Interim Management Statement
Bellway p.l.c.
Interim Management Statement
Thursday 5 June 2014
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 2014.
Highlights
* Strong sales performance with an 11% increase in the weekly reservation
rate to 177 per week during the period (2013 - 160 per week).
* Value of forward order book of homes due for completion beyond 31 July
2014, significantly ahead at £670 million (31 May 2013 - £380 million).
* £400 million expended on land and land creditors since 1 August (2013 - £
270 million), providing an excellent base for future growth.
* Strong balance sheet maintained with net bank debt of only £47 million (31
May 2013 - £95 million).
Ted Ayres, Chief Executive, commented:
"The strong UK housing market and our disciplined approach to land investment
provides a significant opportunity for ongoing volume growth. The Group has a
substantial balance sheet and operational capacity for further expansion. Land
with detailed planning permission is already in place to achieve next year's
volume growth aspirations. This strong position, together with a focus on
improving return on capital employed, ensures that Bellway remains well placed
to deliver further enhancement to shareholder value."
Market and current trading
Demand for new homes remains robust, buoyed by growing consumer confidence and
a strong supply of mortgage finance. Significant investment in land over recent
years has enabled Bellway to respond positively to these market conditions and
accordingly the Group has taken an average of 177 reservations per week since 1
February (2013 - 160), an increase of 11% compared with the same period last
year.
The government's Help to Buy shared equity scheme continues to be an important
selling incentive, providing more widespread access to mortgage finance. The
Group has taken 879 reservations using this incentive since 1 February.
Demand from within the London boroughs, where the Group continues to offer
affordable product in the context of the local market, remains strong and more
pronounced than elsewhere in the country. Customers' use of Help to Buy
mortgages in and around London is about one third of the rate in other regions.
This continued strength of consumer demand, together with an acceleration of
construction programmes, means that the Board now expects the number of legal
completions to increase by around 20% for the year ending 31 July 2014.
The average selling price continues to improve due to changes in product and
geographic mix. Furthermore, the Group has benefited from modest net pricing
gains, largely as a result of a reduction in the use of selling incentives,
together with underlying selling price improvements on some new sites brought
to the market, primarily in and around London. As a consequence, the Board now
expects the Group to achieve an average selling price slightly in excess of £
210,000 for the current financial year.
The favourable trading environment, a more efficient absorption of the overhead
base and an increasing proportion of completions from land acquired since the
downturn, should result in the Group achieving an operating margin of around
17%. Provided market conditions remain unchanged, the Board expects to build
upon this further during the next financial year.
Land buying and financial position
The Group's strategy of volume growth is underpinned by employing strict
capital disciplines in respect of land acquisition. Whilst adopting this
approach, the Group has spent £400 million on land and land creditors since 1
August (2013 - £270 million) and has terms agreed on a further 4,900 plots.
Furthermore, Bellway has all of its land requirements in place, with the
benefit of detailed planning permission, in order to meet next year's volume
growth aspirations.
Bellway continues to benefit from a low cost of bank debt and therefore uses
bank finance to fund land acquisitions in instances where this is a more cost
effective source of finance than land creditors. At 31 May, the Group had net
bank debt of £47 million (31 May 2013 - £95 million), having redeemed its £20
million 9.5% preference shares on 7 April 2014.
Outlook
The Group has all reservations in place to achieve the current year volume
growth target. In addition, the strong trading performance has resulted in a
substantial forward order book, comprising reservations with a value of £670
million (2013 - £380 million) due for completion beyond 31 July 2014. This
positive position should ensure that Bellway is well placed to deliver further
volume growth, subject to market conditions remaining unchanged and challenging
construction targets being met.
Beyond that, the Group's capacity from its 15 operating divisions, strong
balance sheet and significant consented land bank provides opportunity for
ongoing growth. This, together with a focus on improving return on capital
employed, should lead to a further sustainable enhancement in shareholder
return.
FOR FURTHER INFORMATION PLEASE CONTACT:
TED AYRES, CHIEF EXECUTIVE AND 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.