Bellway
p.l.c.
Trading
Update
Friday 9 February 2024
Bellway p.l.c. ('Bellway' or the 'Group') is
today issuing a trading update for the six months ended 31 January
2024 (the 'period') ahead of its Interim Results announcement on
Tuesday 26 March 2024.
Highlights
§ Housing revenue of
over £1.25 billion (2023 - £1,804.9 million), in line with the
Board's expectations.
§ Total housing
completions of 4,092 homes (2023 - 5,695) at an average selling
price of £309,300 (2023 - £316,929).
§ Headline pricing has
remained firm, with ongoing use of targeted sales incentives to
attract customers and secure reservations. Build cost
inflation has moderated during the period.
§ The private
reservation rate increased by 15.4% to 105 per week (2023 - 91),
representing a private reservation rate per outlet per week of 0.43
(2023 - 0.38). The overall reservation rate rose slightly to
140 per week (2023 - 138).
§ The reduction in
mortgage interest rates throughout the first half has led to
encouraging levels of customer enquiries in the traditionally
quieter winter trading period, and an improvement in the private
reservation rate during January to 0.59 per outlet per week
(January 2023 - 0.45).
§ Bellway is building
on the recent recovery in customer demand, having opened 34 new
outlets in the period, and has plans to open over 40 additional new
outlets in the second half of the financial year.
§ The forward order
book at 31 January comprised 3,970 homes (2023 - 5,108 homes), with
a value of £1,012.5 million3 (2023 - £1,386.8
million). This will support full year volume output of around
7,500 homes (31 July 2023 - 10,945 homes), which reflects the
higher expected weighting of housing completions in the first half
of financial year 2024.
§ The Group is
well-positioned to increase the order book by 31 July 2024,
provided market conditions remain stable, and this, together with
our programme of site openings, will serve as a platform for volume
recovery from financial year 2025.
§ Bellway's
well-invested and high-quality land bank has enabled a cautious and
targeted approach to land buying activity during the
period.
§ The Group has a
resilient and well-capitalised balance sheet, with net cash of £77
million4 (2023 - £292.5 million) and low adjusted
gearing, inclusive of land creditors, of 5%5 (2023 -
2.3%).
Jason
Honeyman, Group Chief Executive, commented:
"Bellway has delivered another resilient
performance in a period of challenging trading conditions.
While the economic backdrop remains uncertain, the gradual
reduction in mortgage interest rates through the first half has
eased affordability constraints and we are encouraged by the
seasonal pick-up in customer leads and an improvement in
reservations since the start of the new calendar year.
We have maintained balance sheet resilience
and, supported by the strength of our land bank, Bellway remains
well-placed to capitalise on future growth opportunities and will
continue to play an important role in increasing housing supply in
the years ahead."
Market and
current trading
Affordability steadily improved throughout the
period, driven by wage increases, the easing of consumer price
inflation and a gradual reduction in mortgage interest rates.
This, together with good availability of mortgage products, has
helped to improve overall customer demand since the summer of 2023,
although affordability constraints remain relatively acute for
those customers requiring higher loan-to-value
mortgages.
The private reservation rate increased by 15.4%
to 105 per week (2023 - 91), representing a private reservation
rate per outlet per week of 0.43 (2023 - 0.38), including a modest
contribution of 0.03 from bulk sales (2023 - nil). Overall,
headline pricing has remained firm across our regions, and our
sales teams also continue to use a range of targeted incentives to
encourage further customer interest and secure
reservations.
Trading patterns were less volatile than the
comparator period when sharp changes in mortgage interest rates led
to significant variations in customer demand. The improvement
in affordability throughout the first half has also led to
encouraging levels of customer enquiries in the traditionally
quieter winter trading period. Together with early signs of a
seasonal pick-up as we approach the spring selling season, this
resulted in an improvement in the private reservation rate during
January to 0.59 per outlet per week (January 2023 -
0.45).
Notwithstanding the higher demand for private
housing, the overall reservation rate rose only slightly to 140 per
week (2023 - 138), which partly reflects a planned reduction in
social housing output in financial year 2025 from the current
elevated levels. Customer confidence continued to improve
which led to a lower cancellation rate of 16% (2023 - 20%) for the
whole of the first half and a reduction to a normalised level of
around 13% during January 2024.
The Group was operating from 246 outlets as at
31 January 2024, having opened 34 new sales outlets in the period
and traded from an average of 243 (2023 - 238). This was in
line with our expectations and despite the ongoing delays in the
planning system, we remain on track to open over 40 additional new
outlets in the second half of the financial year, supporting our
plans for future volume recovery.
The forward order book at 31 January 2024 is
lower, yet still sizeable, and comprised 3,970 homes (2023 - 5,108
homes), with a value of £1,012.5 million3 (2023 -
£1,386.8 million). The decrease in the order book reflects
the lower opening position at 1 August 2023 and the higher expected
weighting of housing completions in the first half of the current
financial year. Given the levels of underlying customer
demand and the recent improvement in affordability, the Group is
well-positioned to increase the order book by 31 July 2024,
provided market conditions remain stable.
Results
The Group has delivered housing revenue of over
£1.25 billion (2023 - £1,804.9 million), in line with the Board's
expectations. Total housing completions reduced by 28.1% to
4,092 homes (2023 - 5,695), with the decline reflecting the
generally weaker trading conditions experienced since late summer
2022 and the lower order book at 1 August 2023.
The overall average selling price decreased by
over 2% to £309,300 (2023 - £316,929), primarily driven by a lower
proportion of private completions, which reduced to 75% of the
total (2023 - 79%). We continue to expect an overall average
selling price in the year ending 31 July 2024 of around £295,000
(31 July 2023 - £310,306), reflecting a further increase in the
proportion of social homes in the second half of the current
financial year and a continued use of targeted incentives, together
with geographic and mix changes.
Bellway's experienced procurement teams
continue to work closely with our wide range of supply chain
partners, and we are encouraged that build cost inflation has
moderated from the elevated levels in the last two years.
Land
investment
Bellway has a high-quality land bank, and the
strong period of investment prior to financial year 2023 has
enabled an ongoing cautious and targeted approach to land activity
in the first half. This has been focused on securing land
interests which offer compelling and enhanced financial returns
and, where possible, include significant flexibility in the
contract terms.
The Group contracted to purchase 1,237 plots
(2023 - 2,428 plots) across 9 sites (2023 - 16 sites) with a total
contract value of £103.4 million (2023 - £197.3 million) in the
period. We have also reviewed previously contracted land and
decided not to proceed with the purchase of 1,359 plots across 7
previously approved sites. Our experienced land teams
continue to engage with vendors and to support the Group's growth
ambitions, we are rebuilding our future pipeline of potential
acquisitions, with Heads of Terms agreed on over 6,600 plots at 31
January 2024.
Our investment in strategic land has continued
and during the period we entered into option agreements to buy 10
sites (2023 - 12 sites), building upon our increased activity in
the strategic land market over recent years. This has
enhanced our land supply for a relatively low initial capital
outlay and, together with our planned programme of outlet openings,
further underpins Bellway's long-term growth prospects.
Financial
position
The Group has maintained a strong balance sheet
and notwithstanding the lower volume output in the period, net cash
at 31 January 2024 was £77 million4 (2023 - £292.5
million). In addition to the net cash position, the Group has
access to significant levels of committed debt finance, totalling
£530 million.
During the first half, expenditure on land,
including payment of land creditors, was £257 million (2023 - £231
million), primarily comprising cash payments on contracts approved
in the previous two financial years. Committed land
obligations have reduced significantly to around £240 million (2023
- £372.4 million) and adjusted gearing, inclusive of land
creditors, remains low at 5%5 (2023 - 2.3%).
This strong position means we have the
financial capacity to invest in land, if supported by market
conditions, to drive our recovery and subsequent growth in
financial year 2025 and beyond.
Building
safety
Bellway remains fully committed to acting
responsibly with regards to building safety and having signed the
Self-Remediation Terms with the Government in March 2023, we
continue to make good progress on the remediation of legacy
properties through our dedicated Building Safety
division.
Since the start of our remediation programme,
the Group has spent over £120 million on legacy building safety
issues. In addition to those freeholders that have made an
application to the Building Safety Fund or ACM Funds, Bellway has
completed work on 9 developments and is advancing remediation on a
further 12 developments, with additional progress expected in the
second half.
'Better with
Bellway'
'Better with Bellway' is the Group's strategy
and long-term commitment with regards to acting responsibly and
sustainably. The strategy outlines ambitious targets in
respect of our three flagship areas of Carbon Reduction, Customers
and Communities, and becoming an Employer of Choice.
Through a range of initiatives, we continue to
embed the 'Better with Bellway' sustainability strategy across the
Group's operations, and we are delighted that the efforts of our
colleagues have been recognised through several industry
awards.
At the 2023 Housebuilder Awards, Bellway won
the 'Large Housebuilder of the Year' and 'Best Staff Development
Award' for 'Employer of Choice'. The Group's flagship 'Future
Homes' research project into carbon reduction at the University of
Salford has also won several accolades, including 'Best
Sustainability Initiative' at the 2023 Housebuilder Awards and
'Major Project of the Year' at the National Sustainability
Awards.
We look forward to reporting further progress
on our 'Better with Bellway' strategy with our Interim Results on
26 March 2024.
Outlook
We are encouraged by customer enquiry levels
and the pick-up in reservation rates in the new calendar year and,
supported by our order book, the Group is on track to deliver full
year volume output of around 7,500 homes (31 July 2023 - 10,945
homes). If market conditions remain stable and recent
reservation rates are sustained throughout the spring selling
season, we are well-placed to build the order book through the
second half which will serve as a platform for a return to growth
from financial year 2025.
The economic outlook has improved through the
period, although the Board is mindful of future risks to customer
demand and cost inflation, particularly from ongoing geopolitical
tensions. Against this backdrop, we will retain a clear focus
on maintaining balance sheet resilience.
Overall, the long-term fundamentals of the UK
housebuilding industry remain attractive, given the shortage of
energy efficient and affordable homes across the country. We
remain confident that the Group's robust balance sheet and
operational strength, combined with the depth of our land bank,
will enable Bellway to successfully navigate changing market
conditions and to capitalise on future growth
opportunities.
Notes:
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 half-year ended 31 January 2023 or as at 31 January 2023
('2023') unless otherwise stated.
3 Order book is
the total expected sales value of reservations that have not
legally completed.
4 Net cash is cash
plus cash equivalents, less debt financing.
5 Adjusted gearing
is the total of net cash and land creditors divided by total
equity.
For further
information, please contact:
Bellway
p.l.c.
Keith Adey, Group Finance Director
0191 217 0717
Gavin Jago, Group Investor Relations
Director
0191 217 0717
Media
enquiries
Paul Lawler, Group Head of
Communications
paul.lawler@bellway.co.uk
07813 392 669
Powerscourt
(Financial PR)
Justin Griffiths
Nick Dibden
Victoria Heslop
bellway@powerscourt-group.com
020 7250 1446
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.