Bellway
p.l.c.
Trading
Update
Friday 7 June 2024
Bellway p.l.c. ('Bellway' or the 'Group') is
today issuing a trading update in respect of the period from 1
February to 2 June 2024.
Highlights
§ Stronger trading
through the spring selling season, with improved affordability
supporting an increase in customer confidence and reservation rates
compared to the first half of the financial year.
§ The private
reservation rate per outlet per week of 0.62 increased by 6.9%
compared to the prior year equivalent (2023 - 0.58). This was
delivered from a higher number of outlets, which averaged 245 in
the period (2023 - 239).
§ Overall, headline
pricing has remained firm, and incentives continue to be used on a
targeted basis.
§ Reflecting the
improvement in trading and growth in outlet numbers, the forward
order book has increased from the level of 4,411 homes at the start
of the current financial year. The forward order book at 2
June 2024 comprised 5,346 homes (4 June 2023 - 6,172
homes).
§ In line with previous
guidance, the Group is on track to deliver full year volume output
of around 7,500 homes (31 July 2023 - 10,945 homes) and we continue
to expect a reduction in the underlying operating
margin3 of at least 600 basis points from the level in
the prior year (31 July 2023 - 16.0%).
§ The overall average
selling price is now anticipated to be around £305,000 (31 July
2023 - £310,306). The increase from the previous guidance of
£295,000 is mainly due to changes in product mix.
§ The Group is now
fully sold for the current financial year and given our strong
outlet opening programme and healthy forward order book, Bellway is
well-positioned to return to growth in financial year 2025.
Jason
Honeyman, Group Chief Executive, commented:
"Bellway has delivered a solid trading
performance supported by improved affordability and a seasonal
uplift through the spring, and we remain on track to deliver full
year volume output of around 7,500 homes.
We have been encouraged by ongoing healthy
levels of customer interest and combined with the strength of our
outlet opening programme, we continue to expect a year-on-year
increase in the forward order book at 31 July 2024. As a
result, Bellway remains in a strong position to return to growth in
financial year 2025.
We reiterate our confidence that the Group's
robust balance sheet and operational strength, combined with the
depth of our land bank, will enable Bellway to successfully
capitalise on future growth opportunities."
Market and
current trading
Trading through the spring selling season has
been robust, with a sustained improvement in private reservations
compared to the first half of the financial year. Customer
demand has benefitted from an improvement in affordability, driven
by a moderation of both mortgage interest rates and consumer price
inflation and an increase in wages. Overall, the backdrop of
market stability has led to headline pricing and the level of
targeted incentives remaining stable across our
regions.
The private reservation rate was higher than
the equivalent period in 2023 at an average of 152 per week (2023 -
139), with the improvement driven by stronger demand and an
increase in outlet numbers. The private reservation rate per
outlet per week increased by 6.9% to 0.62 (2023 - 0.58), including
a small contribution of 0.01 from bulk sales (2023 - 0.01).
The Group traded from an average of 245 outlets in the period (2023
- 239), an increase of 2.5%, in line with our expectations and
ahead of the closing position of 240 outlets at 31 July
2023.
Notwithstanding the higher demand for private
housing, the overall reservation rate rose only slightly to 192 per
week (2023 - 190), which partly reflects the expected reduction in
social housing output in financial year 2025 from the current
elevated levels. The improvement in customer confidence also
led to a reduction in the cancellation rate to a normalised level
of 11% (2023 - 15%).
Reflecting the improvement in trading and
growth in outlet numbers, the forward order book has increased from
the level of 4,411 homes at the start of the current financial
year. The forward order book at 2 June 2024 comprised 5,346
homes (4 June 2023 - 6,172 homes) with a value of £1,446
million4 (4 June 2023 - £1,710 million). Given
prevailing reservation rates and the anticipated profile of
completions in the coming months, we continue to expect a
year-on-year increase in the forward order book at 31 July 2024,
which will serve as a platform for a return to growth in financial
year 2025.
There are presently good levels of building
material and subcontractor availability across the Group, with
limited overall cost inflation on new tenders. While
underlying cost pressures are currently far less pronounced than
the prior year, the higher levels of inflation experienced on costs
incurred in earlier periods, and carried in our work-in-progress,
will be realised through the income statement for legal completions
in the months ahead.
Land
investment
The strength and depth of the Group's land bank
has enabled an ongoing disciplined and targeted approach to land
acquisition. Our investment in strategic land has continued
during the period, which has enhanced our longer-term growth
prospects and overall land supply for a relatively low initial
capital outlay. Building on the expansion of our strategic
land bank in recent years, since 1 August 2023 the Group has
entered into option agreements to buy 15 sites (1 August 2022 to 4
June 2023 - 14 sites).
Reflecting the backdrop of falling consumer
price inflation and the improving outlook in terms of both lower
interest rates and house price stability, we have been more active
in the shorter-term land market since the start of calendar year
2024. The Group has contracted to purchase 3,906 owned and
controlled plots since 1 August 2023 (1 August 2022 to 4 June 2023
- 4,342 plots) across 21 sites (1 August 2022 to 4 June 2023 - 32
sites) with a total contract value of £277 million (1 August 2022
to 4 June 2023 - £362 million). We are continuing to rebuild
our future pipeline of potential acquisitions, with Heads of Terms
agreed on around 5,700 plots at 2 June 2024.
The Group has good visibility on the expected
timing of near-term planning decisions and, notwithstanding the
risks from ongoing planning delays, we remain on track to open over
40 new selling outlets in the second half of the current financial
year.
Financial
position and dividend
Bellway retains a strong and well-capitalised
balance sheet. Reflecting the delivery profile of completions
and normal working capital requirements to deliver the targeted
output in the current financial year, the Group had net debt of £57
million5 at 2 June 2024 (2023 - net cash of £42
million). The Board continues to expect to end the financial
year with low adjusted gearing6 (31 July 2023 -
4.0%).
As announced at the Interim Results on 26 March
2024, the interim dividend is 16.0p per share (2023 interim
dividend - 45.0p) and will be paid on 1 July 2024. The Board
continues to expect underlying dividend cover for the full
financial year will be around 2.5 times7.
Outlook
We have been encouraged by the recent period of
relative stability in trading and the Group is now fully sold for
the current financial year, with our volume and margin guidance in
line with that provided at the Interim Results.
The Group is on track to deliver full year
volume output of around 7,500 homes (31 July 2023 - 10,945 homes)
and we continue to expect a reduction in the underlying operating
margin3 of at least 600 basis points from the level in
the prior year (31 July 2023 - 16.0%).
The overall average selling price is now
expected to be around £305,000 (31 July 2023 - £310,306). The
increase from our previous guidance of £295,000 is mainly due to
changes in product mix, including a contribution from some
relatively high value private completions in the final quarter of
the current financial year.
Bellway has a strong outlet opening programme
and a healthy forward order book and work-in-progress position and,
if market conditions remain stable, we are well-positioned to
return to growth in financial year 2025.
We remain alert to future potential risks to
customer demand and cost inflation, and in the coming weeks there
may be a temporary impact to trading as political campaigning
continues. Notwithstanding this, the outlook is improving and
there is cross-party political support for increasing the supply of
housing across the country. The long-term housing market
fundamentals remain positive, and we are hopeful these will be
bolstered by greater clarity over planning and housing policy
beyond the upcoming General Election.
The Board is confident that, given the strength
of the Group's land bank and balance sheet, Bellway is very
well-placed to deliver continued volume growth into the longer term
to support ongoing value creation for shareholders.
The Group's next scheduled trading update,
covering the financial year ending 31 July 2024, is on 9 August
2024.
Notes:
1 All figures
relating to completions, forward order book, reservations,
cancellations, and average selling price exclude the Group's share
of its joint ventures.
2 Comparatives are
for the period from 1 February to 4 June 2023 or as at 4 June 2023
('2023') unless otherwise stated.
3 Underlying
operating margin is operating profit before net legacy building
safety expense and exceptional items divided by total
revenue.
4 Forward order
book is the total expected sales value of reservations that have
not legally completed.
5 Net cash/(debt)
is cash plus cash equivalents, less debt financing.
6 Adjusted gearing
is the total of net cash/(debt) and land creditors divided by total
equity.
7 Underlying
dividend cover is underlying profit for the period per ordinary
share divided by the dividend per ordinary share relating to that
period.
For further
information, please contact:
Bellway
p.l.c.
Keith Adey, Group Finance Director
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
0207 250 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.