Final Results

Bellway PLC 15 October 2002 NATIONAL HOUSEBUILDER BELLWAY p.l.c. TODAY (TUESDAY 15 OCTOBER 2002) ANNOUNCE THEIR PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2002. The Chairman, Howard Dawe, said 'I am delighted to report that we have had our most successful year ever'. He added 'We ended the financial year with our strongest forward sales position ever'. He concluded 'I am extremely optimistic about the future prospects for the Group'. HIGHLIGHTS Year to 31 July 2002 2001 Increase Homes sold - no. 6,044 5,725 5.6% Turnover - £m 773.0 695.7 11.1% Operating profit - £m 133.1 107.3 24.0% Operating margin - % 17.2 15.4 11.7% Profit before taxation - £m 125.3 101.5 23.5% Basic earnings per ordinary share - pence 78.6 63.2 24.4% Dividend per ordinary share - pence 15.75 14.2 10.9% Land Bank - plots with planning permission 17,400 16,700 4.2% Shareholders' funds - £m 460.4 391.0 17.8% Net asset value per ordinary share - pence 400 337 18.7% FOR FURTHER INFORMATION, PLEASE CONTACT JOHN WATSON, CHIEF EXECUTIVE OR ALISTAIR LEITCH, FINANCE DIRECTOR TUESDAY 15 OCTOBER AT ING BARINGS, 60 LONDON WALL, LONDON EC2M 5TQ - TEL: 020 7767 1000 OR 07968 599814 (J WATSON - MOBILE) & 07736 779663 (A LEITCH - MOBILE) WEDNESDAY 16 & THURSDAY 17 OCTOBER 07968 599814 & 07736 779663 THEREAFTER 0191 217 0717 BELLWAY p.l.c CHAIRMAN'S STATEMENT Results I am delighted to report that we have had our most successful year ever. By selling over 6,000 homes for the first time, turnover has improved by £77.3m to a record £773.0m. The operating profit jumped by £25.8m to £133.1m and the operating margin has advanced from 15.4% to 17.2%, one of the highest in the industry and we believe it will remain so. Consequently the profit before tax at 31 July rose to a record £125.3m, our sixth consecutive increase. Basic earnings per ordinary share climbed to 78.6p against 63.2p last year, a healthy improvement of 24.4%. Retained profit for the year was £68.6m giving a further boost to our strong balance sheet with shareholders' funds growing to £460.4m. The company places great emphasis on cash management and the return on average capital employed was 27.9%. Borrowings at the year end fell to £41.6m producing gearing of 9%, despite an investment in land during the year of £192m. Increased dividend The Board is delighted to continue its progressive dividend policy and is pleased to recommend a final dividend for the year of 11.2p, compared to 10.1p last year. This produces a total dividend for the year of 15.75p, compared with 14.2p, an increase of 10.9%, the twelfth consecutive annual increase. Ordinary shareholders on the Register of Members at the close of business on Friday, 13 December 2002 will receive the final dividend of 11.2p on Monday, 13 January 2003. Current trading and prospects We have entered the new financial year in an excellent position with record forward sales of £325m, an increase of 47% over last year. Since 1 August demand across all divisions has remained strong. Furthermore we were successful in adding more than 6,700 plots to increase the land bank with planning permission to 17,400 plots. In addition, to further underpin our growth plans, 12,500 plots are held where we expect to receive planning permission shortly. There are also further substantial strategic land interests, owned or controlled, which are being progressed in the long term through the planning process. With a strong balance sheet, we are in an excellent position to secure future opportunities as they arise. People are our strongest foundation These record results have been made possible by the skill and dedication of the Group's employees together with our many suppliers and partners. The Board would like to place on record, once again, its deep gratitude to all who have served the Group so well during the year. Board changes Alan Robson retired as Finance Director on 31 July 2002 and the Board offer him sincere thanks for his major contribution to the Group's progress over the last eighteen years. His successor from 1 August 2002 is Alistair Leitch, a Chartered Accountant who has held a number of senior financial positions within the Group, most recently Group Chief Accountant. On 1 August 2002 Kevin Wrightson was appointed Company Secretary. Kevin is a Chartered Secretary and joined the Group in 1990. His appointment allows Peter Stoker, his predecessor, to concentrate on his role as Commercial Director. Corporate social responsibility Bellway is committed to enhancing the environment and the community. The Group's environmental policy and initiatives are set out in the Annual Report and on its website, www.bellway.co.uk. In addition, the Group is particularly aware of its responsibility to ensure the highest levels of Health and Safety in the workplace. This affects all areas of operation as we strive to minimise and eliminate risks to employees, suppliers and the general public. Building for the future We ended the financial year with our strongest forward sales position ever and current sales are extremely encouraging with all divisions experiencing strong demand. Over the years we have consistently demonstrated that Bellway can increase its market share and earnings, and the Board remains confident that this trend will continue. I am extremely optimistic about the future prospects for the Group. H C Dawe Chairman 14 October 2002 BELLWAY p.l.c. CHIEF EXECUTIVE'S OPERATING REVIEW All fourteen housebuilding divisions traded successfully with the result that we have increased the number of homes sold and turnover to record levels. By achieving higher operating margins, now up to 17.2%, we have also raised our operating profit to £133.1m, the highest in our history. Increasing our market share Despite the total home production in the UK falling to its lowest level in 54 years, Bellway has, since 1992, trebled the number of homes sold and quadrupled its market share with all of this growth having been achieved organically. During the period under review we reached yet another milestone by selling more than 6,000 homes. A wide geographical spread ensures an even coverage across the country and the diversity of our house type portfolio enables us to serve most sectors of the market. We were one of the first to embrace the trend towards inner city living and this has resulted in apartment schemes being developed in every division representing 35% of the total homes sold. Approximately 10% of new homes are sold to housing associations and other agencies and we expect to see this figure increase in the future as planning authorities impose their needs for more affordable homes within each new development. Achieving the best mix and maximising returns As predicted, the average selling price of our homes increased slightly to £120,800. Whilst the most expensive sale last year was in excess of £1m we will continue to trade predominantly in the middle market focusing on brownfield redevelopment in areas of high population. The northern divisions have not only increased average selling price by 12% to £100,600 but they have also increased the number of completions by almost 10% to 3,533 homes. A large contribution to this growth comes from the two north west divisions which have, during the year, increased annual output to almost 1,200 homes - a 57% increase. The East Midlands, West Lancashire and Yorkshire divisions, where in previous years a high percentage of output was grant aided, still have low average selling prices compared to their regional averages. In recent times we have been changing the development profile of these divisions by acquiring higher priced developments in cities such as Leeds, Chester and Nottingham and this will help to increase the average selling price in the future. Output from the two midlands divisions has risen to 850 homes, an increase of over 50% in three years, and a new site for around 300 homes has been acquired in the Birmingham suburbs complementing the existing inner city developments. Further north the North East division continues to perform consistently well and the Scotland division has acquired new sites in the east of Scotland and northwards as far as Perth. With regard to the southern divisions, we decided some time ago to change policy and moved away from higher value London apartments to focus on 'family orientated' housing. This planned change in mix manifested itself in lower average selling prices this year compared to the previous year in the three south eastern divisions. We continue to target the south east of England and have now acquired six new large schemes in and around London which total some 1,800 homes. The product mix of these schemes will serve a much wider cross section of the home buying public and will result in improved average selling prices in these divisions in years to come. Four of our southern divisions sold a record number of homes. In particular, the Wessex division has expanded its presence in Devon and Somerset with the acquisition of a large site near Exeter and are now set to open up new sites in and around Bristol where planning permissions have been received for over 550 homes. Northern Home Counties achieved 139 completions in its second year of trading and further growth is expected as new sites come on stream in this government designated growth area. Thames Gateway has seen a 38% increase in average selling price to £121,000 as it moves away from grant aided projects and Wales has now commenced work on our large investment in Cardiff Bay, whilst at the same time, submitting plans which will lead to a 100% increase in the original density. It is worth highlighting that the overhead structure of our divisions means that they are each capable of selling a minimum of 500 homes per annum. Only three of the divisions have achieved this figure during the year so further growth can be accommodated, market permitting. In addition, we continue to evaluate the possibility of opening new divisions in certain parts of the country to augment our plans for growth. The operating margin of 17.2% has increased significantly from the previous year's 15.4%. This increase in margin is a reflection of increasing turnover and also reflects the types of homes we build, the specification and the well balanced land bank together with the skill and commitment of our employees. Taking advantage of the land market Land acquisition is an opportunistic process and our ability to move quickly allows us to take full advantage of these opportunities. We believe the level of activity in the land market has slowed in the last two years as a result of other housebuilders consolidating their holdings. In this period our land holdings have improved. Following the acquisition of several large sites recently, we decided to sell on a small proportion from eight developments. This was done to maintain our return on average capital employed, which at 27.9%, remains one of the highest in the industry. Consequently, land disposals were higher than usual at £34.7m. Notwithstanding this, our land bank has increased by 700 plots to 17,400 plots with planning permission. In addition we own, or are contracted to own, around 12,500 plots where planning permission is likely to be granted shortly. Both figures exclude strategic long term land holdings. Geographically the plots are evenly dispersed throughout the country and this provides an excellent defence against the regional variances of the UK housing market. We have been, for some time now, one of the industry leaders in brownfield development with well over 75% of the land having had a former use. Building quality We remain committed to training and employing more apprentices and also encouraging site based employees to train for NVQ level qualifications. This training is planned and carried out in conjunction with local colleges and the Construction Industry Training Board. I am delighted to report that in 2002 we received more NHBC 'Pride in the Job' Awards than in any other year, with Bellway's site management teams throughout the country receiving eighteen Quality Awards. Many of these managers began their careers with the Company as apprentices, having advanced through training programmes to their present positions. Our training programmes assist in reducing pressure on labour costs in certain trades, especially in and around city centres. Whilst there is no doubt that the advent of new and more rigorous building regulations will increase the cost base within the industry, the last twelve months have seen cost increases contained at around 5%. We continue to investigate methods of reducing our cost base by streamlining construction systems and employing alternative building techniques. Timber, steel and concrete frames have been used in the construction of over 1,500 homes sold during the year, more than ever before. The use of prefabricated components is an increasing feature of the building process and these techniques and methods reduce construction time and benefit cash flow. Environmental management The Group's divisions seek to minimise the adverse effects of the construction process on the environment. Last year we published our environmental policy and we are now in the course of preparing an environmental management system which will identify the key criteria against which we will have to be measured in future years. Further details are contained in our Annual Report and on our website, www.bellway.co.uk. The future The Group has proved, with these record results, its ability to grow all aspects of the business and the Board remains confident that this can be continued in the future. J K Watson Chief Executive 14 October 2002 BELLWAY p.l.c. GROUP PROFIT AND LOSS ACCOUNT For the year ended 31 July 2002 Notes 2002 2001 £000 £000 Turnover 772,964 695,720 Cost of sales (601,843) (555,439) __________ __________ Gross profit 171,121 140,281 Administrative expenses (38,023) (32,950) __________ __________ Group operating profit 133,098 107,331 Share of operating (loss) / profit in associated undertakings (43) 50 __________ __________ Total operating profit: Group and share of associates 133,055 107,381 Net interest payable (including associated undertakings) (7,711) (5,926) __________ __________ Profit on ordinary activities before taxation 125,344 101,455 Taxation (37,444) (30,784) __________ __________ Profit after taxation 87,900 70,671 Minority interest - equity 1 2 __________ __________ Profit for the financial year attributable to shareholders 87,901 70,673 Dividends on equity and non-equity shares 1 (19,272) (17,518) __________ __________ Retained profit for the financial year 68,629 53,155 ====== ====== Earnings per ordinary share - basic 2 78.6p 63.2p Earnings per ordinary share - diluted 2 77.8p 62.7p 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. The profit retained in the Company for the year was £65,728,000 (2001 - £47,622,000). 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 2002 Group Group Company Company 2002 2001 2002 2001 £000 £000 £000 £000 Notes Fixed assets Tangible assets 21,693 19,351 - - Investments 1,824 2,117 16,200 16,200 _________ _________ _________ _________ 23,517 21,468 16,200 16,200 _________ _________ _________ _________ Current assets Stocks 737,262 644,421 - - Debtors 21,522 21,491 387,047 319,245 Cash at bank and in hand 3 73,381 4,059 2,456 2,456 _________ _________ _________ _________ 832,165 669,971 389,503 321,701 Current liabilities Creditors due within one year (297,643) (230,212) (13,212) (11,961) _________ _________ _________ _________ Net current assets 534,522 439,759 376,291 309,740 _________ _________ _________ _________ Total assets less current liabilities 558,039 461,227 392,491 325,940 Creditors due after more than one year (97,724) (70,337) - - _________ _________ _________ _________ Net assets 460,315 390,890 392,491 325,940 ====== ====== ====== ====== Capital and reserves Equity share capital Ordinary shares 13,775 13,741 13,775 13,741 Non-equity share capital Preference shares 20,000 20,000 20,000 20,000 _________ _________ _________ _________ Called up share capital 33,775 33,741 33,775 33,741 Equity reserves Share premium account 97,940 97,151 97,940 97,151 Other reserves 1,492 1,499 2,145 2,145 Profit and loss account 327,170 258,560 258,631 192,903 _________ _________ _________ _________ Shareholders' funds - equity and non-equity 460,377 390,951 392,491 325,940 Equity minority interest (62) (61) - - _________ _________ _________ _________ 460,315 390,890 392,491 325,940 ====== ====== ====== ====== Approved by the Board of Directors on 14 October 2002 and signed on its behalf by Howard C Dawe Alistair M Leitch BELLWAY p.l.c. GROUP CASH FLOW STATEMENT For the year ended 31 July 2002 Notes 2002 2001 £000 £000 £000 £000 Cash inflow from operating activities 85,234 16,958 Net cash outflow from returns on investments and servicing of finance Interest paid (8,577) (7,174) Interest received 740 862 Dividends paid - non-equity (1,900) (1,900) _________ _________ (9,737) (8,212) Taxation (35,633) (30,521) Net cash outflow from capital expenditure and financial investment Purchase of tangible fixed assets (7,619) (9,116) Purchase of Investments (410) (210) Sale of tangible fixed assets 1,791 908 _________ _________ (6,238) (8,418) Equity dividends paid (16,121) (14,114) _________ _________ Net cash inflow / (outflow) before financing 17,505 (44,307) Net cash inflow from financing Issue of ordinary share capital on exercise of share options 807 1,935 Increase in bank loans due within one year 30,000 - Increase in bank loans due after more than one year 30,000 - _________ _________ 60,807 1,935 _________ _________ Increase / (decrease) in cash in year 3 78,312 (42,372) ====== ====== NOTES 1 DIVIDENDS ON EQUITY AND NON-EQUITY SHARES 2002 2001 £000 £000 Ordinary share capital - equity Interim paid on 1 July 2002 - 4.55p per share (2001 - 4.1p) 5,018 4,513 Final proposed - 11.2p per share (2001 - 10.1p) 12,354 11,105 ________ ________ Total for year - 15.75p per share (2001 - 14.2p) 17,372 15,618 Preference share capital 9.5% - non-equity 1,900 1,900 ________ ________ 19,272 17,518 ===== ===== The directors recommend payment of the final dividend on Monday 13 January 2003 to shareholders on the Register at the close of business on Friday 13 December 2002. 2 EARNINGS The calculation of basic earnings per ordinary share is based on earnings of £86,001,000 (2001 - £68,773,000) after taxation, minority interest and preference dividend and the weighted average number of ordinary shares (excluding the weighted average number of ordinary shares held by the employee ownership plans) in issue during the year of 109,481,485 (2001 - 108,849,482). 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 110,573,636 (2001 - 109,601,603) to reflect the dilutive effect of outstanding share options. 3 RECONCILIATION OF NET BORROWINGS At 1 August Cash Exchange At 31 July 2001 flows differences 2002 £000 £000 £000 £000 Cash at bank and in hand 4,059 69,332 (10) 73,381 Bank overdrafts (8,980) 8,980 - - _______ 78,312 Bank loans due within one year - (30,000) - (30,000) Bank loans due after more than one year (55,000) (30,000) - (85,000) _______ _______ _______ _______ Totals (59,921) 18,312 (10) (41,619) ===== ===== ===== ===== 4. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 July 2001 or 2002 but is derived from those accounts. Statutory accounts for 2001 have been delivered to the registrar of companies and those for 2002 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. This information is provided by RNS The company news service from the London Stock Exchange

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