TIDMBWY
RNS Number : 2157T
Bellway PLC
24 March 2021
NATIONAL HOUSEBUILDER BELLWAY p.l.c. TODAY, WEDNESDAY 24 MARCH,
ANNOUNCES INTERIM RESULTS FOR THE HALF YEARED 31 JANUARY 2021
Results
Strong first half results
Half year ended Half year ended Movement
31 January 31 January
2021 2020
Revenue GBP1,720.5m GBP1,541.4m +11.6%
Gross profit GBP357.5m(1,2) GBP356.5m +0.3%
Gross margin 20.8%(1,2) 23.1% (230 bps)
Operating profit GBP297.7m(1,2) GBP297.2m +0.2%
Operating margin 17.3%(1,2) 19.3% (200 bps)
Net legacy building safety expense GBP20.3m - n/a
Profit before taxation GBP280.2m GBP291.8m (4.0%)
Earnings per share 185.9p 194.4p (4.4%)
Interim dividend per share 35.0p Nil +100.0%
Net asset value per share ('NAV') 2,564p(2) 2,467p +3.9%
Return on capital employed 19.3%(1,2) 19.9% (60 bps)
-- Volume growth of 6.3% to a record 5,656 homes (2020 - 5,321
homes) at the half year, and for the full year, the Board now
expects that Bellway will complete the sale of around 10,000 homes
(31 July 2020 - 7,522 homes).
-- The increase in volume, together with average selling price
growth of 5.8% to GBP303,206 (2020 - GBP286,570), has resulted in a
12.5% increase in housing revenue to a record GBP1,714.9 million
(2020 - GBP1,524.8 million).
-- Strong underlying demand, with a 3.3% increase in the private
reservation rate to 156 per week (2020 - 151), building upon last
year's robust first half trading performance.
-- The operating margin, before net legacy building safety
expense, was 17.3%(1,2) (2020 - 19.3%) and has been positively
influenced by an efficient absorption of overheads due to the
strong first half revenue performance. For the full year, the Board
now expects that the operating margin, before net legacy building
safety expense, will be around 17%(1,2) (31 July 2020 - 14.5%(5)
).
-- The balance sheet is strong, with net cash of GBP346.4
million(2) (2020 - GBP4.6 million), providing resilience and
strategic flexibility. Land creditors remain low, at GBP371.7
million (2020 - GBP274.9 million).
-- A further GBP20.3 million, net of recoveries, has been set
aside to help owners of legacy apartment schemes undertake fire
safety improvements. This brings the total amount provided since
2017, in relation to fire safety, to GBP131.6 million, with GBP91.6
million of this remaining unutilised at 31 January.
-- The interim dividend has been reinstated at 35.0p per share
(2020 - Nil).
Operational highlights
-- The Group has retained its status as a five-star
homebuilder(3) for the fifth consecutive year and our 'Customer
First' programme, designed to enhance the customer experience in
respect of construction quality and service levels, will formally
launch in April.
-- Significant investment in land, with a record 8,848 plots
contracted (2020 - 7,005 plots) with a value of GBP452.8 million
(2020 - GBP408.2 million) at attractive margins, reflecting the
opportunity in the market during a period of reduced competition.
This investment ensures that the Group is well positioned to
deliver future volume growth.
-- New higher margin land, together with ongoing cost control
and efficiency initiatives, will lead to future recovery in the
gross margin.
-- Our 'Artisan Collection' house-type range, which is being
well received by our customers, has now been plotted across 195
developments (2020 - 128 developments) and will help drive quality,
improved efficiency and long-term cost savings.
Current trading and outlook
-- A robust forward sales position, with the forward order book
at 14 March 8.4% ahead at GBP1,643.2 million(2) (8 March 2020 -
GBP1,515.8 million) and comprising 6,028 homes (8 March 2020 -
5,772 homes).
-- The clarity provided by the forward order book has raised the
expectation for the full year average selling price to be more than
GBP295,000 (31 July 2020 - GBP293,054).
-- Bellway is in an excellent position to continue its
long-term, disciplined growth strategy, increasing the supply of
good quality, new homes, while generating future value for our
stakeholders.
1 Before net legacy building safety expense (note 3).
2 Bellway uses a range of statutory performance measures and
alternative 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 15.
3 As measured by the Home Builders' Federation Customer Satisfaction survey.
4 All figures relating to completions, order book, reservations,
cancellations, average selling price and land exclude the Group's
share of its joint ventures.
5 Before net legacy building safety expense and other exceptional items (note 3).
Analyst and investor conference call and webcast
There will be an analyst and investor presentation via webcast,
hosted by Jason Honeyman, Group Chief Executive and Keith Adey,
Group Finance Director, at 9.30am today. To join the presentation,
go to the Bellway p.l.c. corporate website, www.bellwayplc.co.uk .
There is also a facility to join the presentation and Q&A
session via a conference call. Participants should dial +44 (0) 330
336 9411 and use confirmation code 7569986. A playback facility
will be available shortly after the presentation has finished.
For further information, please contact:-
Jason Honeyman, Group Chief Executive
Keith Adey, Group Finance Director
Tel: +44 (0) 191 217 0717
Chairman's Overview
Commenting on the results, Chairman, Paul Hampden Smith,
said:
Bellway has delivered a good first half trading performance,
achieving record first half revenue because of its strong brought
forward sales position and investment in work-in-progress. We have
delivered this growth, while retaining our core focus on quality
and customer care and have been recognised as a five-star
homebuilder(3) for the fifth consecutive year.
We have acted cautiously and responsibly throughout the COVID-19
pandemic, ensuring safe working practices across all our
construction sites, sales centres, and divisional offices. In
addition, we continue to offer support to our colleagues, whose
ongoing efforts have been crucial in helping Bellway emerge
strongly from this global crisis, with ongoing mental health and
wellbeing campaigns.
As a responsible developer, Bellway recognises concerns with
regards to fire safety in apartment buildings. As part of our
efforts to help building owners of legacy apartment schemes, we
have recognised an additional net legacy building safety expense of
GBP20.3 million in the period. The brings the total amount provided
by the Group since 2017, in relation to fire safety, to GBP131.6
million. This is a substantial sum which demonstrates Bellway's
responsible approach to supporting customers with regards to this
issue.
Our front-footed approach to land investment during the period
will help to secure further volume growth and margin recovery in
the years ahead. In addition, we continue to make good progress on
several internal initiatives, not least our initial strides towards
meeting the Government's Future Homes Standard by 2025.
The Group's balance sheet is robust, with substantial cash
resources, and I am therefore pleased to announce that we are
reinstating the interim dividend at 35.0p per share (2020 - Nil).
For the full year, the Board expects the dividend to be weighted
towards the second half and to maintain a dividend cover of around
three times earnings.
As the country prepares to emerge from the latest national
'lockdown', Bellway is in an excellent position to continue its
long-term, disciplined growth strategy, increasing the supply of
good quality, new homes, while generating future value for our
stakeholders.
Group Chief Executive's Operating Review
Strong housing fundamentals
The fundamentals of the housing market remain robust, with an
underlying requirement for new homes in the UK. Affordability is
good, supported by an ongoing environment of low interest rates and
the mortgage market is broadly supportive, although deposit
requirements generally remain high, outside of the Government's
Help-to-Buy scheme. The continuation of this scheme, albeit with
the introduction of regional price caps from April 2021, together
with the temporary and extended stamp duty holiday are both
welcome, providing important support to the housing market and
especially those looking to make their first step onto the housing
ladder.
Bellway is also hopeful that the Government's new mortgage
guarantee scheme will lead to the return of competitive, long-term,
higher loan-to-value mortgages for both the new build sector and
the wider market. If successful, this will underpin ongoing
customer demand, while helping the sector to increase the
much-needed supply of new homes. In doing so, it will promote a
stable and sustainable housing market.
Positive trading conditions
Sales rates were more pronounced in the Summer and early Autumn,
given the pent-up demand arising from the Spring national
'lockdown'. The reservation rate slowed during November, as the
sector transitioned to the new Help-to-Buy rules and more
widespread 'lockdown' measures were reintroduced. Despite the
escalation of these 'lockdown' measures in the new calendar year,
sales rates recovered to a more normalised level for the remainder
of the trading period, boosted by the effective transition to the
new Help-to-Buy scheme, which has been well received by our
customers.
For the whole period, the private reservation rate rose by 3.3%
to 156 per week (2020 - 151), and the overall reservation rate was
resilient at 191 per week (2020 - 194). In line with respective
Government guidance, sales centres have remained open in England
and Scotland on an appointment only basis, but remain closed except
for essential visits in Wales. The cancellation rate was low, at
just 14% (2020 - 13%).
The pricing environment has remained firm, with some modest
house price inflation, benefiting selected sites in localities
where demand is particularly strong, with this most pronounced on
developments in the north west of England and the Midlands.
Strong revenue growth
Bellway has achieved a good first half performance, benefiting
from its elevated order book and investment in work-in-progress at
the start of the financial year, together with ongoing customer
demand for our mid-market, high quality housing product.
Housing revenue rose by 12.5% to GBP1,714.9 million (2020 -
GBP1,524.8 million), in part driven by strong growth in the number
of homes sold, which rose by 6.3% to 5,656 (2020 - 5,321 homes).
This includes 334 homes (2020 - 275 homes) sold using our Ashberry
brand, which continues to perform well and supports enhanced sales
rates on larger sites, through the provision of an additional,
differentiated sales outlet.
The market was strongest for affordably priced homes in
desirable locations, with areas such as Manchester, the Midlands,
Essex and the Home Counties, all delivering solid results. This
strong demand for affordably priced homes has influenced our London
strategy, which has evolved over recent years, to focus on the
outer zones, where customers can often obtain better value.
Completions using our Bellway London brand account for 7% of homes
sold (2020 - 6%), although this has reduced compared to earlier
years, as more compelling land investment opportunities can often
be sourced elsewhere in the country. Our average selling price of
private homes in London was accessible to a range of buyers at
GBP440,391 (2020 - GBP497,419), with sites such as Beckton Parkside
in Beckton, Eastside Quarter in Bexleyheath and St. George's Park
in Hornchurch all experiencing strong demand.
The overall average selling price for the Group rose by 5.8% to
GBP303,206 (2020 - GBP286,570), influenced by a greater proportion
of private housing completions, which rose to 78% of the total
(2020 - 77%). The Group deliberately accelerated the construction
and sales completion of higher value homes in advance of the change
in the Help-to-Buy price caps, which will become effective from 1
April 2021. The increase in the average selling price in the half
year is therefore a short-term adjustment and for the full year,
the overall average selling price is expected to be in excess of
GBP295,000 (31 July 2020 - GBP293,054), before moderating to around
GBP290,000 in the following financial year, assuming no change in
underlying selling prices.
The Group recognised other revenue of GBP5.6 million (2020 -
GBP16.6 million), a decrease from the prior period, which included
a disposal of freehold reversionary interests on apartments
schemes. This no longer forms a recurring source of other
income.
Total revenue, including both housing revenue and other revenue,
rose by 11.6% to GBP1,720.5 million (2020 - GBP1,541.4
million).
Gross margin and cost control
Gross profit, before net legacy building safety expense, was in
line with the prior period at GBP357.5 million(1,2) (2020 -
GBP356.5 million), with the increase in volume and the rise in the
average selling price being offset by a reduction in the gross
margin, which reduced to 20.8%(1,2) (2020 - 23.1%). As previously
reported, this reduction is partly due to an earlier period of cost
inflation, set against a trading backdrop where house price
inflation had been flat. The consequence is that this will continue
to dilute the gross margin throughout the duration of those sites
affected. In addition, as reported in the previous financial year,
there are costs associated with extended site durations because of
COVID-19 and again, this will continue to influence the gross
margin throughout the life of those sites. The proportion of these
extra COVID-19 costs that traded through the income statement in
the half year is GBP12 million.
Going forward, our land acquisition programme is replacing sites
with an anticipated gross margin of around 23%, based on expected
costs and selling prices at the time of entering into land
contracts, and this will help the gross margin to recover beyond
the current financial year. In addition, we continue to adopt
several 'business-as-usual' cost control and efficiency
initiatives, including strong procurement disciplines, site
groundwork reviews, internal cost-saving campaigns, upgraded IT
systems and further house-type standardisation. In that regard, our
'Artisan Collection' house-type range continues to be well received
by our customers and has now been plotted across 25,000 plots on
195 developments (2020 - 128 developments). The 'Artisan
Collection' not only embodies our focus on high standards and
quality, but the variety of elevational treatments and considered
site layouts result in attractive street scenes and an improved
sense of placemaking.
There has been no discernible effect on the supply chain because
of the UK's new trading arrangements with the EU. Many suppliers
and subcontractors have looked to secure certainty and build their
order books over the shorter-term and although there are some
exceptions, this has helped curb overall cost inflation to low
single digits.
Operating performance
Administrative expenses rose slightly to GBP59.5 million (2020 -
GBP56.7 million) but fell to an unusually low 3.5%(2) of revenue
(2020 - 3.7%), because of the strong growth in revenue and one-off
weighting of completions towards the first half of the financial
year. Maintaining a strong and well-established operational
structure, notwithstanding the disruption caused by COVID-19, helps
maintain the growth potential in the business in the years
ahead.
Other operating income and expenses, which net to a modest
expense of GBP0.3 million (2020 - GBP2.6 million), relate to the
cost of running our part-exchange programme. The cost is unusually
low as the use of part-exchange was initially restricted in order
to preserve the strength of the balance sheet, with the onset of
the initial 'lockdown' restrictions last year. The cost is expected
to revert to previous levels in the year ahead.
Overall, operating profit, before net legacy building safety
expense, was GBP297.7 million(1,2) (2020 - GBP297.2 million) and
the operating margin, before net legacy building safety expense,
was 17.3%(1,2) (2020 - 19.3%). This operating margin is expected to
be stronger in the first half due to the more efficient absorption
of administrative overheads driven by the higher first half volume.
The continuing strong trading sentiment, however, means that the
Board now expect that the operating margin, before net legacy
building safety expense, for the full financial year will be around
17%(1,2) (31 July 2020 - 14.5%(5) ).
Building safety
We continue to take a proactive approach to nationwide concerns
with regards to fire safety in high rise buildings across the UK.
Bellway recognises its responsibilities in its legacy apartment
portfolio and continues to review combustion risks, in external
wall systems, on past high-rise developments.
The legal responsibility for ensuring fire safety in buildings
usually rests with the current owners or their managing agents,
which in most cases for our legacy portfolio, is not Bellway. As a
responsible developer, however, Bellway takes apartment safety
concerns seriously and has therefore established a fire remediation
team to work with building owners to help resolve historical
issues. In instances where Bellway considers that it may have a
contractual responsibility, we are committed to assisting with
remediation works to ensure that apartment blocks meet with the
current interpretation of building regulations, which were in force
at the time they were constructed.
In that regard, the total amount provided since 2017, in
relation to fire safety, is GBP131.6 million. This is a substantial
sum, demonstrating Bellway's commitment to act responsibly with
regards to this issue. Some GBP91.6 million of this provision,
relating to 24 developments, most of which are over 18 metres in
height, remains unutilised at 31 January. This remaining provision
is stated after incurring an additional net legacy building safety
expense of GBP20.3 million in the period, which is reported after
recoveries of GBP13.5 million.
Initially, our review efforts were directed towards those
buildings over 18 metres in height, where Aluminium Composite
Material had been used in the construction of the external wall
envelope. The scope of our review has since widened, following the
'Advice for Building Owners of Multi-storey, Multi-occupied
Residential Buildings', issued by the Ministry of Housing,
Communities and Local Government in January 2020.
We therefore now approach this issue, with the benefit of
sector-wide hindsight and, by applying revised guidance which
clarifies the Government's interpretation of the extant building
regulations that were in place at the time of construction. Our
reviews, which often include the results of investigative surveys,
consider whole external wall systems to determine whether the
combination of materials used adequately prevent external fire
spread, thereby rendering the building safe.
Differing regulatory frameworks result in ongoing changes with
regards to the scope of potential remediation works. In addition,
obtaining a supply of suitable replacement materials, and
appropriately skilled remediation experts, proves to be an enduring
challenge. As a result, while a prudent approach has been taken,
there continues to be inevitable labour constraints and upward
pressure on costs as we work with third parties to establish fully
costed remediation solutions on the 24 developments. We believe we
have captured the vast majority of issues and all known liabilities
are properly provided for. The extent of the provision could
increase, however, in line with normal accounting practice if new
issues are identified, as building owners continue to undertake
their own investigative works on other schemes within our legacy
portfolio. Bellway is actively pursuing recoveries from previous
suppliers, subcontractors and professional advisors where they have
fallen short of the standards required.
We have strong controls in place to comply with current building
regulations and have enhanced our internal fire safety procedures.
We welcome the Government's initiatives to assist leaseholders,
particularly on buildings between 11 and 18 metres in height, where
building owners may have concerns with regards to the safety of
cladding. The recent announcement from the Royal Institute of
Chartered Surveyors in relation to External Wall System
certification will also help to unlock the housing market for many
concerned residents. Ultimately, a coordinated response from
Government and lenders will lead to a clearer, long-term solution,
which ensures that the UK's stock of apartment schemes meets
appropriate fire safety standards.
Earnings
The net finance expense, which mainly relates to imputed land
creditor interest and bank commitment fees, was GBP5.1 million(2)
(2020 - GBP5.9 million). This is a slight reduction on the prior
period, reflecting the strong average net cash generation in the
past six months.
Joint venture income, which was GBP7.9 million (2020 - GBP0.5
million), principally relates to two developments. The increase in
the period is because of the completion phasing of apartment blocks
and for the full year, total joint venture income is expected to
approach GBP10 million (31 July 2020 - GBP1.0 million).
Profit before taxation was GBP280.2 million (2020 - GBP291.8
million) and the taxation charge of GBP51.0 million (2020 - GBP52.5
million) represented an effective tax rate of 18.2% (2020 - 18.0%).
This is broadly in line with the standard rate of corporation tax
of 19.0% (2020 - 18.3%) and following the Chancellor's recent
budget statement, it is expected to rise to 25.0% from April
2023.
Basic earnings per share was 185.9p (2020 - 194.4p).
Strengthening the brand
We are determined to continue building upon our reputation as
one of the country's leading national housebuilders, ensuring that
customers are at the core of what we do, and that the Bellway brand
is one in which customers can trust. We are therefore delighted to
have been recognised as a five-star homebuilder(3) in the Home
Builders' Federation Customer Satisfaction survey for the fifth
consecutive year.
Our 'Customer First' programme, which will formally launch in
April, is gathering momentum. It is designed to enhance the
customer experience and help Bellway to exceed customer
expectations in respect of the quality of product and service
levels. It involves a holistic review of all aspects of the
business, from planning through to construction and then customer
care, taking into account the sales process along the way.
Initiatives arising from this review so far include the
introduction of senior management training programmes, an increased
number of Customer Quality Reviews and improved, more regular
communication with customers throughout the sales and construction
process.
Attracting talent for the longer-term
Attracting, developing and retaining talent throughout the
organisation is key to meeting our future growth ambitions. We
undertook our first ever employee engagement survey during the
period and were delighted by the excellent participation from our
colleagues. The Group scored well against a range of metrics and
particularly with respect to 'engagement', achieving a score of
91%. In addition, we achieved a score of 94% when colleagues were
asked whether the changes made to the business as a result of
COVID-19 were effective. These changes included mental health and
wellbeing programmes, which continue to be in place as the country
remains in a national 'lockdown'. We will use the results of the
survey to focus our efforts in the year ahead, particularly around
areas of internal communications and enabling more permanent,
flexible working patterns.
Our recently constructed Bellway Academy has been established to
spearhead training and development across the Group. This
encompasses an enhanced learning and development programme, which
is focussing on the key areas of site management and construction,
together with ongoing training in respect of our Customer First
programme. In addition, we have had significant interest in our
latest graduate recruitment drive and are delighted to have made
offers to a further 38 graduates across a range of disciplines. We
are also pleased that 8.6% (2020 - 8.4%) of our workforce are now
employed in 'learning and earning' positions.
Better with Bellway
Our commitment to operating in an ethical and responsible manner
forms part of the underlying culture at Bellway and is embodied
with our wide-reaching 'Better with Bellway' initiative. The aim of
this is to make tangible improvements to business operations to the
benefit of society and wider stakeholder groups.
A new, revised Environmental, Social and Governance ('ESG')
committee has been created, including both Board level and senior
management representation, with the ambition of broadening the
scope of our current corporate responsibility programme. Current
initiatives include the establishment of science-based targets to
reduce the use of scope 3 carbon emissions throughout the supply
chain. This will build upon our previously published target, set
last financial year, of reducing scope 1 and 2 carbon emissions per
home sold by 10% by 2023.
We have also established an internal zero carbon working group,
which includes several new appointments, whose ambition is to meet
and exceed the requirements of new building regulations on our path
towards achieving the Government's Future Homes Standard. In
addition, along with a strategic business partner, we are also
trialling modular housing at a new site, recently acquired in
Tattenhoe, Milton Keynes, with the intention that our learnings
from this process will influence our future carbon reduction
strategy.
More broadly, we are looking to build upon initiatives already
in place across the Group. We have established a project, using our
own graduates, to look at site-based resource efficiency, with a
target of reducing construction waste, having already achieved high
waste diversion rates across the Group. We also have plans to
further reduce the use of single-use plastics in the supply chain
and water usage in our new homes.
Lastly, we remain committed to supporting our national charity
partner, Cancer Research UK ('CRUK') and at the end of January,
total donations to CRUK, raised by Bellway employees and business
partners, amounted to GBP1.7 million since launching our
partnership over four years ago.
Land and planning
Given the strong underlying demand for new homes, we have
continued our disciplined programme of land acquisition, with our
land teams tasked with identifying attractive investment
opportunities which meet or exceed our minimum hurdle rates in
respect of both gross margin and return on capital employed.
Accordingly, the Group has made good progress and has contracted
to acquire 8,848 plots (2020 - 7,005 plots), across 54 sites (2020
- 41 sites), in good quality locations, with a contract value of
GBP452.8 million (2020 - GBP408.2 million). This is a record half
year investment, reflecting the opportunity in the market, during a
period of reduced competition.
The sites acquired are housing-led developments, geographically
spread across the country and will enable Bellway to offer its
customers an affordable product, with less reliance on Help-to-Buy.
As a result, the expected average selling price of the contracted
plots is around GBP270,000. This is lower than the average selling
price achieved in the period and this is expected to help mitigate
any potential downward effect on sales rates that may arise as the
revised Help-to-Buy scheme comes to an end in March 2023. The
average forecast gross margin on land contracted is around 23%,
based on expected costs and selling prices at the time of entering
into the land contracts.
This responsible, but front-footed investment strategy, will
contribute to the recovery in both volume and operating margin in
the years ahead. The total cash spend on land, including payment of
land creditors, was GBP351 million (2020 - GBP397 million).
The table below analyses the Group's land holdings:-
31 January 31 January
2021 2020
Owned and controlled plots
DPP: plots with implementable detailed
planning permission 27,306 25,277
Pipeline: plots pending an implementable
DPP 21,700 18,800
----------- -----------
Total owned and controlled plots 49,006 44,077
Strategic plots 27,700 25,700
----------- -----------
Total land bank 76,706 69,777
----------- -----------
Overall, the Group had 49,006 plots (2020 - 44,077 plots) within
its owned and controlled land bank, a rise of 11.2%, with this
growth achieved notwithstanding the usage of plots arising from the
record number of homes sold in the period. Within the owned and
controlled land bank, 27,306 plots (2020 - 25,277 plots) benefit
from an implementable detailed planning permission and the
anticipated sales demand and build progress on those plots is such
that all land is in place to meet next year's anticipated legal
completion forecast. Our proactive approach to investment ensures
that the Group's land bank is in a strong position to help drive
volume and margin recovery in the years ahead.
In relation to longer-term land opportunities, Bellway continues
to invest in its strategic land portfolio, which now comprises some
27,700 plots (2020 - 25,700 plots).
Construction progress
As sites initially re-opened in late Spring last year, the Group
focussed its construction investment on homes which were
approaching build completion to maximise liquidity at a time of
heightened uncertainty. This deliberate approach, together with the
reduction in output in the prior financial year, resulted in
elevated levels of work-in-progress at 31 July 2020.
This strategy facilitated strong growth in completions in the
first half of the current financial year which, in turn, has
resulted in a sizeable reduction in the amount invested in
work-in-progress over the past six months. As we have completed
homes already in production, construction investment over this time
has moved, in general, towards new site starts and earlier stage
construction phases and this, supported by strong on-site
organisation, has enabled the Group to increase average active
outlets in the period to 278 (2020 - 274).
Our construction sites operate efficiently with strict COVID-19
safe policies in place, however, the ongoing effects of 'lockdown'
inevitably pose some delays to construction activity, particularly
if site workers are subject to self-isolation requirements. In
addition, although well-managed, we have experienced an elongated
conveyancing process with both mortgage offers and home buyers'
surveys often taking longer to complete.
Notwithstanding our site openings success, the reduced
work-in-progress position, which generally includes plots that are
in earlier stages of the construction process, will be a constraint
to completions in the second half of the financial year. As a
result, and as previously reported, in order to preserve production
quality, the completion profile will be weighted towards the first
half of this year.
Net cash and financial position
Bellway was highly cash generative in the period, producing
GBP428.3 million from operations (2020 - GBP54.3 million), a result
of the conversion of the elevated level of brought forward
work-in-progress into cash.
Taxation payments were GBP40.7 million (2020 - GBP119.8
million), lower than last year due to the reduction in earnings,
but also because the prior year outflow included an acceleration of
quarterly payments following a one-off change in legislation.
Dividend payments were GBP61.6 million (2020 - GBP123.1 million),
net receipt of loans by Bellway from joint ventures was GBP25.6
million (2020 - net payment of loans GBP0.1 million) and there were
other minor cash outflows of GBP6.6 million (2020 - GBP7.9
million). Overall, the Group had net cash of GBP346.4 million(2)
(2020 - GBP4.6 million) at the end of the period, underlining
Bellway's strong balance sheet. Committed land obligations remain
low at GBP371.7 million (2020 - GBP274.9 million). Including land
creditors, net debt stood at GBP25.3 million(2) (2020 - GBP270.3
million), representing negligible adjusted gearing of 0.8%(2) (2020
- 8.9%).
The Group has committed bank facilities of GBP495 million, which
mature in tranches through to 31 December 2023. In addition, the
Group entered into a contractual arrangement during the period to
issue a sterling US Private Placement ('USPP') for a total amount
of GBP130 million, as part of its ordinary course of business
financing arrangements. This USPP debt, which has maturity dates in
seven and ten years and a weighted average fixed coupon of 2.7%,
was drawn down on 17 February 2021. In aggregate, this provides the
Group with access to total committed debt lines of GBP625 million,
thereby securing a long-term and diversified source of capital.
This, together with the Group's substantial cash resources,
provides financial resilience in the event of unforeseen economic
circumstances. In addition, it ensures that Bellway has significant
capacity to invest in compelling land opportunities that meet or
exceed its minimum financial acquisition criteria.
NAV growth and dividend
Following the final dividend payment of 50.0p per share in
respect of the year ended 31 July 2020, the net asset value rose by
4.1% over the past twelve months to GBP3,162.4 million (2020 -
GBP3,038.9 million), representing a net asset value per share of
2,564p(2) (2020 - 2,467p).
Given the robust balance sheet, substantial cash resources and
resilient trading outlook, the Board is also delighted to restore
the interim dividend at 35.0p per share. For the full year, the
Board expects the dividend to be weighted towards the second half
and to maintain a dividend cover(2) of around 3 times earnings.
This remains in line with our long-term approach as we continue to
reinvest in the business in order to facilitate growth.
Return on capital was 19.3%(1,2) (2020 - 19.9%), with the
reduction reflecting the lower operating margin, partially offset
by an improved asset turn. When including land creditors, a source
of long-term debt, as part of the capital base, return on capital
employed was 17.3%(1,2) (2020 - 18.2%). Notwithstanding the strong
cash position, post-tax return on equity was 14.9%(2) (2020 -
16.1%).
Recent trading
In the six weeks since 1 February, trading was resilient,
although given the ongoing national 'lockdown,' reservation rates
were lower than the prior year at 263 per week (2020 - 278).
The forward order book remains substantial and at 14 March
comprised 6,028 homes (8 March 2020 - 5,772 homes), with a value of
GBP1,643.2 million(2) (8 March 2020 - GBP1,515.8 million), with
this primarily expected to contribute to completions over the next
12 months.
Outlook
The reduced level of work-in-progress at 31 January, compared to
July 2020, and higher proportion of homes in earlier stage
construction phases, together with the focus on build quality, will
result in a lower level of completions in the second half of the
financial year, compared to the first half. Notwithstanding this,
the temporary extensions to both the stamp duty holiday and the
previous Help-to-Buy regime, have provided more certainty with
regards to the completion profile over the coming months. As a
result, the Board now expects that Bellway will complete the sale
of around 10,000 homes (31 July 2020 - 7,522 homes) in the current
financial year. The average selling price is expected to be excess
of GBP295,000 (31 July 2020 - GBP293,054) and the operating margin,
before net legacy building safety expense, is expected to be around
17%(1,2) (31 July 2020 - 14.5%(5) ).
Beyond this financial year, Bellway has a strong land bank and
capacity for disciplined, future growth in both volume and the
operating margin, assuming market conditions remain supportive.
This, together with our strong balance sheet, long-term approach,
and focus on quality sets a solid foundation for the years
ahead.
Jason Honeyman
Group Chief Executive
23 March 2021
Condensed Group Income Statement
Note Half year Half year Half year Half year Year Year Year
ended ended ended ended ended ended ended
31 January 31 January 31 January 31 January 31 July 31 July 31 July
2021 2021 2021 2020 2020 2020 2020
Before Net legacy Total Total Before Net legacy Total
net legacy building net legacy building
building safety building safety
safety expense safety expense
expense (note expense and other
3) and other exceptional
exceptional items
items (note
3)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 1,720.5 - 1,720.5 1,541.4 2,225.4 - 2,225.4
Cost of sales (1,363.0) (20.3) (1,383.3) (1,184.9) (1,803.2) (71.9) (1,875.1)
Gross profit 357.5 (20.3) 337.2 356.5 422.2 (71.9) 350.3
Other operating
income 41.3 - 41.3 86.5 153.0 - 153.0
Other operating
expenses (41.6) - (41.6) (89.1) (156.1) - (156.1)
Administrative
expenses (59.5) - (59.5) (56.7) (97.4) (0.7) (98.1)
Operating
profit 297.7 (20.3) 277.4 297.2 321.7 (72.6) 249.1
Finance income 4 0.1 - 0.1 0.2 0.2 - 0.2
Finance
expenses 4 (5.2) - (5.2) (6.1) (13.6) - (13.6)
Share of result
of joint
ventures 7.9 - 7.9 0.5 1.0 - 1.0
Profit before
taxation 300.5 (20.3) 280.2 291.8 309.3 (72.6) 236.7
Income tax
expense 5 (54.9) 3.9 (51.0) (52.5) (57.6) 13.8 (43.8)
Profit for
the
period * 245.6 (16.4) 229.2 239.3 251.7 (58.8) 192.9
----------- ------------ ------------ ------------ ------------ ------------ ----------
Earnings per
ordinary share
- Basic 6 185.9p 194.4p 156.6p
Earnings per
ordinary share
- Diluted 6 185.4p 193.7p 156.1p
Dividend per
ordinary share 7 35.0p Nil 50.0p
Condensed Group Statement of Comprehensive Income
Note Half year Half year Year
ended ended ended
31 January 31 January 31 July
2021 2020 2020
GBPm GBPm GBPm
Profit for the period 229.2 239.3 192.9
Other comprehensive income/(expense)
Items that will not be recycled to the income
statement:
Remeasurement gains/(losses) on defined benefit
pension plans 2.1 - (1.8)
Income tax on other comprehensive (income)/expense 5 (0.4) - 0.3
Other comprehensive income/(expense) for the
period, net of income tax 1.7 - (1.5)
------------ ------------ ---------
Total comprehensive income for the period
* 230.9 239.3 191.4
------------ ------------ ---------
* All attributable to equity holders of the parent.
Condensed Group Statement of Changes in Equity
Note Issued Share Capital Other Retained Total
capital premium redemption reserves earnings equity
reserve
GBPm GBPm GBPm GBPm GBPm GBPm
Half year ended 31 January
2021
Balance at 1 August 2020 15.4 178.4 20.0 1.5 2,778.7 2,994.0
Total comprehensive income
for the period
Profit for the period - - - - 229.2 229.2
Other comprehensive income
** - - - - 1.7 1.7
--------- --------- ------------ ---------- ---------- ----------
Total comprehensive income
for the period - - - - 230.9 230.9
Transactions with shareholders
recorded directly in equity:
Dividends on equity shares 7 - - - - (61.6) (61.6)
Purchase of own shares 11 - - - - (2.5) (2.5)
Shares issued - 0.1 - - - 0.1
Credit in relation to
share options and tax
thereon 5 - - - - 1.5 1.5
--------- --------- ------------ ---------- ---------- ----------
Total contributions by
and distributions to shareholders - 0.1 - - (62.6) (62.5)
Balance at 31 January
2021 15.4 178.5 20.0 1.5 2,947.0 3,162.4
--------- --------- ------------ ---------- ---------- ----------
Half year ended 31 January
2020
Balance at 1 August 2019 15.3 175.8 20.0 1.5 2,708.6 2,921.2
Total comprehensive income
for the period
Profit for the period - - - - 239.3 239.3
Other comprehensive income - - - - - -
**
--------- --------- ------------ ---------- ---------- ----------
Total comprehensive income
for the period - - - - 239.3 239.3
Transactions with shareholders
recorded directly in equity:
Dividends on equity shares 7 - - - - (123.1) (123.1)
Credit in relation to
share options and tax
thereon 5 - - - - 1.5 1.5
Total contributions by
and distributions to shareholders - - - - (121.6) (121.6)
Balance at 31 January
2020 15.3 175.8 20.0 1.5 2,826.3 3,038.9
--------- --------- ------------ ---------- ---------- ----------
Year ended 31 July 2020
Balance at 1 August 2019 15.3 175.8 20.0 1.5 2,708.6 2,921.2
Total comprehensive income
for the period
Profit for the period - - - - 192.9 192.9
Other comprehensive expense
** - - - - (1.5) (1.5)
--------- --------- ------------ ---------- ---------- ----------
Total comprehensive income
for the period - - - - 191.4 191.4
Transactions with shareholders
recorded directly in equity:
Dividends on equity shares 7 - - - - (123.1) (123.1)
Shares issued 0.1 2.6 - - - 2.7
Credit in relation to
share options and tax
thereon 5 - - - - 1.8 1.8
Total contributions by
and distributions to shareholders 0.1 2.6 - - (121.3) (118.6)
Balance at 31 July 2020 15.4 178.4 20.0 1.5 2,778.7 2,994.0
--------- --------- ------------ ---------- ---------- ----------
** An additional breakdown is provided in the Condensed Group
Statement of Comprehensive Income.
Condensed Group Balance Sheet
Note At At At
31 January 31 January 31 July
2021 2020 2020
GBPm GBPm GBPm
ASSETS
Non-current assets
Property, plant and equipment 36.9 35.2 36.7
Financial assets and equity accounted joint
arrangements 43.1 50.5 60.8
Deferred tax assets 5 0.3 1.4 0.5
Retirement benefit assets 3.6 2.9 1.3
83.9 90.0 99.3
Current assets
Inventories 3,678.5 3,581.2 3,863.0
Trade and other receivables 103.0 157.8 69.9
Cash and cash equivalents 8 346.4 24.6 51.4
Corporation tax receivable 5 - 0.7 -
4,127.9 3,764.3 3,984.3
Total assets 4,211.8 3,854.3 4,083.6
LIABILITIES
Non-current liabilities
Trade and other payables (89.0) (95.4) (131.2)
Deferred tax liabilities 5 (4.7) (2.2) (2.6)
(93.7) (97.6) (133.8)
Current liabilities
Interest-bearing loans and borrowings 8 - (20.0) (50.0)
Corporation tax payable 5 (11.1) - (1.5)
Trade and other payables (853.0) (697.8) (834.0)
Provisions 9 (91.6) - (70.3)
(955.7) (717.8) (955.8)
Total liabilities (1,049.4) (815.4) (1,089.6)
------------ ------------ ----------
Net assets 3,162.4 3,038.9 2,994.0
------------ ------------ ----------
EQUITY
Issued capital 15.4 15.3 15.4
Share premium 178.5 175.8 178.4
Capital redemption reserve 11 20.0 20.0 20.0
Other reserves 1.5 1.5 1.5
Retained earnings 11 2,947.0 2,826.3 2,778.7
Total equity 3,162.4 3,038.9 2,994.0
------------ ------------ ----------
Condensed Group Cash Flow Statement
Note Half year Half year Year
ended ended ended
31 January 31 January 31 July
2021 2020 2020
GBPm GBPm GBPm
Cash flows from operating activities
Profit for the period 229.2 239.3 192.9
Depreciation charge 3.1 3.1 6.3
Profit on the sale of property, plant and (0.7) - -
equipment
Finance income 4 (0.1) (0.2) (0.2)
Finance expenses 4 5.2 6.1 13.6
Share-based payment expense 1.6 1.1 2.1
Share of post-tax result of joint ventures (7.9) (0.5) (1.0)
Income tax expense 5 51.0 52.5 43.8
Decrease/(increase) in inventories 186.2 (103.6) (385.0)
(Increase)/decrease in trade and other
receivables (33.1) (30.0) 58.0
(Decrease)/increase in trade and other
payables (27.5) (113.5) 55.0
Increase in provisions 9 21.3 - 70.3
Cash inflow from operations 428.3 54.3 55.8
Interest paid (0.9) (1.9) (6.0)
Income tax paid (40.7) (119.8) (107.7)
Net cash inflow/(outflow) from operating
activities 386.7 (67.4) (57.9)
------------ ------------ ---------
Cash flows from investing activities
Acquisition of property, plant and equipment (3.0) (4.3) (8.3)
Proceeds from sale of property, plant and
equipment 1.5 - 0.1
Increase in loans to joint ventures (0.5) (0.5) (9.9)
Repayment of loans by joint ventures 26.1 0.4 -
Interest received - 0.2 0.3
Net cash inflow/(outflow) from investing
activities 24.1 (4.2) (17.8)
------------ ------------ ---------
Cash flows from financing activities
(Decrease)/increase in bank borrowings (50.0) 20.0 50.0
Payment of lease liabilities (1.8) (1.9) (3.7)
Proceeds from the issue of share capital
on exercise of share options 0.1 - 2.7
Purchase of own shares 11 (2.5) - -
Dividends paid 7 (61.6) (123.1) (123.1)
Net cash outflow from financing activities (115.8) (105.0) (74.1)
------------ ------------ ---------
Net increase/(decrease) in cash and cash
equivalents 295.0 (176.6) (149.8)
Cash and cash equivalents at beginning
of period 51.4 201.2 201.2
Cash and cash equivalents at end of period 8 346.4 24.6 51.4
------------ ------------ ---------
Notes
1. Basis of preparation and accounting policies
Bellway p.l.c. (the "Company") is a company incorporated in
England and Wales.
These condensed consolidated interim financial statements,
prepared to 31 January 2021, include the results of the Company,
its subsidiaries and the Group's interest in joint arrangements
(together referred to as the "Group").
These condensed consolidated interim financial statements are
unaudited and were authorised for issue by the Board on 23 March
2021.
a) Basis of preparation
This set of condensed consolidated interim financial statements
has been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the EU.
The comparative figures for the financial year ended 31 July
2020 are not the Group's statutory financial statements for that
financial year as defined in s434 of the Companies Act 2006. Those
financial statements have been reported on by the Group's auditor
and delivered to the Registrar of Companies. The report of the
auditor was (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 annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards
('IFRSs') as adopted by the EU. As required by the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority,
these condensed consolidated interim financial statements have been
prepared applying the accounting policies and presentation that
were applied in the preparation of the Group's published
consolidated financial statements for the year ended 31 July 2020,
except as noted in (c) below.
b) Going concern
The Group's activities are financed principally by a combination
of ordinary shares and bank borrowings less cash in hand, and, with
effect from 17 February 2021, US Private Placement ("USPP") debt.
At 31 January 2021, net cash was GBP346.4 million(2) (note 8)
having generated cash of GBP345.0 million (note 8) during the
period, which includes GBP428.3 million of cash from operations.
The Group has operated comfortably within all its banking covenants
throughout the period. The Group has committed bank facilities of
GBP495.0 million, expiring in tranches up to December 2023.
Furthermore, in February 2021 the Group issued a sterling USPP for
a total amount of GBP130 million, as part of its ordinary course of
business financing arrangements. This debt, has maturity dates in
seven and ten years.
At 31 January 2021, Bellway had access to total funds, being net
cash and undrawn borrowings, of GBP841.4 million, along with net
current assets (excluding net cash) of GBP2,825.8 million,
providing the Group with adequate headroom and liquidity to meet
its current liabilities as they fall due.
The Group's internal forecasts have been regularly updated, as
usual, throughout the various COVID-19 'lockdowns' and
restrictions, incorporating our actual experience along with our
expected future outturn. The most up to date base forecast has been
sensitised, setting out the Group's resilience to the principal
risks and uncertainties. These sensitivities include a recession
due to economic uncertainty and a deterioration in customer
confidence. This could lead to a reduction in both the total number
of legal completions and private average selling price, with
overheads, land spend and construction spend reducing
accordingly.
The most severe but plausible downside scenario is a severe
recession. It includes the following principal assumptions:
-- Private completions in H2 of FY21 are supported by the strong
order book, but still fall to 64% of that achieved in H1 of FY20,
the last period unaffected by COVID-19. In the 12 months to 31 July
2022, private completions reduce by around 50% compared to the
pre-COVID-19 'lockdown' peak. This is followed by a gradual
recovery based on the lower base position.
-- Private average selling price in H2 of FY21 remains in line
with internal forecasts due to the strong order book position. In
the 12 months to 31 July 2022, private average selling price
reduces by 10% compared to the latest achieved pricing. This is
followed by a gradual recovery based on the lower base
position.
-- These assumptions reflect the Group's experience in the
2008-09 global financial crisis.
A number of prudent mitigating actions were incorporated into
the plausible but severe downside scenario, including:
-- Plots in the land bank being replaced at the same rate that
they are utilised.
-- Construction spend reducing in line with housing revenue.
The sensitivity analysis was modelled over the period to 31 July
2024. In addition to the scenario, several additional mitigating
measures remain available to management that were not included in
the scenario. These include further reducing discretionary land
spend and instead trading out of the substantial existing land
holdings and reducing or cancelling future dividend payments.
In both the base forecast and the most severe but plausible
downside scenario, the Group has significant headroom in both its
financial debt covenants and existing debt facilities, and meets
its liabilities as they fall due.
The directors consider that the Group is well placed to manage
business and financial risks in the current economic environment.
Consequently, the directors are confident that the Group will have
sufficient funds to continue to meet its liabilities as they fall
due for the foreseeable future and have therefore prepared the
condensed consolidated interim financial statements on a going
concern basis.
c) Accounting policies
The Group has recently entered into a small number of
contractual arrangements with certain social housing providers and
this will affect the recognition of the associated revenue and
trade receivables in both the current and future accounting
periods. The amended revenue recognition and trade and other
receivables accounting policies of the Group are:
Revenue recognition
i. Private housing sales and land sales:
Revenue is recognised in the income statement at a point in time
when the performance obligation, being the transfer of a completed
dwelling to a customer, has been satisfied. This is when legal
title is transferred.
ii. Social housing:
The Group reviews social housing contracts on a contract by
contract basis and determines the appropriate revenue recognition
based on the specific terms of each contract.
Where a contract with a housing association transfers both land
and social housing on legal completion ("turnkey and plot sale
contracts" which typically represents around one third of social
housing revenue), there is one performance obligation and revenue
is recognised in the income statement at a point in time when the
homes are build complete and all material contractual obligations
have been fulfilled. This is when legal title is transferred.
Where a contract with a housing association transfers legal
title of land once foundations are in place ("design and build"
contracts' which typically represents around two thirds of social
housing revenue) and separately transfers the social housing
dwellings when they are build complete, there is a judgement as to
whether the sale of land is a separate performance obligation for
the purposes of revenue recognition and consequentially whether
revenue should be recognised over time or at a point in time basis
for the social housing units. Based on the contractual terms in the
majority of such contracts, notably those that enable the Group to
retain control over the land regardless of the transfer of title,
the Group has determined that these contracts include one
performance obligation which is appropriately recognised at a point
in time, when the homes are build complete and all material
contractual obligations have been fulfilled.
The Group recognises revenue in the income statement over time
for contracts where the control of land is irrevocably transferred
to the customer before or during construction. Revenue is
recognised from the point that control is irrevocably transferred
to the customer.
Where revenue is recognised over time and the outcome of the
contract can be estimated reliably, it is recognised based on the
stage of completion of the contract at the balance sheet date. This
is usually by reference to surveys of work performed to the balance
sheet date. Variations to such contracts are included in revenue to
the extent that they have been agreed with the customer. Where the
outcome of such a contract cannot be measured reliably, revenue is
recognised to the extent of costs incurred.
Revenue is measured at the fair value of consideration received
or receivable, net of incentives.
Incentives
Sales incentives are substantially cash in nature. Cash
incentives are recognised as a reduction in housebuild revenue by
the cost to the Group of providing the incentive.
Rental income
Rental income is recognised in the income statement on a
straight-line basis over the term of the lease.
Trade and other receivables
Trade and other receivables are stated at their fair value at
the date of initial recognition and subsequently at amortised cost
less allowances for impairment. Amounts recoverable on certain
social housing contracts where revenue is recognised over time are
included in trade receivables to the extent that they have been
invoiced, or if not they are included within prepayments and
accrued income, and are stated as the amount due less any
foreseeable losses.
Consideration which is contingent on future events is recognised
based on the estimated amount if it is probable and can be reliably
measured. Any subsequent changes to the fair value of the
contingent consideration are recognised in the income
statement.
The directors consider the effect of the updated accounting
policies to be immaterial on revenue, profit and equity in these
condensed consolidated interim financial statements.
Effect of accounting standard amendments effective for the first
time
The Group adopted the following IFRS amendments and improvements
for the first time in these condensed consolidated interim
financial statements:
-- Amendments to IFRS 3 'Business Combinations'
-- Amendments to IFRS 9 'Financial Instruments', IAS 39
'Financial Instruments: Recognition and Measurement' and IFRS 7
'Financial Instruments: Disclosures'
-- Amendments to IAS 1 'Presentation of Financial Statements'
and IAS 8 'Accounting Policies, Changes in Accounting Estimates and
Errors'
-- The Conceptual Framework for Financial Reporting
The adoption of these amendments and improvements has not had a
material effect on the Group's equity or profit for the period.
d) Accounting estimates and judgements
While preparing these condensed consolidated interim financial
statements, the directors are required to make significant
estimates and judgements that could have a significant effect on
these financial statements when applying the Group's accounting
policies.
When preparing these condensed consolidated interim financial
statements, the major judgements in applying the Group's accounting
policies and the major sources of estimation uncertainty were those
applied in the Group's Annual Report and Accounts for the year
ended 31 July 2020, with the exception of the judgement relating to
the COVID-19 exceptional items as no additional related expense or
income has been recognised in the period that satisfies the
requirements to be treated as exceptional.
2. Segmental analysis
The executive Board (the Chief Operating Decision Maker as
defined in IFRS 8 'Operating Segments') 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
macroeconomic factors, such as mortgage availability and government
policy.
3. Net legacy building safety expense and other exceptional items
The net legacy building safety expense and other exceptional
items are those which, in the opinion of the Board, are material by
size or nature and of such significance that they require separate
disclosure on the face of the income statement to allow the users
of the financial statements to understand the performance of the
Group and make more informed decisions.
Operating profit for the half year ended 31 January 2021 has
been arrived at after recognising the following adjusting item in
the income statement:
Half year Half year Year
ended ended ended
31 January 31 January 31 July
2021 2020 2020
GBPm GBPm GBPm
Net legacy building safety expense (note 9) 20.3 - 46.8
COVID-19 related exceptional items
a) Aborted land contracts - - 9.9
b) Abnormal, non-productive site-based costs
arising from the interruption to construction
activity during 'lockdown' - - 14.5
c) Restructuring costs - - 1.4
Total COVID-19 related exceptional items - - 25.8
------------ ------------ ---------
Total net legacy building safety expense and
other exceptional items 20.3 - 72.6
------------ ------------ ---------
Net legacy building safety expense
We continue to take a proactive approach to nationwide concerns
with regards to fire safety in high rise buildings across the UK.
Bellway recognises its responsibilities in its legacy apartment
portfolio and continues to review combustion risks, in external
wall systems, on past high-rise developments.
Initially, our review efforts were directed towards those
buildings over 18 metres in height, where Aluminium Composite
Material ('ACM') had been used in the construction of the external
wall envelope. The scope of our review has since widened, following
the 'Advice for Building Owners of Multi-storey, Multi-occupied
Residential Buildings', issued by the Ministry of Housing,
Communities and Local Government in January 2020.
We therefore now approach this issue, with the benefit of
sector-wide hindsight and, by applying revised guidance which
clarifies the Government's interpretation of the extant building
regulations that were in place at the time of construction. Our
reviews, which often include the results of investigative surveys,
consider whole external wall systems to determine whether the
combination of materials used adequately prevent external fire
spread, thereby rendering the building safe.
As previously reported, Bellway has identified a number of
developments, which obtained building regulation approval at the
time of construction, where the building materials used may not
fully comply with this most recent Government guidance.
Notwithstanding the complexities in assessing legal liability, as a
responsible developer, we continue to assess our portfolio of
legacy apartment schemes to determine the scope of potential
remediation works.
As a result of this evaluation, Bellway has made an additional
net exceptional provision of GBP20.3 million (half year ended 31
January 2020 - GBPnil, year ended 31 July 2020 - GBP46.8 million)
as part of its commitment to help building owners remediate
affected properties.
This is a highly complex area with judgements and estimates in
respect of the cost of rectification works and the extent of those
properties within the scope of the latest government guidance which
are likely to evolve. The Group is also pursuing recoveries from
third parties and a GBP0.9m reimbursement asset has been recognised
on the balance sheet at 31 January 2021, being those assets which
are virtually certain.
COVID-19 related exceptional items
This category solely relates to the year ended 31 July 2020,
with no items recognised in either the half year ended 31 January
2021 or 31 January 2020. The onset of the COVID-19 pandemic in
March 2020 initially affected the Group, and a COVID-19 related
exceptional item was recognised in the financial statements for the
year ended 31 July 2020.
Aborted land contracts - as conditions changed in the land
market following the onset of COVID-19, a number of land deals were
aborted or indefinitely suspended, a full impairment of inventories
was performed, resulting in a land impairment of GBP9.9 million
during the year ended 31 July 2020.
Abnormal, non-productive site-based costs arising from the
interruption to construction activity during 'lockdown' - a number
of site-based costs, which would have ordinarily been capitalised
in to work-in-progress, were incurred when construction activity
was initially suspended across the Group as the UK entered the
first national 'lockdown'. These costs did not contribute to
bringing the inventory into its current location or condition
during this period of interruption, and accordingly GBP14.5 million
was expensed to the income statement.
Restructuring costs - a modest workforce rationalisation
programme was undertaken in response to reduced output and the
suspension of divisional expansion plans
4. Finance income and expenses
Half year Half year Year
ended ended ended
31 January 31 January 31 July
2021 2020 2020
GBPm GBPm GBPm
Interest receivable on bank deposits - 0.2 0.2
Other interest income 0.1 - -
Finance income 0.1 0.2 0.2
Interest payable on bank loans and overdrafts 1.6 2.2 6.2
Interest on deferred term land payables 3.3 3.6 6.9
Interest payable on leases 0.2 0.3 0.5
Other interest expense 0.1 - -
Finance expenses 5.2 6.1 13.6
------------ ------------ ---------
5. Income tax expense
The effective rate of taxation for the period is 18.2% (2020 -
18.0%). The taxation charge for the period is calculated by
applying the standard corporation tax rate of 19.0% (2020 - 18.3%)
to the profit before taxation adjusted for non-taxable items and
enhanced deductions.
In March 2021, the UK Government announced its intention to
increase the corporation tax rate to 25.0% from April 2023. As this
change had not been substantively enacted as at 31 January 2021,
the deferred tax assets/liabilities of the Group have been
calculated based on the substantively enacted corporation tax rate
of 19.0%.
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 six month period (excluding the weighted average number
of ordinary shares held by the Bellway Employee Share Trust (1992)
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 of
ordinary ordinary
shares shares
2021 2021 2021 2020 2020 2020
GBPm Number p GBPm Number p
For basic earnings per ordinary
share 229.2 123,270,262 185.9 239.3 123,119,444 194.4
Dilutive effect of options
and awards 339,661 (0.5) 443,288 (0.7)
For diluted earnings per
ordinary share 229.2 123,609,923 185.4 239.3 123,562,732 193.7
--------- -------------- ----------- --------- -------------- -----------
7. Dividends on equity shares
Amounts recognised as distributions to equity holders in the
period:
Half year Half year Year
ended ended ended
31 January 31 January 31 July
2021 2020 2020
GBPm GBPm GBPm
Final dividend for the year ended 31 July
2020 of 50.0p per share (2019 - 100.0p) 61.6 123.1 123.1
Interim dividend for the year ended 31 July - - -
2020 of nil per share (2019 - 50.4p)
61.6 123.1 123.1
----------- ----------- --------
Proposed interim dividend for the year ending
31 July 2021 o f 35.0p per share (2020 - nil) 43.1 - 61.7
----------- ----------- --------
The proposed interim dividend was approved by the Board on 23
March 2021 and, in accordance with IAS 10 'Events after the
Reporting Period', has not been included as a liability in these
condensed consolidated interim financial statements. The interim
dividend will be paid on Thursday 1 July 2021 to all ordinary
shareholders on the Register of Members on Friday 21 May 2021. The
ex-dividend date is Thursday 20 May 2021 .
8. Analysis of net cash
At 1 August Cash At 31 January
2020 flows 2021
GBPm GBPm GBPm
Cash and cash equivalents 51.4 295.0 346.4
Bank loans (50.0) 50.0 -
Net cash 1.4 345.0 346.4
------------ -------- --------------
9. Provisions and reimbursement assets
Legacy building Reimbursement Total
safety assets
provision
GBPm GBPm GBPm
At 1 August 2020 (70.3) - (70.3)
Additions (note 3) (36.5) 13.5 (23.0)
Released (note 3) 2.7 - 2.7
Utilised/(recovered) 12.5 (12.6) (0.1)
At 31 January 2021 (91.6) 0.9 (90.7)
---------------- -------------- ---------
The Group has a provision for the cost of performing fire
remedial works on a small number of legacy developments. These
estimates may change over time as further information is assessed,
building works progress and the interpretation of fire safety
regulations further evolve. The majority of the provision is
expected to be utilised within five years, however, the timing is
uncertain, so the provision has not been discounted.
This is a highly complex area with judgements and estimates in
respect of the cost of rectification works and the extent of those
properties within the scope of Bellway's legacy building safety
improvement provision could be extended should the latest
interpretation of government guidance further evolve (note 10).
10. Contingent liabilities
Legacy building safety improvements
We continue to take a proactive approach to nationwide concerns
with regards to fire safety in high rise buildings across the UK.
Bellway recognises its responsibilities in its legacy apartment
portfolio and continues to review combustion risks, in external
wall systems, on past high-rise developments.
As previously reported, Bellway has identified a number of
developments, which obtained building regulation approval at the
time of construction, where the building materials used may not
fully comply with the most recent Government guidance.
Notwithstanding the complexities in assessing legal liability, as a
responsible developer, we continue to assess our portfolio of
legacy apartment schemes to determine the scope of potential
remedial works.
As a result of this evaluation, Bellway has made an additional
net provision of GBP20.3 million in order to help building owners
remediate affected properties, resulting in total outstanding
remediation costs of GBP91.6 million (note 9).
While a prudent approach has been taken, the extent of the
provision could increase, in line with normal accounting practice
if new issues are identified, as building owners continue to
undertake their own investigative works on these and other schemes
within the legacy portfolio. The Group is also pursuing recoveries
from third parties over and above the GBP0.9m reimbursement asset
recognised on the balance sheet at 31 January 2021 (note 9), but as
these are not virtually certain, no further assets have been
recognised on the balance sheet.
11. Reserves
Own shares held
The Group holds shares within the Bellway Employee Share Trust
(1992) (the 'Trust') for participants of certain share-based
payment schemes. These are held within retained earnings. During
the period 105,967 shares were purchased by the Trust (2020 - nil
shares) and the Trust transferred 47,923 (2020 - 20,820) shares to
employees and directors. The number of shares held within the Trust
and on which dividends have been waived, at 31 January 2021 was
101,853 (2020 - 43,809). These shares are held within the financial
statements at a cost of GBP2.4 million (2020 - GBP1.0 million). The
market value of these shares at 31 January 2021 was GBP2.8 million
(2020 - GBP1.7 million).
Capital redemption reserve
On 7 April 2014 the Company 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.
12. Related party transactions
There have been no related party transactions in the first six
months of the current financial year which have materially affected
the financial position or performance of the Group.
Other than the business combination disclosed in note 13 and the
acquisition of 100% of the ordinary share capital of both Galaxy
Land Limited and Ainscough Land Limited on 3 March 2021, the
related parties are consistent with those disclosed in the Group's
Annual Report and Accounts for the year ended 31 July 2020.
13. Business combination
The Group acquired 50% of the ordinary share capital of DFE TW
Residential Limited ("DFE") on 22 January 2021 for GBP8.9 million
cash consideration solely to access a land interest where the
pre-acquisition shareholders had achieved a positive planning
prognosis over a number of years. The land interest was immediately
transferred to both shareholders of DFE. As part of the acquisition
of DFE there was no transfer of trade, nor any transfer of
employees. As the shareholders of DFE have substantially all of the
economic benefit of the assets and fund the liabilities of DFE,
this entity is deemed to be a joint operation.
The Group incurred acquisition-related expenses of GBP0.4m on
legal fees and due diligence costs. These costs have been included
in 'cost of sales' in the period.
The following table summarises the fair value of assets acquired
and liabilities assumed at the date of acquisition:
Fair value
GBPm
Inventories 13.7
Corporation tax liability (0.1)
Deferred tax liabilities (1.7)
Trade and other payables (3.0)
Total identifiable net assets acquired 8.9
-----------
The valuation technique used for measuring the fair value of the
material asset acquired is as follows:
Assets acquired Valuation technique
Inventories The fair value was determined as the consideration
paid by the Group, on an arm's length basis, for
the underlying inventory assets acquired, less the
costs of sale.
----------------------------------------------------
If new information, obtained within one year of the date of
acquisition, about facts and circumstances that existed at the date
of acquisition identifies adjustments to the above amounts, then
the accounting for the acquisition will be revised.
No goodwill arose on the acquisition as the consideration
transferred was equal to the total identifiable net assets
acquired.
Following the acquisition by the Group, both revenue and cost of
sales of GBP1.4 million have been recognised in the reported
condensed Group income statement for the half year ended 31 January
2021, resulting in no additional profit before taxation.
14. Seasonality
In common with the rest of the UK housebuilding industry,
activity occurs throughout the year, but is subject to the two main
house selling seasons of spring and autumn. As these seasons fall
in separate half years, the Group's financial results are not
usually subject to significant seasonal variations.
15. Alternative performance measures
Bellway uses a variety of alternative performance measures
('APMs') which, although financial measures of either historical or
future performance, financial position or cash flows, are not
defined or specified by IFRSs. The directors use a combination of
APMs and IFRS measures when reviewing the performance, position and
cash of the Group.
The APMs used by the Group are defined below:
-- Gross profit and operating profit before net legacy building
safety expense and other exceptional items - Both of these measures
are reconciled to total gross profit and total operating profit on
the face of the condensed Group income statement. The directors
consider that the removal of the net legacy building safety expense
and other exceptional items provides a better understanding of the
underlying performance of the Group.
-- Gross profit margin before net legacy building safety expense
and other exceptional items - This is gross profit before net
legacy building safety expense and other exceptional items divided
by total revenue. The directors consider this to be an important
indicator of the underlying trading performance of the Group.
-- 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.
-- Operating profit margin before net legacy building safety
expense and other exceptional items - This is operating profit
before net legacy building safety expense and other exceptional
items divided by total revenue. The directors consider this to be
an important indicator of the operating performance of the
Group.
-- 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 to be an important indicator
of the proportion of earnings paid to shareholders and reinvested
in the business.
-- Net asset value per 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.
-- Return on capital employed ('RoCE') before net legacy
building safety expense and other exceptional items - This is
calculated as operating profit before net legacy building safety
expense and other exceptional items 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.
31 January 2021 31 January 2020
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 before
net legacy building
safety
expense 297.7 297.7 297.2 297.2
Capital employed/land
creditors:
Opening 2,994.0 343.6 3,337.6 2,921.2 297.9 3,219.1
Half year 3,162.4 371.7 3,534.1 3,038.9 274.9 3,313.8
Average 3,078.2 357.7 3,435.9 2,980.1 286.4 3,266.5
---------- --------------- ---------------- ---------- --------------- ----------------
Annualised return on
capital
employed 19.3% 17.3% 19.9% 18.2%
-- Return on capital employed ('RoCE') - This is calculated as
total operating profit divided by the average capital employed.
Average capital employed is calculated based on opening and half
year 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
31 January 2021 31 January 2020
Capital Land creditors Capital Capital Land creditors Capital
employed employed employed employed
including including
land creditors land creditors
GBPm GBPm GBPm GBPm GBPm GBPm
Total operating profit 277.4 277.4 297.2 297.2
Capital employed/land
creditors:
Opening 2,994.0 343.6 3,337.6 2,921.2 297.9 3,219.1
Half year 3,162.4 371.7 3,534.1 3,038.9 274.9 3,313.8
Average 3,078.2 357.7 3,435.9 2,980.1 286.4 3,266.5
---------- --------------- ---------------- ---------- --------------- ----------------
Annualised return on
capital
employed 18.0% 16.1% 19.9% 18.2%
-- Order book - This is calculated as the total expected sales
value of current reservations that have not legally completed. The
directors consider this to be an important indicator of the likely
future operating performance of the Group.
-- Post tax return on equity - This is calculated as profit for
the period divided by the average of the opening and half year net
assets. The directors consider this to be a good indicator of the
operating efficiency of the Group.
31 January 31 January
2021 2020
GBPm GBPm
Profit for the period 229.2 239.3
Net assets:
Opening 2,994.0 2,921.2
Half year 3,162.4 3,038.9
Average 3,078.2 2,980.1
----------- -----------
Annualised post-tax return on equity 14.9% 16.1%
-- Net cash - This is 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.
-- 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.
31 January 31 July Movement 31 January 31 July Movement
2021 2020 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm
Land 2,241.0 2,216.2 24.8 2,068.3 2,004.4 63.9
Work in progress 1,309.4 1,496.1 (186.7) 1,333.2 1,298.2 35.0
(Decrease)/increase in
capital invested in land
and work in progress in
the period (161.9) 98.9
Land creditors (371.7) (343.6) (28.1) (274.9) (297.9) 23.0
(Decrease)/increase in
capital invested in land,
net of land creditors,
and work in progress in
the period (190.0) 121.9
---------- ---------
-- 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.
-- Average net debt - This is calculated by averaging the net
debt/cash position at 1 August and each month end during the
period. The directors consider this to be a good indicator of the
financing position of the Group throughout the period.
Principal risks and uncertainties
A risk register is maintained detailing all of our potential
risks, categorised between strategic, operational, financial,
compliance and reputational risks. The risk management processes
are set up to ensure all aspects of the business are considered,
from strategy through to business execution and including any
specialist business areas.
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.
A summary of principal risks is reported to management, the
Audit Committee and the Board, which is mainly, but not
exclusively, comprised of risks considered to be outside of 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.
We have identified the following principal risks to our
business:
Risk and Strategic relevance KPIs Mitigation Change
description in
period
Land
Inability to * Insufficient land would affect our volume growth * Land bank (with DPP). * Budgeting and forecasting of growth targets to ensure No
source targets. land bank supports strategic target. change.
suitable
land at * Number of homes sold.
appropriate * Failure to buy land at the right margin would have a * Targeted approach to land acquisitions, with
gross margins detrimental effect on future returns. pre-purchase due diligence and viabilities on all
and RoCE. * RoCE. proposed land purchases.
* Gross margin. * Authorisation of all land purchases in accordance
with Group procedures and our Approvals Matrix.
* EPS.
----------------------------------------------------------------------- ------------------------------------------------------------- -------------------------------------------------------------------- ---------
Planning
Delays and * Failure to obtain planning within appropriate * EPS. * Group and divisional planning specialists provide No
complexity timescales would have a detrimental impact on our advice and support to the divisions to assist with change.
in the growth prospects and have an adverse effect on securing planning permissions.
planning returns. * RoCE.
process.
* 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 and appropriate resources * Number of homes sold. * Systems are in place to select, appoint, monitor, No
Shortage of causes delays in construction, impacting the ability manage and build long-term relationships with our change.
appropriately to deliver volume growth targets. subcontractors and suppliers.
skilled * Customer satisfaction score.
subcontractors
and shortages * Pricing pressure would impact returns. * Competitive rates and prompt payment for our
of building * Employee turnover. subcontractors.
materials at
competitive
prices. * EPS. * Group-wide purchasing arrangements are in place.
* Continued review and monitoring of supplier and
subcontractor performance.
----------------------------------------------------------------------- ------------------------------------------------------------- -------------------------------------------------------------------- ---------
Health and
safety * In addition to the moral obligation and the * Number of RIDDOR seven day lost time accidents per * The Board considers health and safety issues at every No
There are significant requirement to act in a responsible manner, injuries 100,000 site operatives. meeting. change.
health and to any individual while at one of our business
safety risks locations would delay construction and could result
inherent in in criminal prosecution, civil litigation and * NHBC health and safety benchmark. * Regular visits to sites by senior management
the construction reputational damage. (independent of our divisions) and external
process. consultants to monitor health and safety standards
* NHBC Health and Safety Awards. and performance against the health and safety
policies and procedures.
External environment
There are a
number of external * The ultimate impact of these external factors would * Number of homes sold. * Ongoing monitoring of key business metrics and No
factors that be on the ability to sell houses and apartments and development of action plans as necessary. change.
could affect on returns.
our ability * Order book.
to generate * Product range and pricing strategy determined based
sales, including on regional market conditions.
but not limited * Reservations rate.
to:
* Economic factors, especially house price * Use of sales incentives, such as part-exchange, to
inflation * Customer satisfaction score. encourage the selling process.
and interest rates.
* EPS. * Use of Government-backed schemes to encourage home
* Mortgage availability. ownership.
* RoCE.
* Government housing policy. * We continue to monitor business performance and build
a robust future-proof business with a solid strategy
and sound financial controls.
* Uncertainty over post-BREXIT agreements.
------------------------------------------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ ---------
Human resources
Inability to * Failure to attract and retain people with appropriate * Employee turnover. * Continued development of the Group Human Resources No
attract and skills will affect our ability to perform and deliver function and implementation of our people strategy. change.
retain appropriate our volume growth target.
people. * Number of graduates and apprentices.
* Centralised recruitment support and employee
engagement activities.
* Number of people who have worked for the Group for 10
years or more.
* Monitoring and review of staff turnover and feedback
from exit interviews.
* Training days per employee.
* Competitive salary and benefits packages which are
* Senior management gender split. regularly reviewed and benchmarked.
* Succession plans in place and key person dependencies
identified and mitigated.
* Increased level of training provided to employees.
* Graduate, apprentice and site manager programmes in
place.
------------------------------------------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ ---------
IT and security
Failure to * Poor performance of our systems would affect * EPS. * Group-wide systems are in operation which are No
have suitable operational efficiency, profitability and our control centrally controlled with an outsourced support change.
systems in environment. function in place.
place and appropriate
back up, contingency
plans and security * Continued investment in systems.
policies.
* Regular review and testing of our security measures,
contingency plans and IT security policies.
* Group-wide Cyber Security Committee in place.
------------------------------------------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ ---------
Legal and
regulatory * Lack of appropriate procedures and compliance would * Volume growth. * In-house expertise from Group Company Secretariat, No
compliance result in delays in land development, construction Legal, Health and Safety and Technical functions who change.
Failure to and sales completions plus possible re-work to sites, advise and support divisions on compliance and
comply with all of which could have a detrimental impact on * EPS. regulatory matters.
legislation profitability and reputation, potentially leading to
and financial penalties and other regulatory
regulatory consequences. * Number of homes sold. * Consultation with Government agencies, specialist
requirements. external legal advisors and subject matter experts
(e.g. fire safety consultants) including ongoing
* Changes may occur as a result of the MHCLG's Building * RoCE. cooperation with the CMA.
Safety Programme and the work being carried out by
the CMA and Government on leasehold reform.
* Gross margin. * Strengthened Group-wide policies, procedures and
training for key regulatory matters, supported by
reporting and whistleblowing procedures.
* Continual monitoring and review of changes to
legislation and regulation, including any supporting
guidance and advice notes.
* Continual liaison with the HBF on regulation and
compliance matters.
Climate
change * There is an increased focus on the actions taken by * Greenhouse gas emissions. * Continual monitoring of new and evolving requirements No
Failure to businesses in response to climate change and the as part of our legal and regulatory compliance change.
evolve disclosures made. Failure to improve reporting and framework, including the Future Homes Standard.
business performance in line with new regulations and * Carbon emissions per completed home.
practices and heightened social expectations could lead to
operations financial penalties and reputational damage. * Dedicated Head of Sustainability to assess risks
in response relating to climate change, monitor performance and
to climate drive improvement.
change, * The physical impacts of climate change (such as
including extreme weather) could lead to disruptions within the
physical supply chain and build programme. * Investment in energy-saving measures for offices and
impacts, sites, including transition to REGO certified
reporting electricity.
requirements
and social
expectations. * Procurement of materials (e.g. timber) from
sustainable sources.
* Regular review of the design and features of new
homes to increase energy efficiency.
------------------------------------------------------------------ -------------------------------------------- ------------------------------------------------------------------ ---------
COVID-19
Uncertainty * The economic uncertainty brought about by COVID-19, * EPS. * Strong balance sheet as at 31 January 2021 and No
over the in addition to the factors below, affects committed bank facilities of GBP495 million. The change.
impact construction and sales activity which ultimately Group also has USPP debt of GBP130 million.
of COVID-19 impact the Group's liquidity: * Number of homes sold.
on the
Group's * Regular review of liquidity and cashflow at a Group
operational * Lack of high loan-to-value mortgages * RoCE. level.
and financial
performance.
* Government imposed restrictions/guidance * Gross margin. * Targeted spend on land and WIP.
* Maintaining social distancing practices * Order book value. * Maintenance of business resilience plans supported by
investment in IT to enable robust homeworking.
* Issues in the supply chain or high levels of * Land bank (with DPP).
staff/subcontractor absence. Safe working practices
and arrangements
* Operating margin. implemented across
* Damage to reputation if the Group is not perceived to offices and sites
be following Government guidelines and acting for staff, subcontractors
responsibly. * Dividend per ordinary share. and customers with
Marshalls appointed
to monitor social
* Operating profit. distancing.
* Net asset value per ordinary share.
* Employee turnover.
* Reservations rate.
------------------------------------------------------------------ -------------------------------------------- ------------------------------------------------------------------ ---------
The Group also faces a number of emerging risks that have the
potential to be significant to the achievement of our strategy, but
which at present cannot be fully defined and assessed. These are
considered as part of our established risk management framework,
discussed by the Board regularly and elevated to principal risks
when warranted.
Statement of directors' responsibilities
We confirm that to the best of our knowledge:
-- the condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the EU;
-- the Half Year Report 2021 includes a fair review of the
information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
consolidated set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the Group during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The directors of Bellway p.l.c. are listed in the Annual Report
and Accounts for the year ended 31 July 2020.
For and on behalf of the Board
Jason Honeyman
Chief Executive
Registered number 1372603
23 March 2021
Note on forward-looking statements
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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