Final Results

Bellway PLC 16 October 2001 NATIONAL HOUSEBUILDER BELLWAY p.l.c. TODAY (TUESDAY 16 OCTOBER 2001) ANNOUNCE THEIR PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2001 THE CHAIRMAN SAID ' ....... I am delighted to report that we have had another successful year with group pre-tax profit exceeding £100 million for the first time, yet another milestone in our long history of progress ....... WITH THESE RECORD RESULTS, THE GROUP HAS REINFORCED ITS PROVEN TRACK RECORD OVER DECADES FOR PRODUCING CONSISTENT AND SUSTAINABLE GROWTH. YOUR BOARD REMAINS CONFIDENT ABOUT THE FUTURE PROSPECTS OF THE GROUP. ' HIGHLIGHTS 2001 2000 Increase Turnover £695.7m £634.3m 9.7% Group operating profit £107.3m £95.6m 12.2% Operating margin 15.4% 15.1% 2.0% Profit before tax £101.5m £89.1m 13.9% Basic earnings per ordinary share 63.2p 55.4p 14.1% Dividend per ordinary share 14.2p 12.4p 14.5% Land bank - plots with planning permission 16,700 15,500 7.7% Shareholders' funds £391.0m £335.9m 16.4% Net asset value per ordinary share 337p 289p 16.6% FOR FURTHER INFORMATION, PLEASE CONTACT JOHN WATSON, GROUP CHIEF EXECUTIVE OR ALAN ROBSON, GROUP FINANCE DIRECTOR TUESDAY 16 OCTOBER AT ING BARINGS, 60 LONDON WALL, LONDON EC2M 5TQ - TEL: 020 7767 1000 OR 07831 331191 (J WATSON - MOBILE) & 07775 732493 (A ROBSON - MOBILE) WEDNESDAY 17 OCTOBER 07831 331191 & 07775 732493 THEREAFTER 0191 217 0717 BELLWAY p.l.c. CHAIRMAN'S STATEMENT I am delighted to report that we have had another successful year with group pre-tax profit exceeding £100 million for the first time, yet another milestone in our long history of progress. Results Turnover rose to a record £695.7 million from £634.3 million in the previous year. The number of homes sold showed a slight increase and the average selling price rose by 12% from £106,400 to £119,000. The operating margin advanced to 15.4%. This produced pre-tax profit of £101.5 million compared to £89.1 million last year. Basic earnings per ordinary share climbed to 63.2p against 55.4p last year, a healthy improvement of over 14%. Retained profit for the year was £53.2 million, giving a further boost to our strong balance sheet with shareholders' funds climbing to over £390 million. Net borrowings at 31 July 2001 were £59.9 million, resulting in gearing of 15.3% which compares with 5.2% last year. This increase in gearing is reflected in our enhanced land bank. At 31 July 2001 we held 16,700 plots with planning permission, an increase of 1,200 from last year's 15,500, representing some three years' sales. In addition, we also own or control a similar number of plots, many of which we anticipate will achieve planning consent in the near future. Government pressure for the release of brownfield land for residential development together with consolidation in the industry has presented a window of opportunity to acquire profitable sites which should assist us in our future growth plans. Dividend To mark the achievement of a pre-tax profit in excess of £100 million, your Board is recommending an enhanced dividend increase this year. The Board has had a progressive dividend policy over the last ten years, showing an average increase of more than 10% year on year, well above inflation. Therefore, on this occasion the Board is pleased to recommend an increase of 14.5% equating to a total dividend for the year of 14.2p per share. The recommended final dividend of 10.1p per ordinary share, compared with 8.8p in the previous year, will be paid on Monday 14 January 2002 to ordinary shareholders on the Register of Members at the close of business on Friday 14 December 2001. Current Trading & Prospects Since 1 August, the market has generally been stable. There has been no noticeable change in reservation levels even following the recent tragic events in the United States of America. We are pleased that some time ago we decided to reduce our exposure to the central London investor market. Our strong emphasis on the middle market, together with our wide geographical spread gives your Board confidence for the future. This year we are planning to improve on the number of units we sold in the last financial year and current reservations are in line with our expectations. Your Board anticipates producing another satisfactory performance and will continue to plan for further expansion. Environment There is an increasing focus on environmental issues and Bellway has introduced policies across the Group to achieve high standards of environmental awareness. Further details on this important area are outlined in the Annual Report and on our web site. Employees These record results could not have been achieved without the hard work and endeavour of our loyal and dedicated employees. The directors would like to thank all our employees for their outstanding efforts. Conclusion With these record results, the Group has reinforced its proven track record over decades for producing consistent and sustainable growth. Your Board remains confident about the future prospects of the Group. H C Dawe Chairman 15 October 2001 BELLWAY p.l.c. CHIEF EXECUTIVE'S REVIEW Introduction This has been my first full year as Chief Executive. It has been both enjoyable and challenging. We now need to ensure that our enviable track record is continued into the future by building on the solid foundations and sound commercial practice which always underpins Bellway's success. The strategy of growing the Bellway Group continues to be successful and we have a strong platform to sustain this growth. The Group has performed well this year as evidenced by an increase in pre tax profit to £101.5m from £89.1m the previous year, a new record. The Group's turnover rose to £695.7m, another record, the tenth annual increase in succession. We experienced good market conditions with average selling prices rising 12% to £119,000. Other key indicators also saw good improvements with increased margins and basic earnings per share up 14%. Our already strong balance sheet has been further enhanced, allowing opportunities for investment in the future. Trading & Land Bellway occupies a unique position in the housebuilding industry: a position summed up in the phrase 'the local, national housebuilder'. With fourteen housing divisions, it has a decentralised organisation, with local management reporting on all aspects of the business allowing the Group to focus on local markets, providing for local needs. The results include particularly strong performances from our Essex, North East, North London, South East, Wessex and West Midlands divisions. Most of our other divisions performed well and in line with our expectations and all are making good progress. Some of the more noteworthy events during the year included the formation on 1 August 2000 of our Northern Home Counties division based in Milton Keynes. In its first year of trading we are pleased to report that it has traded profitably and has sold 100 units during the year from three sites. It has acquired four more sites and its growth plans continue. Both the West Midlands division and the Thames Gateway division have relocated their offices so that they are more conveniently located in their respective market places. The moves have been completed successfully and both divisions are performing well. Our Wales division is about to embark on another major development in Cardiff Bay comprising in excess of 250 homes built on reclaimed land. In Gloucester the division has purchased its third site in England, a former hospital site at Coney Hill, for 320 homes. This represents a significant step forward for this rapidly growing division which was established only seven years ago. One of the fundamental strengths of Bellway is its land strategy. Our policy of building an enviable land bank remains a key factor, enabling the Group to deliver consistently high margins. Last year our land bank grew significantly with many site acquisitions throughout the UK. The recent consolidation in the industry has presented the Group with further opportunities to purchase land at advantageous margins. A decision was taken some while ago to reduce our involvement in the central London investment property market, in particular high rise luxury apartments in favour of the middle market private home buyer. We believe this decision has been vindicated following the very recent softening of prices of higher value properties in central London. At 31 July we held a land bank, with residential planning permission, amounting to 16,700 plots, representing approximately three years' production. In addition, we own or control a similar number of plots where residential planning permission is being actively pursued. Of these, it is anticipated that some 4,500 plots will receive permission in the near future. The demand for urban living is growing and Bellway's commitment to this important area should not be understated. We were one of the first house builders to move into the urban regeneration market, several decades ago. Our credentials are demonstrable and proven! Across the length and breadth of the country there are shining examples of projects that have dramatically altered the urban landscape. Our expertise in transforming old watersides, factories, railway yards, aerodromes, old hospitals and a host of other similar brownfield locations is well established. Employees & Training The recent consolidation within the industry has enabled us to recruit more experienced industry professionals than in previous years to fill existing and new posts. Bellway believes that local experience is an essential ingredient in a decentralised structure and our divisional management comprises individuals who have a wealth of local knowledge and contacts. This underpins our stated philosophy of being the 'local national housebuilder'. We also strongly believe in the importance of training throughout the divisional network and this has helped to develop skilled site managers and qualified trade professionals, vital to the future of the Group. For example, in the North West, our Manchester Division has been pro-active in this important field. The division has been involved in the training of its site workforce in conjunction with the trade union UCATT. Together we have embarked upon an on-site assessment programme which allows site employees to be trained in situ leading to the NVQ Level II qualification. The scheme has been so successful that it is now being adopted by other Bellway divisions and approximately 700 employees have so far received the benefit of this training. Technology & Innovation This has been an exciting year with a number of projects coming to fruition which have employed the latest construction and design techniques. In County Durham, the North East division built our first house utilising factory insulated panels. Working in partnership with a supplier, a Bellway house type was constructed from wooden panels and insulated with expanded polystyrene. The large insulated panels were manufactured in Scotland and delivered to site by road. The construction of the inner skin took just over 24 hours and was accomplished by one crane driver and three operatives. The method allowed what was previously a 3 bedroom house to be transformed into a 5 bedroom house, the redundant attic space having been used to create two additional bedrooms. Through extensive research and development on this project we believe we have been able to deliver a mode of construction that has outstanding 'green' credentials together with impressive heat retention properties. In addition, the timber came from sustainable managed forests. At Eastney, Portsmouth the Thames Gateway Division employed a new and innovative build in the construction of 32 apartments. The insulation was made from recycled newspaper and the construction was a closed panel, timber frame system using masonite, a timber substitute. This method significantly reduced build time and produced impressive heat retention statistics. Another innovative project was launched at Grange Park, Northampton where, in partnership with design engineers, Ove Arup, our West Midlands division has built a concrete modular house. Essentially this 2 storey house consists of six concrete modular units. The kitchen and bathroom, together with the boiler and radiators were fitted in factory conditions. The individual units, fabricated off site, were delivered and lifted into place by crane in less than one day. Bellway continues to place great emphasis on the successful use of information technology solutions throughout all its activities. In addition, we are an active member of an industry initiative to standardise communications with suppliers. We will continue to exploit any opportunities which may arise to utilise information technology to enhance our operations. Environment The Group Environmental Policy is included in our annual report and is also published on our website at www.bellway.co.uk. Our aim is to include the integration of environmental considerations in all aspects of the business, wherever possible. New construction technology reflects the needs of our business and the industry, to harness environmental responsibilities. We continue, for example, to operate initiatives that help preserve special habitats for wildlife and to restore woodlands, flora and fauna. Every year we plant tens of thousands of trees across the country and, for example, at Grange Park we have planted 35,000 out of a planned 42,500 trees to create a new woodland habitat. At our Ravenswood site in Ipswich and at other sites throughout the country, we are employing the SUDS system (sustainable urban drainage system) which returns rainwater direct to the aquifer layer in the ground rather than to the normal water courses. In years to come, this may also be extended to facilitate domestic water on our developments. We have been able to form strategic alliances with suppliers to deliver 'in action' re-cycling. The Group has an arrangement with plasterboard manufacturer British Gypsum to recycle its plasterboard on many of our developments. On a site in Somerset the layout is planned to accommodate the flight paths of Lesser Horseshoe bats to allow uninterrupted feeding patterns to continue. The development will also include the construction of a new bat roost. The Group places great emphasis on maximising the re-use of land. The Government's stated target of 60% brownfield development by 2008 has already been surpassed, well in advance of this target. Customer Care Bellway is totally committed to our customers. Our 24 hours a day, 7 days a week service aims to rectify any problems which arise with our homes quickly and efficiently. Our aim is to maximise client satisfaction so that customers remain loyal to the Bellway brand and return to us in the future, confident that they will be acquiring an outstanding product. Bellway's commitment to its customers is further underlined by our Financial Services division which creates added value by providing a 'one-stop shop' facility including mortgages, insurances and a range of financial products. This service is supported by a 7 days a week call centre based in Newcastle upon Tyne. This ensures that the time consuming and complicated process of buying a home is considerably eased for our customers. The Future Our track record demonstrates a consistently strong performance, delivered through a quality product, enviable land bank and motivated staff. The future is filled with opportunities and the market for homes across the spectrum is generally good. Provided consumer confidence remains, my fellow directors and I are confident that we can continue to deliver high performance and good value for the benefit of the environment, our shareholders, customers and employees. J K Watson Chief Executive 15 October 2001 BELLWAY p.l.c. GROUP PROFIT AND LOSS ACCOUNT For the year ended 31 July 2001 Notes 2001 2000 £000 £000 Turnover 695,720 634,301 Cost of sales 555,439 509,332 _______ _______ Gross profit 140,281 124,969 Administrative expenses 32,950 29,360 _______ _______ Group operating profit 107,331 95,609 Share of operating profit / (loss) in associated 50 (2) undertakings _______ _______ Total operating profit: Group and share of associates 107,381 95,607 Net interest payable (including associated undertakings) 5,926 6,462 _______ _______ Profit on ordinary activities before taxation 101,455 89,145 Taxation 30,784 27,182 _______ _______ Profit after taxation 70,671 61,963 Minority interest 2 (9) _______ _______ Profit attributable to shareholders 70,673 61,954 Dividends on equity and non-equity shares 1 17,518 15,446 _______ _______ Retained profit for year 53,155 46,508 ===== ===== Earnings per ordinary share - basic 2 63.2p 55.4p Earnings per ordinary share - diluted 2 62.7p 55.3p The Group's results for both the current and preceding financial years derive from continuing operations. The Company has taken advantage of the exemption from the requirement to present its own profit and loss account which is given by Section 230 of the Companies Act 1985. There were no significant recognised gains or losses in the current or preceding year other than the profit attributable to shareholders. BELLWAY p.l.c. BALANCE SHEETS At 31 July 2001 Notes Group Group Company Company 2001 2000 2001 2000 £000 £000 £000 £000 Fixed assets Tangible assets 19,351 14,768 - - Investments 2,117 2,249 16,200 16,197 _________ _________ _________ _________ 21,468 17,017 16,200 16,197 _________ _________ _________ _________ Current assets Stocks 644,421 508,514 - - Debtors 21,491 14,206 319,245 268,495 Cash at bank and in hand 3 4,059 37,525 2,456 2,055 _________ _________ _________ _________ 669,971 560,245 321,701 270,550 Current liabilities Creditors due within one year 230,212 167,751 11,961 10,455 _________ _________ _________ _________ Net current assets 439,759 392,494 309,740 260,095 _________ _________ _________ _________ Total assets less current 461,227 409,511 325,940 276,292 liabilities Creditors due after more than one 70,337 73,640 - - year _________ _________ _________ _________ Net assets 390,890 335,871 325,940 276,292 ======= ======= ======= ======= Capital and reserves Equity share capital Ordinary shares 13,741 13,652 13,741 13,652 Non-equity share capital Preference shares 20,000 20,000 20,000 20,000 _________ _________ _________ _________ Called up share capital 33,741 33,652 33,741 33,652 Equity reserves Share premium account 97,151 95,214 97,151 95,214 Other reserves 1,499 1,518 2,145 2,145 Profit and loss account 258,560 205,546 192,903 145,281 _________ _________ _________ _________ Shareholders' funds - equity and 390,951 335,930 325,940 276,292 non-equity Equity minority interest (61) (59) - - _________ _________ _________ _________ 390,890 335,871 325,940 276,292 ======= ======= ======= ======= Approved by the Board of Directors on 15 October 2001 and signed on its behalf by Howard C Dawe Alan G Robson BELLWAY p.l.c. GROUP CASH FLOW STATEMENT For the year ended 31 July 2001 2001 2000 £000 £000 £000 £000 Cash inflow from operating activities 16,958 75,613 Net cash outflow from returns on investments and servicing of finance Interest paid (7,174) (7,189) Interest received 862 772 Dividends paid - non-equity (1,900) (1,900) ________ ________ (8,212) (8,317) Taxation (30,521) (22,688) Net cash outflow from capital expenditure Purchase of tangible fixed assets (9,116) (5,808) Purchase of Investments (210) - Sale of tangible fixed assets 908 1,118 ________ ________ (8,418) (4,690) Equity dividends paid (14,114) (12,587) ________ ________ Net cash (outflow) / inflow before (44,307) 27,331 financing Net cash inflow from financing Issue of ordinary share capital on exercise of share options 1,935 549 ________ ________ (Decrease) / increase in cash in year (42,372) 27,880 ====== ====== NOTES 1. DIVIDENDS ON EQUITY AND NON-EQUITY SHARES 2001 2000 £000 £000 Ordinary share capital - equity Interim paid on 1 July 2001 - 4.1p per share (2000 - 3.6p) 4,513 3,932 Final proposed - 10.1p per share (2000 - 8.8p) 11,105 9,614 _______ _______ Total for year - 14.2p per share (2000 - 12.4p) 15,618 13,546 Preference share capital 9.5% - non-equity 1,900 1,900 _______ _______ 17,518 15,446 ===== ===== The directors recommend payment of the final dividend on Monday 14 January 2002 to shareholders on the Register at the close of business on Friday 14 December 2001. 2. EARNINGS PER ORDINARY SHARE The calculation of basic earnings per ordinary share is based on earnings of £68,773,000 (2000 - £60,054,000) after taxation, minority interest and preference dividend and the weighted average number of ordinary shares in issue during the year of 108,849,482 (2000 - 108,328,741). 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 109,601,603 (2000 - 108,559,653) to reflect the dilutive effect of outstanding share options. 3 RECONCILIATION OF NET BORROWINGS At 1 August Cash Exchange At 31 July 2000 flows differences 2001 £000 £000 £000 £000 Cash at bank and in hand 37,525 (33,392) (74) 4,059 Bank overdrafts - (8,980) - (8,980) Bank loans falling due after more than (55,000) - - (55,000) one year _______ _______ _______ _______ (17,475) (42,372) (74) (59,921) ======= ======= ======= ======= 4. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 July 2000 or 2001 but is derived from those accounts. Statutory accounts for 2000 have been delivered to the registrar of companies and those for 2001 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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