Bellway p.l.c.
Interim Management
Statement
Friday
5 June 2015
Bellway is today updating the market with regard to its current
trading position by issuing an Interim Management Statement (IMS)
in respect of the period from 1 February to 31 May 2015.
Highlights
-
Housing completions for the full year to 31 July 2015 are expected to exceed those
achieved last year by around 850 units (2014 – 6,851).
-
A strong trading performance should result in the full year
operating margin increasing by around 300 bps to over 20% (2014 –
17.2%).
-
A record £500 million has been spent on land and land creditors
since 1 August (2014 – £400 million), thereby securing further
growth potential at attractive rates of return.
-
The successful disposal of the Group’s entire portfolio of
shared equity assets for cash consideration of £32.5 million has
resulted in an exceptional profit of £6.9 million and will
facilitate additional investment in land.
-
The forward sales position is strong, with growth of 22% in the
value of the forward order book to £1,270 million (2014 – £1,040
million).
Ted
Ayres, Group Chief Executive, commented:
“Positive market conditions, implementation of our strategy for
growth and a continuing focus on return on capital employed are
allowing Bellway to deliver a further increase in volume and a
significant rise in profitability. Our disciplined investment
in land, alongside plans to open a seventeenth operating division
early in the next financial year, ensure that the Group is well
positioned to create additional value for shareholders. ”
Market and current trading
The strong start to the spring selling season has continued with
the general election having no noticeable effect on customer
sentiment. Consumer confidence remains strong, with a
favourable mortgage market, supported by Help to Buy, helping to
satisfy customer demand. Reservations since 1 February
averaged 182 per week (2014 – 177 per week), a slight increase of
almost 3% compared to the same period last year which benefited
from particularly strong sales demand.
The pricing backdrop remains positive, enabling the Group to
maximise sales values, with London
still outperforming other parts of the country. This
environment, together with ongoing investment in higher value
locations, should enable the Group to achieve an increase in the
average selling price to slightly in excess of £220,000
(31 July 2014 – £213,182) for the
year ending 31 July 2015.
The strong trading conditions and continued control over both
construction and administrative costs should result in a rise in
the operating margin of around 300 bps for the full year to over
20% (31 July 2014 – 17.2%).
Sale of shared equity loans
On 22 May 2015, Bellway disposed
of its entire interest in 2,376 shared equity loans for cash
proceeds of £32.5 million, resulting in a profit of £6.9
million. This transaction will be treated as an
‘exceptional’[1] item and the profit is therefore excluded from the
operating margin guidance set out earlier in this statement.
The completion of this transaction means that the Group has now
sold all of its remaining interest in shared equity assets, thus
releasing underperforming capital for further investment in land
opportunities. This will assist the Group in achieving its
objective of delivering enhanced value for shareholders by
increasing volume whilst maintaining a strong focus on return on
capital employed.
Land buying
Whilst the land market remains competitive, particularly in and
around the south east, the Group has continued to identify
attractive opportunities that meet or exceed its minimum
acquisition criteria in respect of both gross margin and return on
capital employed. To that extent, Bellway has expended a
record £500 million on land and land creditors since 1 August (2014
– £400 million) and also has heads of terms agreed, with solicitors
instructed, to progress a further 6,400 plots to completion.
Bellway now has all the land required, with the benefit of an
implementable detailed planning permission, in order to meet next
year’s growth targets. Beyond next year, the Group’s land
holdings are supplemented by an owned and controlled pipeline of
some 14,600 plots, which are currently being progressed through the
planning system. Following the outcome of the general
election, the planning environment is expected to remain broadly
positive.
Net bank debt
The Group had net bank debt at 31 May of £191 million
(31 May 2014 – £47 million),
representing modest gearing of around 13% (2014 – 4%). The
timing of land acquisitions and the profile of forecast legal
completions should mean that net debt is likely to reduce
throughout the remainder of the current financial year.
Outlook
The order book at 31 May stood at £1,270 million (2014 – £1,040
million), representing 5,502 homes (2014 – 5,002 homes), an
increase in value of 22% compared to the same period last
year. Industry wide labour constraints remain a challenge,
however, notwithstanding this, the Board still expects completions
for the year ending 31 July 2015 to
exceed those achieved last year by around 850 units. The
ongoing delivery of the growth strategy should lead to another year
of substantial earnings growth.
The recently opened South West division is gradually becoming
established and is expected to contribute to housing completions in
the next financial year. Furthermore, premises have been
identified for a new seventeenth division in the south east of
England and the intention is that
this should be operational in the first half of 2015/16.
The strong order book, positive lending environment and the
capacity to invest in land, whilst gradually expanding the
divisional structure, ensure that Bellway is well placed to deliver
further value for shareholders by continuing its disciplined growth
ambitions.
Site visit
Ted Ayres, Group Chief Executive
and Keith Adey, Group Finance
Director will be hosting a site visit for investors and analysts at
Platinum Riverside, John Harrison
Way, Greenwich, SE10 0SW, today, Friday 5 June 2015, from 11.00
am during which no new financial information will be
given. Bellway will release a trading update for the
financial year ending 31 July 2015 on
Friday 7 August.
FOR FURTHER INFORMATION PLEASE
CONTACT:
TED
AYRES, GROUP CHIEF EXECUTIVE AND KEITH ADEY, GROUP FINANCE
DIRECTOR FROM 7:00 AM ON 0207 262
3226 AND FROM 9:00 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.
[1] In accordance with IAS 1 – ‘Presentation of Financial
Statements’ and as defined on page 79 of the Annual Report and
Accounts 2014.