Interim Management Statement
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.