Final Results

BELLWAY PLC 19 October 1999 NATIONAL HOUSEBUILDER BELLWAY p.l.c. TODAY (TUESDAY 19 OCTOBER 1999) ANNOUNCE THEIR PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 1999 HIGHLIGHTS 1999 1998 TURNOVER - £MILLION - UP 13% 504 445 HOMES SOLD 5,172 5,154 AVERAGE SELLING PRICE - UP 10% £93,100 £84,400 OPERATING MARGIN 14.5% 14.5% PROFIT BEFORE TAX - £MILLION - UP 12% 68.2 60.7 DIVIDEND PER ORDINARY SHARE - PENCE - UP 11.25 10.2 10% ORDINARY DIVIDEND COVER -TIMES 3.7 3.7 EARNINGS PER ORDINARY SHARE - PENCE - UP 10% 42.0 38.1 NET ASSET VALUE PER ORDINARY SHARE - PENCE - 247 216 UP 14% PLOTS WITH PLANNING PERMISSION - UP 6% 17,200 16,300 CHAIRMAN'S STATEMENT It is a cause for deep regret that the issue of this year's statement is over-shadowed by the sudden and untimely death of Ashley Bell on 28 September 1999 at the age of 42. Ashley joined the Bellway Group at the age of 18 in 1975 and was appointed to the Board in 1985. His wide knowledge of the industry contributed greatly to the success and expansion of Bellway and his family, colleagues and friends will sadly miss him. RECORD RESULTS In the year ended 31 July 1999, our turnover was £504.4 million, up 13% and we sold 5,172 units, more than ever before. Our average selling price grew by 10% to £93,100 compared with £84,400 last year. Market conditions in the south were buoyant and we saw record sales of 2,332 units with turnover of £264.7 million, representing 55% of our new homes revenue. There was a good trading improvement in all southern divisions with the exception of our South East division where they were hampered by planning and other unforeseen delays. Market conditions in the north varied from area to area with an increase in turnover of some 9%. Our North East division continued to perform well contributing over 30% of the turnover in this region. Operating margins were maintained at 14.5%, which resulted in profit before tax reaching a new high of £68.2 million against £60.7 million last year, a 12% increase. Earnings per ordinary share rose by 10% from 38.1p to 42.0p. The balance sheet remains strong, with shareholders' funds having climbed £34.4 million to £289.0 million. Net bank borrowings at 31 July 1999 were £45.3 million resulting in modest gearing of 16%. Against this positive background of continuing growth, the Board is proposing an increase in the final dividend from 7.2p to 7.95p, making a total for the year of 11.25p as against 10.2p last year, an increase of over 10%. The final dividend will be payable on Monday 17 January 2000 to ordinary shareholders on the Register of Members at the close of business on Friday 17 December 1999. EMPLOYEES These results continue our pattern of growth which few within the industry have matched. There are sound reasons for this steady progress. The most important is the experience, dedication, professional skill and craftsmanship of our teams throughout the Group. It is often said that people are a company's greatest resource. This is especially true of Bellway and we believe that the quality and commitment of our employees set us apart from our competitors. We have first class people and the Board congratulate them very sincerely for their achievements in the past year. DIRECTORS From 1 November 1999, I will become Executive Chairman and I am delighted to announce that John Watson will be promoted to Group Chief Executive from that date. This is a thoroughly well deserved appointment for John who has made an increasingly important contribution since he joined us more than twenty years ago. A chartered surveyor, John was formerly Managing Director of our North East Division and joined the Board in 1995. After more than twenty years' service, Collingwood Thompson has decided to retire as a Non-Executive and will not seek re-election at the forthcoming Annual General Meeting. We are all very sad to see him go after such a long association with Bellway. He has contributed much to the company over many years and his knowledge, incisive mind and long legal experience have been invaluable. The Board is delighted to announce the appointment of David Perry as a Non-Executive with effect from 1 November 1999. David has held a number of senior positions and he is presently Non-Executive Chairman of Anglian Group PLC. He also holds a number of other non-executive directorships, most notably with Kelda Group plc (formerly Yorkshire Water plc) and Dewhirst Group plc. ENVIRONMENT Environmental issues are, quite rightly, an increasingly important consideration for Bellway and the housing and construction industry generally. Our record of brownfield land use, house design and sensitive approach to development is well known and recognised. We continue to seek new environmentally friendly alternatives whenever possible, both in the choice of materials and supplies and in such sensitive areas as land drainage and landscaping. The Group is working increasingly closely in partnership with local authorities, housing associations and other agencies throughout the UK. The main thrust of the Government's housing policy is to renew former industrial and inner city areas and, with our great experience in this specialist and exacting area, we are well placed to take advantage of market opportunities. I am pleased to report that we have already achieved the Government's national target of having 60% of homes built on recycled land long before the target date of the year 2008. We recognise that an active commitment to environmental issues is an essential part of business today. To this end, we are working to achieve best practice in many areas, for example, energy efficiency and the use of recyclable materials. POLICY, TRADING AND PROSPECTS Our consistent long-term profits record has been helped by our wide geographical spread. This smooths out the variations in supply and demand patterns in different parts of the country. Our decentralised 'light touch' management style gives a high level of authority and decision making powers to our local teams. Their knowledge of local conditions combined with the Group's strict reporting systems and controls enables effective Board management. This has been our ongoing policy to which high calibre people respond well. It fosters an entrepreneurial spirit, facilitates effective and rapid decision-making and creates that all- important quality - job satisfaction. The Board has recently completed a strategic review to prepare Bellway for the challenges of the future and ensure that we meet the ambitious but realistic growth targets that we continue to set ourselves, whilst continuing to be committed to decentralisation and local design. As a result of this review, we have decided to adjust our divisional boundaries to meet changing market needs and to structure ourselves so that we can continue to deliver substantial turnover increases and improved shareholder value. The divisions are based on population profile so that the Group can maximise its growth potential. The revised divisional structure involves the amalgamation of our two divisions in Yorkshire from August 1999. This results in a decrease in our operating divisions to thirteen. However, in the near future we will be expanding the number of our divisions, initially with a new operation in the northern Home Counties and a further one in Scotland. The changes taking place in housing policy and direction, with many more homes now being built on brownfield and inner city sites, have necessitated a further change in our divisional structure. Each division will be multi-disciplined and capable of delivering the full spectrum of housing need, whether it be brownfield or greenfield. We are acutely aware of the higher standards being demanded by the public. Throughout our whole approach - from land acquisition, design, building, successful completion and aftercare - we strive to provide a continually improving quality of service to our customers. The Board believes that the new structure will enable the Group to increase sales in line with the exacting targets we have set ourselves. We have an excellent track record and are fifth in the national housebuilders league table of unit completions. Bellway has always built to suit local traditions and tastes, not for corporate identity. This is a distinctive approach for a company of our size. We have an enviable land bank and, at 31 July 1999, we held some 17,200 plots with planning consent, an increase of 900 since last year. We have many excellent developments and there is a strong demand for our products. This is reflected in our current reservations and targets which indicate that we will significantly increase the total number of homes sold during the current year. The outlook is exciting. We are operating in a period of relatively low interest rates, which makes the purchase of a new home an increasingly attractive proposition. For a great many people, buying a new house has never been more affordable. We have a deserved reputation for quality and a track record of consistent profit growth. We build the right homes, in the right locations, at the right price. Our philosophy continues to be: 'Bellway, the local, national housebuilder'. H C Dawe Acting Chairman 18 October 1999 For further information contact:- Alan G Robson, Finance Director, Bellway p.l.c. at the offices of Charterhouse Securities Limited, 1 Paternoster Row, St Paul's, London EC4M 7DH (telephone 0171 248 4000) GROUP PROFIT AND LOSS ACCOUNT for the year ended 31 July 1999 Notes 1999 1998 £000 £000 Turnover 504,406 444,873 Cost of sales 405,521 357,316 _______ _______ Gross profit 98,885 87,557 Administrative expenses 25,633 23,059 _______ _______ Group operating profit 73,252 64,498 Share of operating profit in associated 440 419 undertakings _______ _______ 73,692 64,917 Exceptional profit - sale of fixed asset 900 - _______ _______ Profit before interest 74,592 64,917 Net interest payable (including 6,415 4,194 associated undertakings) _______ _______ Profit on ordinary activities before 68,177 60,723 taxation Taxation 21,033 18,675 _______ _______ Profit after taxation 47,144 42,048 Minority interest 79 - _______ _______ Profit attributable to shareholders 47,223 42,048 Dividends on equity and non-equity 1 14,163 12,903 shares _______ _______ Retained profit for year 33,060 29,145 ======= ======= Earnings per ordinary share - basic 2 42.0p 38.1p Earnings per ordinary share - diluted 2 41.8p 37.5p The Group's results for both the current and preceding financial years derive from continuing operations. There were no significant gains or losses in the current or preceding year other than the profit attributable to shareholders. GROUP BALANCE SHEET at 31 July 1999 1999 1998 £000 £000 Fixed assets Tangible assets 13,221 12,498 Investments 2,072 2,177 _______ _______ 15,293 14,675 _______ _______ Current assets Stocks 490,164 405,048 Debtors 19,961 17,760 Cash at bank and in hand 9,656 19,478 _______ _______ 519,781 442,286 Current liabilities Creditors due within one year 165,085 148,558 _______ _______ Net current assets 354,696 293,728 _______ _______ Total assets less current liabilities 369,989 308,403 Creditors due after more than one year 81,057 53,767 _______ _______ Net assets 288,932 254,636 ======= ======= Capital and reserves Equity share capital Ordinary shares 13,622 13,549 Non-equity share capital Preference shares 20,000 20,000 _______ _______ Called up share capital 33,622 33,549 Equity reserves Share premium account 94,695 93,502 Other reserves 1,511 1,511 Profit and loss account 159,172 126,063 _______ _______ Shareholders' funds 289,000 254,625 Equity minority interest (68) 11 _______ _______ 288,932 254,636 ======= ======= Approved by the Board of Directors on 18 October 1999 and signed on its behalf by Howard C Dawe Alan G Robson GROUP CASH FLOW STATEMENT for the year ended 31 July 1999 1999 1998 £000 £000 £000 £000 Cash inflow/(outflow) from operating 15,767 (2,716) activities Net cash outflow from returns on investments and servicing of finance Interest paid (6,261) (3,967) Interest received 281 559 Dividends paid - non-equity (1,900) (1,900) _______ _______ (7,880) (5,308) Taxation (23,790) (16,324) Net cash outflow from capital expenditure and financial investment Purchase of tangible fixed assets (4,852) (4,403) Sale of tangible fixed assets - 1,310 - exceptional item 750 644 - other Sale of investments - 10 _______ _______ (2,792) (3,749) Equity dividends paid (11,403) (9,996) _______ _______ Net cash outflow before financing (30,098) (38,093) Net cash inflow from financing Issue of ordinary share capital on exercise of share options 1,266 956 Increase in bank loans 19,000 - Placing - 11,317 Placing costs - (152) _______ _______ 20,266 12,121 _______ _______ Decrease in cash in year (9,832) (25,972) ======= ======== NOTES 1 DIVIDENDS ON EQUITY AND NON-EQUITY SHARES 1999 1998 £000 £000 Ordinary share capital - equity Interim paid on 1 July 1999 - 3.3p (1998 - 3.0p) 3,598 3,199 Final proposed - 7.95p (1998 - 7.2p) 8,665 7,804 ________ ________ 12,263 11,003 9.5% preference share capital - non-equity 1,900 1,900 ________ ________ 14,163 12,903 ======== ======== The directors recommend payment of the final dividend on 17 January 2000 to shareholders on the register at the close of business on 17 December 1999. 2 EARNINGS PER ORDINARY SHARE The calculation of basic earnings per ordinary share is based on earnings of £45,323,000 (1998 - £40,148,000) after taxation, minority interest and preference dividend and the weighted average number of ordinary shares in issue during the year of 107,918,069 (1998 - 105,401,740). The calculation of diluted earnings per ordinary share uses the same earnings figure as the basic calculation but the weighted average number of shares has been adjusted to 108,390,769 (1998 - 106,928,397) to reflect the dilutive effect of outstanding share options. Following the implementation of Financial Reporting Standard 14 'Earnings per share' the figure for basic earnings per share for the year ended 31 July 1998 has been restated from the figure shown in last year's Annual Report of 37.8p. 3 RECONCILIATION OF NET BORROWINGS At 1 Cash flows Exchange At 31 July August 1998 Differences 1999 £000 £000 £000 Cash at bank and in hand 19,478 (9,832) 10 9,656 Bank loans falling due after (36,000) (19,000) - (55,000) more than one year _______ _______ _______ _______ (16,522) (28,832) 10 (45,344) ======== ======== ======= ======== The net borrowings at 31 July 1999 of £45,344,000 represents gearing of 15.7%. 4 The financial information set out above does not constitute the company's statutory accounts for the years ended 31 July 1998 or 1999 but is derived from those accounts. Statutory accounts for 1998 have been delivered to the registrar of companies and those for 1999 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

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