TIDMBWY
RNS Number : 7991B
Bellway PLC
15 June 2021
Bellway p.l.c.
Trading update
Tuesday 15 June 2021
Bellway p.l.c. ("Bellway" or the "Group") is today issuing a
trading update in respect of the period from 1 February to 6 June
2021.
Highlights
-- Strong sales demand in the period, with an average of 239
reservations per week (2020 - 158 per week, 2019 - 244 per week),
an increase of 51.3% compared to the equivalent period in the prior
year, which was detrimentally affected due to COVID-19.
-- Record investment in land providing a strong platform for
growth and margin recovery in future years, with 15,982 plots
contracted since 1 August 2020 (2020 - 10,079 plots, 2019 - 10,620
plots) at attractive rates of return.
-- Strong balance sheet with net cash of GBP408 million(2) (31
May 2020 - net debt of GBP157 million, 2 June 2019 - net debt of
GBP261 million) provides resilience and flexibility.
-- Continued focus on quality with the launch of our "Customer
First" programme in April and ongoing recognition as a five-star
home builder in the HBF's Customer Satisfaction survey.
-- A robust forward sales position, with the value of the order
book rising by 20.5% to GBP1,889 million(3) (31 May 2020 - GBP1,568
million, 2 June 2019 - GBP1,643 million) and comprising 6,763 homes
(31 May 2020 - 6,038 homes, 2 June 2019 - 6,312 homes).
-- Housing completions for the full year are expected to be
around 10,000 homes (31 July 2020 - 7,522 homes, 31 July 2019 -
10,892 homes) and the average selling price is now expected to rise
further, to in excess of GBP300,000 (31 July 2020 - GBP293,054, 31
July 2019 - GBP291,968).
Jason Honeyman, Chief Executive, commented:
"Demand for our high-quality new homes continues to be strong
and customer confidence throughout the wider housing market is
resilient. Customer satisfaction is high and our recently launched
"Customer First" programme will help to improve quality further and
will build upon our continued success as a five-star home
builder.
We have continued our front-footed approach to land acquisition,
making a record investment in new sites, thereby enabling us to
grow sales outlets and meet the ongoing demand for new homes in the
years ahead. This disciplined investment approach, together with
our strong balance sheet, ensures that Bellway is in a good
position to continue its long-term growth strategy."
Market and current trading
Bellway continues to perform well in the second half of the
financial year, experiencing strong customer demand for our
high-quality new homes. The pricing environment remains positive,
with some house price inflation benefiting selected sites, in
localities where demand is particularly strong.
Since 1 February, the Group has achieved an average of 239
reservations per week (2020 - 158 per week, 2019 - 244 per week),
from an average of 266 active outlets. The weekly reservation rate
represents an increase of 51.3% compared to the equivalent period
in the prior year, during which the sales rate was detrimentally
affected following the closure of outlets from 23 March 2020, due
to COVID-19. Average private weekly reservations during the same
period were 193 per week (2020 - 120 per week, 2019 - 190 per
week), an increase of 60.8%. Customer confidence is resilient and
the cancellation rate since 1 August remains low at 13% (2020 -
15%, 2019 - 12%).
Notwithstanding the introduction of lower regional Help-to-Buy
price caps, outside of London, and the restriction of the scheme to
first time buyers only, with effect from April 2021, the demand for
larger, higher value homes remains encouraging. This has been
supported by the extended stamp duty land tax holiday and more
broadly, ongoing customer aspirations for more home-working space.
As a result, the Board now expects that the average selling price
for the current financial year will rise further than previously
guided, to in excess of GBP300,000 (31 July 2020 - GBP293,054, 31
July 2019 - GBP291,968), before moderating in the year ending 31
July 2022, because of ongoing product mix changes.
Strong cost control
Bellway continues to adopt several 'business-as-usual' quality,
cost control and efficiency initiatives, such as strong procurement
disciplines, site groundwork reviews, internal cost-saving
campaigns, and further house-type standardisation. These are
expected to maintain and contribute towards gross margin
improvement in the year ahead.
Securing high quality labour and materials also remains a
priority for the Group, however, the global increase in
construction activity is resulting in growing demand for both
skilled labour and material resources. This is leading to some
upward pressure on costs throughout the wider industry and for
Bellway, these are most pronounced when routine group procurement
agreements approach their normal, staggered renewal dates.
House price growth is, in general, currently offsetting these
sector-wide cost pressures and in turn, helping to preserve
site-based margins. In addition, Bellway continues to advance its
construction programmes with the intention of securing resources at
competitive rates. This approach also ensures that the Group is
well positioned to further increase output in the next financial
year.
Building homes to be proud of
Our commitment to quality throughout the organisation is
ingrained within our approach to business and embodied within our
group-wide "Customer First" programme, formally launched internally
in April this year. This is designed to further raise awareness and
standards throughout all organisational disciplines, thereby
contributing to a positive experience for our customers. While this
approach is cultural, we also continue to use a range of metrics to
quantitively assess our performance in relation to quality and
customer satisfaction. In that regard, we are delighted to have
retained our five-star home builder rating from our customers in
the HBF Customer Satisfaction survey for the fifth consecutive
year.
Disciplined investment in high quality land opportunities
Bellway's solid, asset-backed balance sheet, substantial cash
resources and long-term committed financing arrangements, have
enabled the Group to continue its front-footed, yet disciplined
approach to land acquisition.
As a result, Bellway has contracted to acquire some 15,982 plots
since 1 August 2020 (2020 - 10,079 plots, 2019 - 10,620 plots), at
attractive rates of return, continuing the momentum from the last
quarter of the previous financial year, when competition in the
land market was generally less pronounced. The value of those plots
contracted is a record GBP891 million (2020 - GBP651 million, 2019
- GBP631 million) and the average anticipated gross margin, based
upon revenue and cost at the time of acquisition, is around 23%. In
addition, there are heads of terms agreed and solicitors
instructed, to purchase a further 9,000 plots.
The continued effects of COVID-19 have led to some inevitable
delays in the planning process, however, this period of enhanced
land investment serves to strengthen the depth of the Group's land
bank. This will contribute to continued, well-controlled outlet
growth, both in the next financial year and beyond and this will
help to maintain overall sales rates as the Help-to-Buy scheme
draws to a close in March 2023.
Financial position
As at 6 June, the Group had net cash of GBP408 million(2) (31
May 2020 - net debt of GBP157 million, 2 June 2019 - net debt of
GBP261 million), representing an ungeared(4) position (31 May 2020
- gearing of 5%, 2 June 2019 - gearing of 9%). The Board expects
Bellway to end the year with net cash of around GBP100 million(2)
(31 July 2020 - GBP1.4 million, 31 July 2019 - GBP201.2 million),
depending upon the timing of land opportunities.
Outlook
As previously reported, the reduced level of work-in-progress at
31 January, compared to July 2020, will result in a lower level of
completions in the second half of this financial year, compared to
the first half. The Board therefore still expects that Bellway will
complete the sale of around 10,000 homes (31 July 2020 - 7,522
homes, 31 July 2019 - 10,892 homes) in the current financial
year.
Notwithstanding the growth in completions already achieved to
date, the value of the forward order book has risen by 20.5% to
GBP1,889 million(3) (31 May 2020 - GBP1,568 million, 2 June 2019 -
GBP1,643 million) and comprises 6,763 homes (31 May 2020 - 6,038
homes, 2 June 2019 - 6,312 homes), with 60% of these contracted.
This strong order book, together with further investment in land,
work-in-progress and sales outlets, provides an excellent platform
from which Bellway can continue its disciplined growth strategy and
generate further value for shareholders.
1 All figures relating to completions, order book, reservations,
cancellations and average selling price exclude the Group's share
of its joint ventures.
2 Net cash/debt is cash plus cash equivalents, less debt financing.
3 Order book is the total expected sales values of reservations that have not legal completed.
4 Gearing is net debt divided by total equity.
For further information, please contact:
Bellway p.l.c.
Jason Honeyman, Group Chief Executive
0191 217 0717
Keith Adey, Group Finance Director
0191 217 0717
Media enquiries
Paul Lawler, Group Head of Communications
paul.lawler@bellway.co.uk
07813 392 669
Smithfield
Ged Brumby
gbrumby@smithfieldgroup.com
07540 412 301
Rob Yates
ryates@smithfieldgroup.com
07715 375 443
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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