Bellway PLC Trading Update
June 12 2018 - 1:00AM
UK Regulatory
TIDMBWY
Bellway p.l.c.
Trading Update
Tuesday 12 June 2018
Bellway is today issuing a trading update in respect of the period from 1
February to 3 June 2018.
Highlights
* For the full year, anticipated volume growth of around 600 homes should
enable the Group to complete the sale of in excess of 10,000 homes for the
first time in its history.
* In addition, an expected average selling price in excess of GBP280,000 and an
anticipated operating margin of around 22%, should contribute to another
year of substantial earnings growth.
* A responsible, sustainable and customer focussed approach to growth has
resulted in Bellway maintaining its status as a five star housebuilder2 for
the second year in succession.
* Market conditions remain favourable, with the Group achieving a 5.4%
increase in the reservation rate in the period to 233 per week (2017 - 221
per week).
* The forward sales position is excellent, with the value of the order book
7.8% ahead at GBP1,703 million (4 June 2017 - GBP1,580 million).
* Substantial investment in land, with GBP678 million spent on land and land
creditors since 1 August (2017 - GBP586 million), securing future growth at
attractive rates of return.
John Watson, Executive Chairman, commented:
"This has been another successful trading period for Bellway, in which the
demand for new build homes remained strong, enabling the Group to continue
delivering its long term and sustainable strategy of increasing shareholder
value through responsible volume growth. We have retained our status as a five
star housebuilder2 and reservations are ahead of the same period in the
previous financial year. For the full year, Bellway is on target to complete
the sale of in excess of 10,000 homes for the first time in its history and in
doing so, achieve another record year of earnings. Furthermore, we have
invested a substantial amount in new land, laying the foundations for further
growth, beyond this financial year."
Market and current trading
The underlying requirement for new homes remains robust and is supported by
favourable, stable market conditions and the continued availability of Help to
Buy. Demand is most pronounced for affordably priced family homes countrywide,
with divisions operating in locations as dispersed as Scotland, Essex and the
Midlands all continuing to show strong performance.
The pricing environment is firm, with many sites reporting modest, single digit
price rises, although the rate of increase has moderated compared to last
year. In certain areas, where affordability is a greater constraint, customer
interest is less pronounced for particularly large or higher priced homes.
Accordingly, the use of incentives, whilst low by historical standards, is
generally focussed towards more expensive properties, where sales rates can be
slower.
Since 1 February, notwithstanding the period of inclement weather in early
March, the Group has achieved 233 reservations per week (2017 - 221 per week),
an increase of 5.4% from an average of 251 active outlets (2017 - 235). This
is a good performance, particularly given the strength of the comparator
period, during which reservations were almost 13% ahead of the equivalent
period in the year before last. Overall, customer confidence remains strong
and the cancellation rate is low, at only 11% (2017 - 11%).
The Group is committed to delivering growth in a sustainable and responsible
manner and retains a focus on build quality, customer care and health and
safety. For the second year in succession, Bellway has maintained its status
as a five star housebuilder2, reflecting our commitment to delivering a high
quality product. In addition, eleven of our site managers have recently
received NHBC health and safety commended awards, which recognise their success
in this important area. Proportionate to volume output, this record
performance represents the highest number of awards of any national
housebuilder.
Land buying and financial position
The land market continues to provide an ample supply of opportunities at
attractive margins and healthy rates of return on capital employed. Good
quality sites continue to be identified across the country, however, in order
to maintain strict capital disciplines, activity in London is focussed on the
more affordable end of the market. Proposals to acquire new sites are
carefully appraised to ensure the product mix is appropriate for the location
and the financial assumptions are robust.
In the period since 1 August, the Group has spent GBP678 million (2017 - GBP586
million) on land and land creditors. The average gross margin on land
contracted over the same period is expected to be in excess of 24%, based on
anticipated selling prices and costs at the time of acquisition. Bellway has
land in place, with the benefit of detailed planning permission, to meet next
year's volume growth aspirations. In addition, the Group has agreed heads of
terms and instructed solicitors on the purchase of a further 6,800 plots.
At 3 June, the Group had net bank debt of GBP278 million3 (4 June 2017 - GBP317
million), representing modest gearing of approximately 11%4 (4 June 2017 -
15%). In accordance with previous guidance, the Group is expected to end the
year with net cash of around GBP50 million, depending upon the timing of land
opportunities.
Outlook
The Board expects completions for the year ending 31 July 2018 to exceed those
achieved last year by around 600 units. This forecast volume growth, together
with the previously reported rise in the average selling price, which is
expected to be in excess of GBP280,000 and an anticipated operating margin of
around 22% (31 July 2017 - 22.3%), should result in Bellway achieving another
year of substantial earnings growth.
In addition, the value of the order book at 3 June is 7.8% ahead at GBP1,703
million (4 June 2017 - GBP1,580 million) and comprises 6,144 homes (4 June 2017 -
5,819 homes), of which 67% are contracted. This should contribute to further
growth in both this year and in the next financial year. Beyond that, Bellway
still has potential to expand the existing divisional structure, thereby
continuing its long term and disciplined strategy of enhancing value for
shareholders through volume growth, provided market conditions remain
supportive.
1 All figures relating to completions, order book, reservations,
cancellations and average selling price exclude the Group's share of its joint
ventures.
2 As measured by the Home Builders' Federation Customer Satisfaction survey.
3 Net bank debt is cash plus cash equivalents, less bank debt.
4 Gearing is calculated as net bank debt divided by total equity.
FOR FURTHER INFORMATION PLEASE CONTACT:
JASON HONEYMAN, CHIEF OPERATING OFFICER AND KEITH ADEY, FINANCE DIRECTOR FROM
7:00 AM ONWARDS ON 0191 217 0717.
Certain statements in this announcement are forward-looking statements which
are based on Bellway p.l.c.'s expectations, intentions and projections
regarding its future performance, anticipated events or trends and other
matters that are not historical facts. Such forward-looking statements can be
identified by the fact that they do not relate only to historical or current
facts. Forward-looking statements sometimes use words such as 'aim',
'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal',
'believe', or other words of similar meaning. These statements are not
guarantees of future performance and are subject to known and unknown risks,
uncertainties and other factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements.
Given these risks and uncertainties, prospective investors are cautioned not to
place undue reliance on forward-looking statements. Forward-looking statements
speak only as of the date of such statements and, except as required by
applicable law, Bellway p.l.c. undertakes no obligation to update or revise
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
END
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