cost control. Overall,
administrative expenses have risen more slowly than revenue, by
8.7% to GBP90.0 million (2016 - GBP82.8 million).
The strong trading performance has resulted in operating profit
increasing by 16.2% to GBP571.6 million (2016 - GBP492.0 million)
and the operating margin improving by a further 30 basis points to
22.3% (2016 - 22.0%), surpassing last year's record.
Net finance expense
The net finance expense of GBP11.2 million(1) (2016 - GBP11.1
million) principally includes notional interest on land acquired on
deferred terms, which has increased slightly to GBP7.7 million
(2016 - GBP7.6 million). The remaining net interest expense
primarily relates to bank interest, comprising interest on drawn
monies, commitment fees and refinancing costs on the Group's GBP430
million banking facilities. This has increased slightly to GBP4.5
million (2016 - GBP4.3 million), reflecting higher average net bank
borrowings throughout the year.
Profitability
Profit before taxation ('PBT') rose by 12.6% to GBP560.7 million
(2016 - GBP497.9 million), lower than the rate of operating profit
growth, primarily as the PBT reported in the prior year benefited
from the one-off exceptional and non-trading related profit of
GBP17.3 million, arising on the disposal of the Group's interest in
Barking Riverside Limited. The corporation tax charge was GBP106.7
million (2016 - GBP95.0 million), reflecting an effective tax rate
of 19.0% (2016 - 19.1%). The effective tax rate is below the
standard rate of corporation tax of 19.7% (2016 - 20%), primarily
due to an enhanced tax deduction for remediating previously
developed, brownfield land.
Investing cash for growth
The Group invested significantly in land and work in progress
throughout the year in order to achieve future growth. As a result,
the capital invested in land, net of land creditors and work in
progress increased by GBP331.6 million(1) (2016 - GBP289.4
million). Before taking this investment into account, cash
generated from operations was GBP588.1 million(1) (2016 - GBP538.8
million), thereby demonstrating the substantial cash generative
ability of the Group. After accounting for this investment in
growth assets, cash generated from operations was GBP256.5 million
(2016 - GBP249.4 million).
After expending GBP98.8 million on tax, paying a dividend of
GBP136.6 million, providing joint venture funding of GBP29.4
million and taking into consideration other minor cash outflows of
GBP2.2 million, the Group ended the year with net cash of GBP16.0
million(1) (2016 - GBP26.5 million), reflecting an ungeared(1)
balance sheet (2016 - ungeared).
Land creditors, which are considered to be a source of longer
term debt finance, stood at GBP366.8 million (2016 - GBP304.2
million) and continue to be used only when it is cost effective to
do so. Including land creditors, total debt stood at GBP350.8
million (2016 - GBP277.7 million), representing adjusted gearing of
16.0%(1) (2016 - 14.9%).
A strong balance sheet to secure future growth
Net tangible assets were GBP2,191.3 million (2016 - GBP1,867.0
million), of which inventory totalled GBP2,968.2 million (2016 -
GBP2,548.3 million). Bellway has continued to invest in a
controlled manner, securing land and sometimes limited production
resource in order to establish a strong foundation to help achieve
future growth targets.
The net amount invested in land has increased by GBP212.6
million to GBP1,838.2 million (2016 - GBP1,625.6 million) and work
in progress has risen by GBP181.6 million to GBP1,017.7 million
(2016 - GBP836.1 million). Bellway now has 10,251 units in
production (2016 - 9,621 units) at a variety of stages across the
Group, which will support future growth.
Other than land creditors and the use of net bank debt during
the year, there are limited sources of long term liabilities on the
balance sheet. The pension scheme deficit remains modest at only
GBP4.0 million (2016 - GBP8.0 million) and is unlikely to be a
significant cash drain on the business in the years ahead.
A sustainable approach to value creation
RoCE continues to be a key metric used across the Group when
appraising land opportunities and managing divisions' performance.
As a result of this approach, and notwithstanding the significant
investment in land and work in progress in order to secure future
growth, Bellway achieved a strong RoCE of 27.6%(1) (2016 - 28.2%).
Recognising that land creditors are a source of long term funding,
an adjusted measure including land creditors as part of the capital
base, resulted in a RoCE of 23.9%(1) (2016 - 24.6%).
Post tax return on equity was 22.6%(1) (2016 - 23.5%), a strong
result from a conservatively managed and lowly geared balance
sheet.
This focus on returns has resulted in NAV increasing by 17.3% to
1,785p(1) (2016 - 1,522p), with this being achieved after paying
out 111.5p per share in dividends.
The disciplined growth strategy, with a continued focus on RoCE
and the ongoing reinvestment of earnings back into the business to
achieve future growth, continues to deliver ongoing value for
shareholders.
Keith Adey
Finance Director
16 October 2017
Group Income Statement
For the year ended 31 July 2017
Note 2017 2016 2016 2016
Total Pre-exceptional item Exceptional Total
item
(note 3)
GBP000 GBP000 GBP000 GBP000
Revenue 2 2,558,561 2,240,651 - 2,240,651
Cost of sales (1,896,977) (1,665,892) - (1,665,892)
Gross profit 661,584 574,759 - 574,759
Administrative expenses (90,029) (82,751) - (82,751)
Operating profit 571,555 492,008 - 492,008
Profit on disposal of investment in joint
venture 3 - - 17,306 17,306
Finance income 4 1,248 1,186 - 1,186
Finance expenses 4 (12,492) (12,326) - (12,326)
Share of result of joint ventures 412 (306) - (306)
Profit before taxation 560,723 480,562 17,306 497,868
Income tax expense 5 (106,666) (94,966) - (94,966)
Profit for the year * 454,057 385,596 17,306 402,902
------------ --------------------- ------------ ------------
Earnings per ordinary share - Basic 6 370.6p 328.7p
Earnings per ordinary share - Diluted 6 369.0p 328.0p
* All attributable to equity holders of the
parent.
Group Statement of Comprehensive Income
For the year ended 31 July 2017
2017 2016
GBP000 GBP000
Profit for the period 454,057 402,902
Other comprehensive income/(expense)
Items that will not be recycled to the income statement:
Remeasurement gains/(losses) on defined benefit pension plans 3,846 (1,806)
Income tax on other comprehensive income/expense (730) (136)
Other comprehensive income/(expense) for the period, net of income tax 3,116 (1,942)
---------- ----------
Total comprehensive income for the period * 457,173 400,960
---------- ----------
* All attributable to equity holders of the parent.
Group Statement of Changes in Equity
At 31 July 2017
Note Issued Share Capital Other Retained Total Non-controlling Total
capital premium redemption reserves earnings interest equity
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
August 2015 15,314 169,012 20,000 1,492 1,370,160 1,575,978 (66) 1,575,912
Total
comprehensive
income for the
period
Profit for the
period - - - - 402,902 402,902 - 402,902
Other
comprehensive
expense ^ - - - - (1,942) (1,942) - (1,942)
--------- ---------- ----------- --------- ------------ ------------ ---------------- ------------
Total
comprehensive
income
for the
period - - - - 400,960 400,960 - 400,960
Transactions
with
shareholders
recorded
directly in
equity:
Dividends on
equity shares 7 - - - - (105,411) (105,411) - (105,411)
Shares issued 21 1,134 - - - 1,155 - 1,155
Purchase of own
shares - - - - (6,864) (6,864) - (6,864)
Credit in
relation to
share options
and tax
thereon - - - - 1,264 1,264 - 1,264
--------- ---------- ----------- --------- ------------ ------------ ---------------- ------------
Total
contributions
by and
distributions
to
shareholders 21 1,134 - - (111,011) (109,856) - (109,856)
Balance at 31
July 2016 15,335 170,146 20,000 1,492 1,660,109 1,867,082 (66) 1,867,016
Total
comprehensive
income for the
period
Profit for the
period - - - - 454,057 454,057 - 454,057
Other
comprehensive
income ^ - - - - 3,116 3,116 - 3,116
--------- ---------- ----------- --------- ------------ ------------ ---------------- ------------
Total
comprehensive
income
for the
period - - - - 457,173 457,173 - 457,173
Transactions
with
shareholders
recorded
directly in
equity:
Dividends on
equity shares 7 - - - - (136,556) (136,556) - (136,556)
Shares issued 14 1,094 - - - 1,108 - 1,108
Credit in
relation to
share options
and tax
thereon - - - - 2,599 2,599 - 2,599
Total
contributions
by and
distributions
to
shareholders 14 1,094 - - (133,957) (132,849) - (132,849)
Balance at 31
July 2017 15,349 171,240 20,000 1,492 1,983,325 2,191,406 (66) 2,191,340
--------- ---------- ----------- --------- ------------ ------------ ---------------- ------------
^ Additional breakdown is provided in the Group Statement of
Comprehensive Income.
Group Balance Sheet
At 31 July 2017
Note 2017 2016
GBP000 GBP000
ASSETS
Non-current assets
Property, plant and equipment 11,255 14,904
Investment property - -
Investments in joint ventures 34,345 4,550
Trade and other receivables - 11,406
Deferred tax assets 2,432 2,490
48,032 33,350
Current assets
Inventories 2,968,184 2,548,339
Trade and other receivables 85,168 80,185
Cash and cash equivalents 8 45,965 58,968
3,099,317 2,687,492
Total assets 3,147,349 2,720,842
LIABILITIES
Non-current liabilities
Retirement benefit obligations 3,977 8,036
Trade and other payables 113,743 87,866
Deferred tax liabilities 686 314
118,406 96,216
Current liabilities
Interest bearing loans and borrowings 8 30,000 32,500
Corporation tax payable 58,143 50,500
Trade and other payables 749,460 674,610
837,603 757,610
Total liabilities 956,009 853,826
Net assets 2,191,340 1,867,016
EQUITY
Issued capital 15,349 15,335
Share premium 171,240 170,146
Capital redemption reserve 9 20,000 20,000
Other reserves 1,492 1,492
Retained earnings 9 1,983,325 1,660,109
Total equity attributable to equity holders of
the parent 2,191,406 1,867,082
Non-controlling interest (66) (66)
Total equity 2,191,340 1,867,016
Group Cash Flow Statement
For the year ended 31 July 2017
Note 2017 2016
GBP000 GBP000
Cash flows from operating activities
Profit for the year 454,057 402,902
Depreciation charge 2,759 3,044
Exceptional profit 3 - (17,306)
Profit on sale of property, plant and equipment (162) (74)
Loss on sale of investment properties - 187
Finance income 4 (1,248) (1,186)
Finance expenses 4 12,492 12,326
Share-based payment expense 2,066 1,568
Share of post tax result of joint ventures (412) 306
Income tax expense 5 106,666 94,966
Increase in inventories (419,845) (413,041)
Decrease/(increase) in trade and other receivables 7,561 (68)
Increase in trade and other payables 92,581 165,737
Cash from operations 256,515 249,361
Interest paid (4,616) (4,284)
Income tax paid (98,790) (82,384)
Net cash inflow from operating activities 153,109 162,693
---------- ----------
Cash flows from investing activities
Acquisition of property, plant and equipment (2,109) (3,373)
Proceeds from sale of property, plant and equipment 3,161 273
Proceeds from sale of investment in joint venture
- exceptional item 3 - 16,600
Proceeds from sale of investment properties - 1,422
Increase in loans to joint ventures (29,383) (1,768)
Interest received 167 250
Net cash (outflow)/inflow from investing activities (28,164) 13,404
---------- ----------
Cash flows from financing activities
Decrease in bank borrowings (2,500) (47,500)
Proceeds from the issue of share capital on exercise
of share options 1,108 1,155
Purchase of own shares by employee share option
plans - (6,864)
Dividends paid 7 (136,556) (105,411)
Net cash outflow from financing activities (137,948) (158,620)
---------- ----------
Net (decrease)/increase in cash and cash equivalents (13,003) 17,477
Cash and cash equivalents at beginning of year 58,968 41,491
Cash and cash equivalents at end of year 8 45,965 58,968
Notes
1. Basis of preparation
Bellway p.l.c. is a company incorporated in England and
Wales.
The financial information set out above does not constitute the
Group's statutory financial statements for the years ended 31 July
2017 or 2016, but is derived from those financial statements.
Statutory financial statements for 2016 have been delivered to the
registrar of companies, and those for 2017 will be delivered in due
course. The auditor, KPMG LLP, has reported on those financial
statements; their reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
The preparation of the financial statements in conformity with
Adopted IFRSs requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about the carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The Group's activities are financed principally by a combination
of ordinary shares and bank borrowings less cash in hand. At 31
July 2017, net cash was GBP16.0 million having expended cash of
GBP10.5 million during the year. The Group has operated within all
of its banking covenants throughout the year. In addition, the
Group had bank facilities of GBP430.0 million, expiring in tranches
up to November 2020, with GBP400.0 million available for drawdown
under such facilities at 31 July 2017.
The directors consider that the Group is well placed to manage
business and financial risks in the current economic environment
and have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. Accordingly they continue to adopt the going concern basis
in preparing the Annual Report and Accounts.
Whilst the financial information included in this announcement
has been prepared in accordance with Adopted IFRSs, this
announcement does not itself contain sufficient information to
comply with Adopted IFRSs. The Group expects to send its Annual
Report and Accounts 2017 to shareholders on 10 November 2017.
The Group adopted IAS 1 'Disclosure Initiative' and Annual
Improvements 2012-2014 during the year. The adoption of these has
not had a material effect on the Group's profit for the year or
equity.
The other standards and interpretations that are applicable for
the first time in the Group's financial statements for the year
ended 31 July 2017 have had no effect on these financial
statements.
At the date of authorisation of the financial statements, the
following relevant standards which have not been applied in these
financial statements were in issue and endorsed by the EU but not
yet effective:
-- IFRS 9 'Financial Instruments'. This standard will replace
IAS 39 'Financial Instruments: Recognition and Measurement' and
will affect both the measurement and disclosures of financial
instruments. This is effective for the period beginning on 1 August
2018. The Group is still assessing the full effect of this
standard.
-- IFRS 15 'Revenue from contracts with customers'. This is a
converged standard from the IASB and FASB on revenue recognition to
assist with comparability of revenue globally. This is effective
for the period beginning on 1 August 2018. It is expected that this
standard will result in presentational changes to the income
statement to gross up part-exchange revenue and expenses within
operating profit which are currently recognised on a net basis
within cost of sales. It is not anticipated that the adoption of
this standard will effect either the balance sheet or cash flow
statement.
Of the other IFRSs that are available for early adoption, none
are expected to have a material effect on the financial
statements.
The following standard, which is expected to effect the
financial statements of the Group, has not been applied in these
financial statements, but was in issue although not yet endorsed by
the EU:
Notes (continued)
-- IFRS 16 'Leases'. This standard replaces the existing
standard, IAS 17 'Leases', where lessees are required to make a
distinction between a finance lease (on balance sheet) and an
operating lease (off balance sheet). IFRS 16 requires lessees to
recognise a lease liability reflecting future lease payments and a
'right of use asset' for virtually all lease contracts. This is
effective for the period beginning on 1 August 2019, with earlier
adoption permitted if IFRS 15 'Revenue from contracts with
customers' is also applied. This is likely to affect the timing of
the recognition of the lease costs within the income statement and
the split between operating profit and finance expenses.
2. Segmental analysis
The executive Board (the Chief Operating Decision Maker as
defined in IFRS 8) regularly reviews the Group's performance and
balance sheet position at both a consolidated and divisional level.
Each division is an operating segment as defined by IFRS 8 in that
the executive Board assess performance and allocates resources at
this level. All of the divisions have been aggregated in to one
reporting segment on the basis that they share similar economic
characteristics including:
-- National supply agreements are in place for key inputs
including materials.
-- Debt is raised centrally and the cost of capital is the same
at each division.
-- Sales demand at each division is subject to the same
macro-economic factors, such as mortgage availability and
government policy.
Additional information on average selling prices and the unit
sales split between north, south, private and social has been
included in the Operating Review. The Board does not, however,
consider these categories to be separate reportable segments as
they review the entire operations at a consolidated and divisional
level when assessing performance and making decisions about the
allocation of resources.
3. Exceptional item
Exceptional items are those which, in the opinion of the Board,
are material by size or nature, non-recurring, and of such
significance that they require separate disclosure on the face of
the income statement.
On 7 March 2016, the Group disposed of its entire interest in
Barking Riverside Limited, its joint venture company with the
Greater London Authority, to L&Q New Homes Limited. Bellway
will receive total consideration with a fair value of GBP43.5
million over the three years from the date of disposal, including
GBP17.0 million received in March 2016 on completion. The deferred
consideration is recognised as a 'fair value through profit or
loss' financial asset. In addition to the disposal proceeds, the
Group was relieved from its substantial funding obligations with
regards to the ongoing remediation and infrastructure requirements
of this long-term, capital intensive site. The profit of GBP17.3
million, arising on disposal, was treated as an exceptional item
during the year ended 31 July 2016.
4. Finance income and expenses
2017 2016
GBP000 GBP000
Interest receivable on bank deposits 154 211
Interest on fair value through profit or loss 1,054 533
Other interest income 40 442
Finance income 1,248 1,186
Interest payable on bank loans and overdrafts 4,642 4,497
Interest on deferred term land payables 7,662 7,589
Interest element of movement in pension scheme deficit 188 240
Finance expenses 12,492 12,326
Notes (continued)
5. Taxation
The effective rate of taxation for the year is 19.0% (2016 -
19.1%). The taxation charge for the year is calculated by applying
the standard corporation tax rate of 19.7% (2016 - 20.0%) to the
profit before taxation, adjusted for non-taxable items and enhanced
deductions. The lower effective tax rate in the current year is
principally due to enhanced tax deductions received by the Group in
relation to land remediation relief and a credit following the
finalisation of the prior year corporation tax returns.
The deferred tax assets and liabilities held by the Group at the
start of the year that are expected to be realised after 31 March
2020 have been revalued at 17%, the substantively enacted
corporation tax rate that will be effective when they are expected
to be realised.
6. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing
earnings by the weighted average number of ordinary shares in issue
during the year (excluding the weighted average number of ordinary
shares held by the Bellway Employee Share Trust (1992) (the
'Trust') which are treated as cancelled).
Diluted earnings per ordinary share uses the same earnings
figure as the basic calculation. The weighted average number of
shares has been adjusted to reflect the dilutive effect of
outstanding share options allocated under employee share schemes
where the market value exceeds the option price. Diluted earnings
per ordinary share is calculated by dividing earnings by the
diluted weighted average number of ordinary shares.
Reconciliations of the earnings and weighted average number of
shares used in the calculations are outlined below:
Earnings Weighted Earnings Earnings Weighted Earnings
average per share average per share
number of number
ordinary of ordinary
shares shares
2017 2017 2017 2016 2016 2016
GBP000 Number p GBP000 Number p
For basic earnings per
ordinary share 454,057 122,511,626 370.6 402,902 122,558,261 328.7
Dilutive effect of options
and awards 536,577 (1.6) 291,845 (0.7)
For diluted earnings per
ordinary share 454,057 123,048,203 369.0 402,902 122,850,106 328.0
--------- ------------ ----------- --------- ------------- -----------
7. Dividends on equity shares
2017 2016
GBP000 GBP000
Amounts recognised as distributions to equity holders
in the year:
Final dividend for the year ended 31 July 2016 of 74.0p
per share (2015 - 52.0p) 90,589 63,712
Interim dividend for the year ended 31 July 2017 of 37.5p
per share (2016 - 34.0p) 45,980 41,709
Dividends forfeited (13) (10)
136,556 105,411
---------- ----------
Proposed final dividend for the year ended 31 July 2017
of 84.5p per share (2016 - 74.0p) 103,608 90,787
The 2017 proposed final dividend is subject to approval by shareholders
at the Annual General Meeting on 13 December 2017 and, in accordance
with IAS 10 'Events after the Reporting Period', has not been included
as a liability in these financial statements. The proposed final dividend,
subject to shareholder approval, will be paid on 10 January 2018 to
all ordinary shareholders on the Register of Members on 1 December 2017.
The ex-dividend date is 30 November 2017. At the record date for the
final dividend for the year ended 31 July 2016 shares were held by the
Trust on which dividends had been waived.
The level of distributable reserves are sufficient in comparison to
the proposed dividend.
Notes (continued)
8. Analysis of net cash
At 1 August Cash At 31 July
2016 flows 2017
GBP000 GBP000 GBP000
Cash and cash equivalents 58,968 (13,003) 45,965
Bank loans (32,500) 2,500 (30,000)
Net cash 26,468 (10,503) 15,965
------------ --------- -----------
9. Reserves
Capital redemption reserve
On 7 April 2014 the Group redeemed 20,000,000 GBP1 preference
shares, being all of the preference shares in issue. An amount of
GBP20 million, equivalent to the nominal value of the shares
redeemed, was transferred to a capital redemption reserve on the
same date.
Own shares held
The Group holds shares within the Trust for participants of
certain share-based payment schemes. During the period the Trust
made a market purchase of nil shares (2016 - 342,143 at an average
price of 2,006p) and transferred 119,733 (2016 - 55,823) shares to
employees and directors. The number of shares held within the
Trust, and on which dividends have been waived, at 31 July 2017 was
184,403 (2016 - 304,136). These shares are held within the
financial statements at a cost of GBP3.421 million (2016 - GBP5.908
million). The market value of these shares at 31 July 2017 was
GBP5.882 million (2016 - GBP6.375 million).
10. Principal risks and uncertainties
A detailed risk register is maintained of all of our potential
risks, including strategic, operational, financial and compliance
risks. The risk management processes are set up so as to ensure all
aspects of the business are considered, from strategy through to
business execution. Specifically, specialist areas are also
incorporated into the risk processes, for example, corporate
responsibility and joint ventures.
The risk register is reviewed on a regular basis as part of the
management reporting process resulting in the regular assessment of
each risk, its severity and any required mitigating actions. The
severity of risk is determined based on a defined scoring system
assessing risk impact and likelihood.
Derived from the detailed risk register, a summary of principal
risks is reported to management, the Audit Committee and the Board.
This summary is mainly, but not exclusively, comprised of risks
scoring above our risk appetite after mitigation. This summary is
reviewed throughout the year, with the Board systematically
considering the risks taking into account any changes which may
have occurred. Once a year, via the Audit Committee, the Board
determines whether the system of risk management is appropriately
designed and operating effectively.
Through our regular risk management programme of activities, we
have identified the following principal risks to our business:
Notes (continued)
Risk and Relevance to KPIs Mitigation Change in
description strategy year
---------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- -------------
Land
Inability to * Insufficient land would affect our volume growth * Land bank (with DPP). * Budgeting and forecasting of growth targets to ensure No change.
source suitable targets. land bank supports strategic target.
land at
appropriate * Number of homes sold.
gross margins * Failure to buy land at the right margin would have a * Thorough pre-purchase due diligence and viabilities
and ROCE. detrimental effect on future returns. on all proposed land purchases. These are kept under
* RoCE. regular review to ensure capital is invested
appropriately.
* Gross margin.
* Authorisation of all land purchases in accordance
with Group procedures at Head Office.
* EPS.
---------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- -------------
Planning
Delays and * Failure to obtain planning within appropriate, * EPS. * Centralised and divisional planning specialists No change.
complexity pre-planned timescales would have a detrimental provide advice and support to the divisions to assist
in the planning impact on our growth prospects and have an adverse with securing planning permissions.
process. effect on returns. * RoCE.
* Management of immediate, medium-term and strategic
* Number of plots acquired directly in land bank with land to maintain an appropriate balance of land in
an implementable DPP. terms of quantity and location.
* Number of plots converted from medium-term pipeline
to land with DPP.
* Number of plots in our pipeline land bank.
* Number of plots identified in our strategic land bank
with a positive planning status.
---------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- -------------
Construction
resources * Failure to secure required resources causes delays in * Number of homes sold. * Systems are in place to select, appoint, monitor, No change.
Shortage of construction, impacting the ability to deliver volume manage and build long-term relationships with our
appropriately growth targets. sub-contractors.
skilled * Customer care satisfaction.
sub-contractors
and shortages * Pricing pressure would impact returns. * Competitive rates and prompt payment for our
of building * Employee turnover. sub-contractors.
materials at
competitive
prices. * EPS. * Group purchasing arrangements are in place.
* Continued review and monitoring of supplier
performance.
---------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- -------------
Health and
safety * In addition to the moral obligation and the * Number of RIDDOR seven-day lost time accidents. * The Board considers health and safety issues at every Increase.
There are requirement to act in a responsible manner, injuries meeting. This risk
significant to any individual while at one of our business has
health and locations could delay construction and result in * NHBC health and safety benchmark. increased
safety risks criminal prosecution, civil litigation and * Regular visits to sites by senior management slightly
inherent in reputational damage. (independent of our divisions) and external during the
the * NHBC Health and Safety Awards. consultants to monitor health and safety standards year
construction and performance against the health and safety as a result
process. policies and procedures. of
increased
complexity
in
regulations
and build
programmes.
---------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- -------------
Notes (continued)
Sales and external
factors
There are a * The ultimate impact of these external factors would * Number of homes sold. * On-going monitoring of key business metrics and No change.
number of external be on the ability to sell houses and apartments and development of action plans as necessary.
factors that on returns.
could affect * Forward order book.
our ability * Product range and pricing strategy determined based
to generate on regional market conditions.
sales, including * Reservations rate.
but not limited
to: * Use of sales incentives, such as part-exchange, to
* Economic factors, especiall * Customer care satisfaction. encourage the selling process.
y house price inflation
and interest rates.
* EPS. * Use of government-backed schemes to encourage home
ownership.
* Mortgage availability.
* RoCE.
* Government housing policy.
---------------------------------- -------------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------- ---------------
Human resources
Inability to * Failure to attract and retain people with appropriate * Employee turnover. * Continued development of the Group Human Resources No change.
attract and skills will affect our ability to perform and deliver function and implementation of our people strategy.
retain appropriate our volume growth target.
people. * Graduates and apprentices.
* Competitive salary and benefits packages which are
regularly reviewed.
* People who have worked for the Group for 10 years or
more.
* Succession plans in place and key person dependencies
identified and mitigated.
* Graduate and apprentice training programmes in place.
---------------------------------- -------------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------- ---------------
IT and security
Failure to * Poor performance of our systems would affect * EPS. * Group-wide systems are in operation which are Increase.
have suitable operational efficiency, profitability and our control centrally controlled with an outsourced support This risk has
systems in environment. function in place. increased due
place and appropriate to growing
back up, contingency complexity
plans and security * Continued investment in systems. of our
policies. business,
together with
* Regular review and testing of our security measures, continued
contingency plans and IT security policies. external
exposure to
ever-changing
security
threats.
---------------------------------- -------------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------- ---------------
Legal and regulatory
compliance * Lack of appropriate procedures and compliance would * Volume growth. * Central Secretariat, Legal, Health and Safety and No change.
Failure to result in delays in land development and construction, Technical functions advise and support divisions on
comply with have a detrimental impact on profitability and compliance and regulatory matters.
legislation reputation and potentially lead to financial * EPS.
and regulatory penalties and other regulatory consequences.
requirements. * Group-wide policies, procedures and training for key
regulatory matters.
---------------------------------- -------------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------- ---------------
The previously reported principal risk relating to the
environment remains under constant review, but mitigating actions
during the year and our current control environment have reduced
potential exposure from this risk and thus removed it from our
principal risks.
Notes (continued)
11. Alternative performance measures
Bellway uses a variety of alternative performance measures
('APM') which, although financial measures of either historical or
future performance, financial position or cash flows, they are not
defined or specified by IFRSs. The directors use a combination of
APM's and IFRS measures when reviewing the performance, position
and cash of the Group.
The APM's used by the Group are defined below:-
-- Administrative expenses as a percentage of revenue - This is
calculated as the total administrative overheads divided by total
revenue. The directors consider this to be an important indicator
of how efficiently the Group is managing its administrative
overhead base.
-- Net finance expense - This is finance expenses less finance
income. The directors consider this to be an important measure when
assessing whether the Group is using the most cost effective source
of finance.
-- Dividend cover - This is calculated as earnings per ordinary
share for the period divided by the dividend per ordinary share
relating to that period. At the half year the dividend per ordinary
share is the proposed interim ordinary dividend, and for the full
year it is the interim dividend paid plus the proposed final
dividend. The directors consider this an important indicator of the
proportion of earnings paid to shareholders and reinvested in the
business.
-- Capital invested in land, net of land creditors, and work in
progress - This is calculated as shown in the table below. The
directors consider this as an indicator of the net investment by
the Group in the period to achieve future growth.
2017 2016 Mvt 2016 2015 Mvt
Per balance sheet GBPm GBPm GBPm GBPm GBPm GBPm
Land 1,838.2 1,625.6 212.6 1,625.6 1,297.0 328.6
Work in progress 1,017.7 836.1 181.6 836.1 763.7 72.4
Increase in capital
invested in land
and work in progress
in the year 394.2 401.0
Land creditors (366.8) (304.2) (62.6) (304.2) (192.6) (111.6)
Increase in capital
invested in land,
net of land creditors,
and work in progress
in the year 331.6 289.4
-------- --------
-- Net asset value per ordinary share (NAV) - This is calculated
as total net assets divided by the number of ordinary shares in
issue at the end of each period. The directors consider this to be
a proxy when reviewing whether value, on a share by share basis,
has increased or decreased in the period.
-- Capital employed - Capital employed is defined as the total
of equity and net bank debt. Equity is not adjusted where the Group
has net cash. The directors consider this to be an important
indicator of the operating efficiency and performance of the
Group.
Notes (continued
-- Return on capital employed (RoCE) - This is calculated as
operating profit divided by the average capital employed. Average
capital employed is calculated based on opening, half year and
closing capital employed. The calculation is shown in the table
below. The directors consider this to be an important indicator of
whether the Group is achieving a sufficient return on its
investments.
2017 2017 2017 2016 2016 2016
Capital Land creditors Capital Capital Land creditors Capital
employed employed employed employed
including including
land creditors land creditors
GBPm GBPm GBPm GBPm GBPm GBPm
Operating profit 571.6 571.6 492.0 492.0
Capital employed/land
creditors:
Opening 1,867.0 304.2 2,171.2 1,614.4 192.6 1,807.0
Half year 2,152.4 301.7 2,454.1 1,753.8 275.7 2,029.5
Closing 2,191.3 366.8 2,558.1 1,867.0 304.2 2,171.2
Average 2,070.2 324.2 2,394.4 1,745.1 257.5 2,002.6
---------- --------------- ---------------- ---------- --------------- ----------------
Return on capital
employed 27.6% 23.9% 28.2% 24.6%
-- Post tax return on equity - This is calculated as profit for
the year divided by the average of the opening, half year and
closing net assets. The directors consider this to be a good
indicator of the operating efficiency of the Group.
2017 2016
GBPm GBPm
Profit for the year 454.1 402.9
Net assets:
Opening 1,867.0 1,575.9
Half year 1,977.3 1,694.9
Closing 2,191.3 1,867.0
Average 2,011.9 1,712.6
---------- ----------
Post tax return on equity 22.6% 23.5%
-- Total growth in value per ordinary share - The directors use
this as a proxy for the increase in shareholder value since 31 July
2014.
Net asset value per ordinary share:
At 31 July 2017 1,785p
At 31 July 2014 1,118p
-------
Net asset value growth per ordinary share 667.0p
Dividend paid per ordinary share:
Year ended 31 July 2017 111.5p
Year ended 31 July 2016 86.0p
Year ended 31 July 2015 61.0p
-------
Cumulative dividends paid per ordinary share 258.5p
Total growth in value per ordinary share 925.5p
---------
Notes (continued)
-- Annualised accounting return in NAV and dividends paid since
31 July 2014 - This is calculated as the annualised increase in net
asset value per ordinary share plus cumulative ordinary dividends
paid per ordinary share since 31 July 2014 (as detailed above)
divided by the net asset value per ordinary share at 31 July 2014.
The directors use this as a proxy for the increase in shareholder
value since 31 July 2014.
Net asset growth per ordinary share 667.0p
Dividend paid per ordinary share 258.5p
Total growth in value per ordinary share 925.5p
Net asset value per ordinary share at 31 July 2014 1,118.0p
Total value per ordinary share 2,043.5p
-----------
Annualised accounting
return ( 2,043.5 ) 1/3 -1
--------
1,118.0 22.3%
-- Net cash - This is the cash and cash equivalents less bank
debt. The directors consider this to be a good indicator of the
financing position of the Group. This is reconciled in note 8.
-- Cash generated from operations before investment in land, net
of land creditors, and work in progress - This is calculated as
shown in the table below. The directors consider this as an
indicator of whether the Group is generating cash before investing
in land and work in progress to achieve future growth.
2017 2016
GBPm GBPm
Cash from operations 256.5 249.4
Add: increase in capital invested in land, net
of land creditors, and work in progress (as described
above) 331.6 289.4
Cash generated from operations before investment
in land, net of land creditors, and work in progress 588.1 538.8
-------- --------
-- Gearing - This is calculated as net bank debt divided by
total equity. The directors consider this to be a good indicator of
the financial stability of the Group.
-- Adjusted gearing - This is calculated as the total of net
bank debt/cash and land creditors divided by total equity. The
directors believe that land creditors are a source of long term
finance so this provides an alternative indicator of the financial
stability of the Group.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFIRITLRLID
(END) Dow Jones Newswires
October 17, 2017 02:00 ET (06:00 GMT)
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