TIDMBWY
RNS Number : 0272I
Bellway PLC
10 August 2021
Bellway p.l.c.
Trading Update
Tuesday 10 August 2021
Bellway p.l.c. ("Bellway" or the "Group") is today issuing a
Trading Update for the year ended 31 July 2021 ahead of its
Preliminary Results announcement on Tuesday 19 October 2021.
Highlights
-- Strong recovery in housing revenue, which rose by 41% to over
GBP3.1 billion (2020 - GBP2,204.4 million, 2019 - GBP3,180.1
million), and only 2.5% below the level achieved in financial year
2019.
-- The number of housing completions rose by 34.8% to 10,138
(2020 - 7,522, 2019 - 10,892).
-- Good underlying demand across the country, with a private
reservation rate of 169 per week (2020 - 141, 2019 - 160), an
increase of 19.9% and 5.6% compared to the prior year and financial
year 2019 respectively.
-- A front-footed, yet disciplined approach to land investment,
with a record 19,819 plots(3) (2020 - 12,124 plots, 2019 - 13,284
plots) contracted in desirable locations, with a total contract
value of GBP1,066.0 million(3) (2020 - GBP777.7 million, 2019 -
GBP787.7 million), has resulted in a strengthened land bank.
-- Strong balance sheet, with net cash of GBP330 million(4)
(2020 - GBP1.4 million, 2019 - GBP201.2 million) provides
resilience and strategic flexibility.
-- A record forward sales position, with an order book
comprising 7,082 homes (2020 - 6,588 homes, 2019 - 4,878 homes) at
a value of GBP2,022.3 million(5) (2020 - GBP1,760.2 million, 2019 -
GBP1,223.9 million), offers a strong platform for growth in the
year ahead.
Jason Honeyman, Chief Executive, commented:
"Bellway has delivered a strong performance, with volume output
once again above 10,000 homes and housing revenue approaching 2019
levels. This positive recovery has been achieved through the hard
work and dedication of our colleagues, subcontractors, and supply
chain partners, while maintaining the high quality of our product
and making further improvements in the service we offer our
customers.
Going forward, we are in an excellent position to continue our
long-term growth strategy. The Group benefits from a substantial
order book and a robust balance sheet. In addition, our record
investment in land and the resultant strengthened land bank
provides a strong platform for both volume growth and further
margin recovery in the years ahead."
Market and current trading
Bellway has performed well throughout the financial year,
benefitting from strong underlying demand across the country for
our high-quality new homes. Average weekly private reservations
during the year were 169 per week (2020 - 141, 2019 - 160), an
increase of 19.9% compared to the prior year and 5.6% ahead of
financial year 2019. The overall reservation rate rose by 14.6% to
204 per week (2020 - 178, 2019 - 210), with this achieved from an
average of 270 outlets.
The pricing environment remains positive, with house price
inflation, which is benefitting selected sites in localities where
demand is particularly strong, generally offsetting build cost
pressures. There remain manageable short-term constraints in the
supply chain and intermittent labour shortages across the sector as
colleagues, subcontractors and suppliers are subject to
self-isolation requirements to curtail the spread of COVID-19.
Results
The Group has delivered significant growth in housing revenue,
which rose by 41% to over GBP3.1 billion (2020 - GBP2,204.4
million, 2019 - GBP3,180.1 million), with this only 2.5% below the
housing revenue generated in financial year 2019. The growth in
housing revenue has principally been achieved by the recovery in
volume output, with housing completions rising by 34.8% to 10,138
(2020 - 7,522, 2019 - 10,892). In addition, geographical mix
changes and the benefit of underlying house price inflation have
resulted in the overall average selling price rising by 4.4% to
over GBP306,000 (2020 - GBP293,054, 2019 - GBP291,968). As
previously guided, the average selling price is expected to
moderate in the year ending 31 July 2022 to just over GBP290,000,
with this a reflection of changes in product mix.
The underlying operating margin for the full financial year is
still expected to be around 17%(6) (2020 - 14.5%, 2019 - 21.0%) and
it is anticipated that the recovery in the underlying operating
margin will continue in the year ahead, driven by increased volume
output and completions from more recently acquired land.
Land buying
Our front-footed, yet disciplined approach towards land
acquisition has led to a record investment in new sites since our
re-entry into the market in early summer 2020. This reflects the
strong, long-term demand for good quality housing and has resulted
in a strengthened land bank, providing a solid platform for ongoing
growth and margin recovery in the years ahead.
The Group has contracted to purchase 19,819 plots(3) (2020 -
12,124 plots, 2019 - 13,284 plots) across 109 sites(3) (2020 - 69
sites, 2019 - 94 sites), with a focus on acquiring land in
desirable locations with high demand, where the product is
affordable in the context of localised market conditions. The
contract value of those plots acquired is GBP1,066.0 million(3)
(2020 - GBP777.7 million, 2019 - GBP787.7 million) and the
anticipated gross margin, based upon revenue and cost at the time
of acquisition, is an average 23%.
Bellway also continues to invest in its strategic land portfolio
and is further strengthening its strategic land team to pursue
longer-term opportunities.
Building safety
We continue to take a proactive and responsible approach to
concerns about 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 reported in March we are working with building owners and
warranty providers, who are undertaking their own investigative
works, to determine whether the combination of materials used in
the construction of whole wall systems adequately prevents the
spread of fire.
As a result of these ongoing reviews, and notwithstanding that
all buildings obtained the required regulatory approvals at the
time of construction, the Board anticipates a further net legacy
building safety expense in the second half of the financial year
and will provide a further update with the release of the
Preliminary Results. This is a complex area where cost estimates
are subject to change as on-site works progress and further
investigative works are undertaken, or, if the scope of Government
legislation further widens. Before taking any additional amounts
into consideration, Bellway has already set aside GBP131.6 million
since 2017 in relation to fire safety, demonstrating our commitment
to act responsibly to this issue.
Bellway continues to actively pursue recoveries from suppliers,
subcontractors, and professional advisors where they have fallen
short of the standards required.
Financial position
Bellway has a strong balance sheet and ended the year with net
cash of GBP330 million(4) (2020 - GBP1.4 million, 2019 - GBP201.2
million), representing an ungeared(7) position (2020 - ungeared,
2019 - ungeared). This is ahead of previous expectations,
reflecting the completion of additional homes and changes in the
timing of cash outflows in relation to land contracts.
Committed land obligations remain low, at around GBP455 million
(2020 - GBP343.6 million, 2019 - GBP297.9 million).
Outlook
The Board recognises that there are wider economic uncertainties
because of Brexit and the continuing pandemic. Notwithstanding
these concerns, customer confidence is strong, and the success of
the vaccination programme is having a positive impact on the UK's
prospective economic performance. In addition, our order book is
substantial and on 31 July the value had risen by 14.9% to a record
GBP2,022.3 million(5) (2020 - GBP1,760.2 million, 2019 - GBP1,223.9
million), equating to 7,082 homes (2020 - 6,588 homes, 2019 - 4,878
homes), with 66% of these contracted. Our investment in land
provides a solid platform for both future volume growth and margin
recovery and our significant cash holdings provide resilience and
strategic flexibility.
The long-term fundamentals remain strong and Bellway, with its
Customer First agenda, focussed on providing high quality new
homes, is well placed to continue creating long-term value and
making a positive contribution for all our stakeholders.
(1) All figures relating to completions, order book,
reservations, cancellations, and average selling price exclude the
Group's share of its joint ventures unless otherwise stated.
(2) Comparatives are for the year ended 31 July 2020 or as at 31
July 2020 ('2020') or are for the year ended 31 July 2019 or as at
31 July 2019 ('2019') unless otherwise stated.
(3) Includes the Group's share of land contracted through joint
venture partners comprising 882 plots (2020 - 203 plots, 2019 - 171
plots), with a contract value of GBP39.2 million (2020 - GBP15.3
million, 2019 - GBP5.7 million) across 2 sites (2020 - 1 site, 2019
- 1 site).
(4) Net cash is cash and cash equivalents less debt financing.
(5) Order book is the total expected sales value of reservations
that have not legally completed.
(6) The underlying operating margin is the operating profit
(before net legacy building safety expense and exceptional items)
divided by total revenue.
(7) Gearing is net debt divided by total equity
FOR FURTHER INFORMATION PLEASE CONTACT KEITH ADEY, FINANCE
DIRECTOR FROM 7:00 AM ONWARDS ON 0191 217 0717.
Certain statements in this announcement are forward-looking
statements which are based on Bellway p.l.c.'s expectations,
intentions and projections regarding its future performance,
anticipated events or trends and other matters that are not
historical facts. Such forward-looking statements can be identified
by the fact that they do not relate only to historical or current
facts. Forward-looking statements sometimes use words such as
'aim', 'anticipate', 'target', 'expect', 'estimate', 'intend',
'plan', 'goal', 'believe', or other words of similar meaning. These
statements are not guarantees of future performance and are subject
to known and unknown risks, uncertainties and other factors that
could cause actual results to differ materially from those
expressed or implied by such forward-looking statements. Given
these risks and uncertainties, prospective investors are cautioned
not to place undue reliance on forward-looking statements.
Forward-looking statements speak only as of the date of such
statements and, except as required by applicable law, Bellway
p.l.c. undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.
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