Final Results

Bellway PLC 14 October 2003 NATIONAL HOUSEBUILDER BELLWAY p.l.c. TODAY, TUESDAY 14 OCTOBER 2003, ANNOUNCE THEIR PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2003. HIGHLIGHTS Year to 31 July 2003 2002 Increase Turnover - Â£m 954.2 773.0 23.4% Operating profit - Â£m 172.8 133.1 29.8% Profit before taxation - Â£m 169.3 125.3 35.1% Basic earnings per ordinary share - pence 106.0 78.6 34.9% Dividend per ordinary share - pence 20.0 15.75 27.0% Net asset value per ordinary share - pence 483 400 20.8% THE CHAIRMAN HOWARD DAWE SAID 'IT GIVES ME GREAT PLEASURE TO ANNOUNCE THAT BELLWAY PLC HAS AGAIN DELIVERED A RECORD SET OF ANNUAL RESULTS'. HE ADDED 'WE HAVE REMAINED COMMITTED TO DELIVERING QUALITY HOMES TO THE MIDDLE MARKET AND THIS HAS RESULTED IN THE VALUE OF OUR FORWARD SALES INCREASING FROM Â£325 MILLION IN JULY 2002 TO Â£380 MILLION AT THE END OF JULY 2003'. HE CONCLUDED 'OUR PROVEN TRACK RECORD, THE STRONGEST FORWARD SALES POSITION IN OUR HISTORY, THE EXCEPTIONAL QUALITY OF OUR LAND BANK AND THE FORMATION OF THREE NEW TRADING DIVISIONS, MAKES THE BOARD EXTREMELY CONFIDENT ABOUT THE FUTURE'. 2003 2002 * Homes sold - no. 6,278 6,044 * Average selling price - Â£000 149.7 120.8 * Operating margin - % 18.1 17.2 * Return on average capital employed - % 31.4 27.9 * Land bank - plots with planning permission 18,400 17,400 * Shareholders' funds - Â£m 558.5 460.4 FOR FURTHER INFORMATION, PLEASE CONTACT JOHN WATSON, CHIEF EXECUTIVE OR ALISTAIR LEITCH, FINANCE DIRECTOR TUESDAY 14 OCTOBER AT HSBC, 10 LOWER THAMES STREET, LONDON EC3R 6AE TEL: 020 7260 8000 OR 07855 337007 (J WATSON - MOBILE) & 07855 337001 (A LEITCH - MOBILE) WEDNESDAY 15 OCTOBER & THURSDAY 16 OCTOBER 07855 337007 & 07855 337001 THEREAFTER 0191 217 0717 BELLWAY p.l.c CHAIRMAN'S STATEMENT Results It gives me great pleasure to announce that Bellway p.l.c. has again delivered a record set of annual results. For the year ending 31 July 2003, turnover increased to Â£954 million from Â£773 million in the corresponding period last year, following the sale of 6,278 homes at an average price of Â£149,700. Operating profit rose by 29.8% to Â£172.8 million with operating margins increasing to 18.1%, up from 17.2%. Interest payable of Â£5.9 million is covered 29 times. Profit before exceptional items increased 33.4% to Â£167.2 million. After netting Â£2.1 million from the sale of ground rents, profit before taxation advanced by 35.1% to Â£169.3 million and basic earnings per share grew to 106.0p, up 34.9%. The already strong balance sheet was further augmented by retained earnings of Â£94.4 million, improving shareholders' funds to Â£558.5 million. Return on average capital employed was 31.4%, one of the highest in our industry. Having spent some Â£272 million on land, our land bank owned with planning permission increased by 1,000 plots to 18,400. At the year end, borrowings were Â£41.7 million resulting in gearing of just 7.5%. Dividend In my statement last April, I was delighted to inform shareholders of an increase in the interim dividend. In view of these outstanding results, the Board has decided to recommend an increase in the final dividend of 23.2% to 13.8p. This produces a total dividend for the year of 20p per share compared to 15.75p last year, an increase of 27%. Ordinary shareholders on the Register of Members at the close of business on Friday 12 December 2003 will receive the final dividend of 13.8p on Monday 19 January 2004. Current Trading Uncertainties surrounding economic conditions and concerns over military action in the Middle East dampened demand for new homes in late spring. However, I am pleased to say that since the start of summer we have enjoyed good market conditions throughout all our areas of operation. We have remained committed to delivering quality homes to the middle market and this has resulted in the value of our forward sales increasing from Â£325 million in July 2002 to Â£380 million at the end of July 2003. Since that date, the market has remained buoyant resulting in a further Â£250 million of reservations. In April I announced the opening of a new division in the South West and I am pleased to advise that this will contribute to the current year's profitability. Furthermore, we have appointed an experienced managing director to lead another division that will operate in the north Thames Gateway area. It is also our intention to create a new division in the east of Scotland by summer 2004. These moves underpin our organic growth plans for the future and will enable us to raise our annual production target to 8,500 homes in the medium term. People The Board would like to place on record, once again, its deep gratitude to all who have worked so hard for the Group during the year. These record results have been made possible by the skill and dedication of the Group's employees together with our many suppliers, sub-contractors and partners. Board Changes Dennis Bramley, the company's senior non-executive director, retires on 31 October 2003 and on behalf of my colleagues, I would like to offer him our sincere thanks for his valuable contribution to the Board over the past ten years and wish him well for the future. At the same time, I welcome the appointment of Peter Johnson, a new non-executive director on 1 November 2003. Peter is a chartered accountant who had been until September 2000 a partner for 23 years with KPMG and will assume chairmanship of the Audit Committee. Leo Finn will now assume chairmanship of the Board Committee on Executive Directors' Remuneration and will take up the role of senior independent non-executive director. My contractual retirement date is 1 November 2004 and the Board have invited me to become non-executive chairman from that date. I have indicated to them that I will be delighted to accept this new role. Corporate Social Responsibility Through its operations, Bellway continues its commitment to enhance the environment and the community. Details of the environmental policy and various related projects are set out in our Annual Report together with our performance achievements in the areas of energy, water and waste. In addition, the Group is particularly aware of its responsibility to ensure the highest standards of health and safety in the workplace. Future Prospects Our proven track record, the strongest forward sales position in our history, the exceptional quality of our land bank and the formation of three new trading divisions, makes the Board extremely confident about the future. H C Dawe Chairman 13 October 2003 BELLWAY p.l.c. CHIEF EXECUTIVE'S OPERATING REVIEW For many years Bellway's consistent approach to housebuilding has delivered improving returns for shareholders resulting in earnings per share achieving compound growth of 25.8% over the last ten years. Group turnover in the year to 31 July 2003 increased by 23.4% to Â£954 million and operating profit rose 29.8% to Â£172.8 million. The number of homes sold increased by 234 to 6,278 with 55% of completions in the north and the remaining 45% in the south of the country. Our wide geographical coverage helps to smooth the impact of local price fluctuations and provides more consistent returns for shareholders. The operating margin increased from 17.2% to 18.1% through a combination of strategic land buying and improved overhead recovery. During the course of the year, overheads reduced from 4.9% to 4.4% of turnover. One of the key financial indicators within our business is return on capital employed. Managing the balance between core long-term sites and short-term land opportunities has resulted in a healthy return on capital this year of 31.4%. This is one of the highest in the industry and a creditable performance in the light of higher work-in-progress levels associated with apartment developments and a record expenditure on land, up Â£70 million to Â£272 million. The Right Product in the Right Place In developing a wide range of property types we benefit substantially from our product portfolio which runs from one bedroom apartments to five bedroom detached houses. This extensive product range enables us to cover the full pricing spectrum and all market sectors, with the exception of retirement housing. The average selling price across the Group advanced by 24% to Â£149,700. This was largely due to planned product changes and the continued re-focusing of our former urban renewal divisions. The core of our production is firmly established in the middle market sector and this year 60% of our homes were sold at Â£150,000 or less. Advancing our Reputation for Regeneration Using our urban renewal credentials and under the new banner of Bellway City Solutions, we are forging closer links with housing associations and local authorities. Last year saw the commencement of a landmark site in the Borough of Barnet in partnership with Notting Hill Housing Association. This is a different form of land procurement with the end product providing homes for key workers within the local borough. We feel that this model can be transported elsewhere and further schemes are now being submitted for planning in Greenwich and Liverpool. This year 10% of our completions have been sold to housing associations, predominantly in the south of England. We expect this trend for affordable social housing will continue to increase as housing associations and other agencies come under further pressure to provide more homes. Infrastructure and Growth In April we announced the opening of our new South West division and whilst still utilising the facilities and services available from a neighbouring division we will see production flowing through in the current financial year. Furthermore we are currently acquiring new sites in the east of Scotland with the intention of separating the existing single entity into two distinct trading divisions, serving the east and west respectively. The new division will be operating by Summer 2004. The Government's Communities Plan has identified four key housing growth areas - Ashford, Cambridge, Milton Keynes and Thames Gateway, the last two regions being targeted for a further 134,000 and 120,000 new homes by 2016. Whilst we already have divisions in these locations we have recruited an experienced Managing Director to form a new Thames Gateway North division covering the London boroughs of Newham, Stratford and Tower Hamlets, extending as far east as Thurrock. This area has undoubted growth potential and we anticipate production from this new division in the 2004/05 financial year. These changes will increase the number of divisions to 17 raising our medium term growth aspirations to over 8,500 homes per annum. Land and Planning Despite the cost and time spent in processing planning applications increasing throughout the year, we have been successful in acquiring almost 7,300 new plots with detailed planning permission in the period under review - 16% more than we used, increasing last year's 17,400 plots to 18,400 at 31 July 2003. Furthermore our medium-term land representing plots owned or contracted subject to planning, has increased from 12,500 to 14,800 plots. This figure includes our substantial land holding adjacent to the River Thames at Barking. We also own, control or hold under option, some 3,500 acres where we expect to see land releases coming through the planning process in due course. Earlier this year the Deputy Prime Minister announced a wide ranging review of the planning system and we welcome any Government initiatives that are designed to improve the current planning process. Award Winning Quality We continue to evaluate new products and building processes in order to maximise quality and margin. We have in place supply chain agreements with manufacturers where we continue to benefit from economies in Group wide purchase arrangements. Our focus on quality has this year been recognised by Bellway being voted 'Major Housebuilder of the Year 2003' by Building Magazine. Also, in the annual NHBC Pride in the Job Awards, twelve of our site managers were recognised for their skill and abilities. In Wessex our division was awarded the 'National Volume Housebuilder' Award for its development at Farrington Gurney in Somerset by the Local Authority Building Control Organisation. Environment The management of environmental issues has become a key concern for all companies and we fully recognise our responsibilities in this important area. By purchasing more pre-fabricated materials we have been able to reduce site wastage. Similarly we have increased the volume of on site recycling, thereby reducing our land fill liability. Extensive experience in brownfield development means that more than 75% of our land has had a former use, comfortably exceeding Government regeneration targets. This year we have also supported The Wildlife Trust through an innovative sponsorship culminating in a Bellway wildlife garden at this year's BBC Gardeners' World Live exhibition at the NEC in Birmingham. Training Bellway work closely with the Construction Industry Training Board (CITB) and the National House Building Council (NHBC) to ensure consistent training complementing our business objectives. Over 30% of the workforce participated in training opportunities throughout the year. Currently the Group employs more than 100 apprentices all at various stages in their training programmes. I was particularly pleased to see that Anthony Sutton won the Trainee of the Year Award in the Carpentry and Joinery category as sponsored by the CITB. It is hoped that this will lead to a long and successful career for him within the industry. The Future The underlying fundamentals affecting our business are still in a sound state with high employment levels, low interest rates and household formation increasing above the rate of new housing supply. We commenced the new financial year with a strong forward sales position, up 17% in value terms. Since the end of the financial year, the market place has remained buoyant. Our forward sales position has further improved resulting in over 60% of our current year's target having already been secured. This gives us a solid base on which to continue the future progress of your Group. J K Watson Chief Executive 13 October 2003 BELLWAY p.l.c. GROUP PROFIT AND LOSS ACCOUNT For the year ended 31 July 2003 Notes 2003 2002 Â£000 Â£000 Turnover 954,197 772,964 Cost of sales (739,479) (601,843) __________ __________ Gross profit 214,718 171,121 Administrative expenses (41,956) (38,023) __________ __________ Group operating profit 172,762 133,098 Share of operating profit / (loss) in associated undertakings 367 (43) __________ __________ Total operating profit: Group and share of associates 173,129 133,055 Exceptional items : Profit on disposal of freehold ground rents 2,075 - Net interest payable (including associated undertakings) (5,953) (7,711) __________ __________ Profit on ordinary activities before taxation 169,251 125,344 Taxation (50,687) (37,444) __________ __________ Profit after taxation 118,564 87,900 Minority interest - equity - 1 __________ __________ Profit for the financial year attributable to shareholders 118,564 87,901 Dividends on equity and non-equity shares 1 (24,166) (19,272) __________ __________ Retained profit for the financial year 94,398 68,629 ====== ====== Earnings per ordinary share - basic 2 106.0p 78.6p Earnings per ordinary share - diluted 2 104.9p 77.8p 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 (4) of the Companies Act 1985. The profit retained in the Company for the year was Â£85,834,000 (2002 - Â£65,728,000). 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 2003 Group Group Company Company 2003 2002 2003 2002 Â£000 Â£000 Â£000 Â£000 Notes Fixed assets Tangible assets 16,293 21,693 - - Investments 1,551 1,824 16,200 16,200 _________ _________ _________ _________ 17,844 23,517 16,200 16,200 _________ _________ _________ _________ Current assets Stocks 857,984 737,262 - - Debtors 33,420 21,522 478,935 387,047 Cash at bank and in hand 3 88,301 73,381 3,468 2,456 _________ _________ _________ _________ 979,705 832,165 482,403 389,503 Current liabilities Creditors due within one year (269,360) (297,643) (16,276) (13,212) _________ _________ _________ _________ Net current assets 710,345 534,522 466,127 376,291 _________ _________ _________ _________ Total assets less current liabilities 728,189 558,039 482,327 392,491 Creditors due after more than one year (169,602) (97,724) - - Provisions for liabilities and charges (195) - - - _________ _________ _________ _________ Net assets 558,392 460,315 482,327 392,491 ====== ====== ====== ====== Capital and reserves Equity share capital Ordinary shares 13,926 13,775 13,926 13,775 Non-equity share capital Preference shares 20,000 20,000 20,000 20,000 _________ _________ _________ _________ Called up share capital 33,926 33,775 33,926 33,775 Equity reserves Share premium account 101,791 97,940 101,791 97,940 Other reserves 1,492 1,492 2,145 2,145 Profit and loss account 421,244 327,170 344,465 258,631 _________ _________ _________ _________ Shareholders' funds - equity and non-equity 558,453 460,377 482,327 392,491 Equity minority interest (61) (62) - - _________ _________ _________ _________ 558,392 460,315 482,327 392,491 ====== ====== ====== ====== Approved by the Board of Directors on 13 October 2003 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 2003 Notes 2003 2002 Â£000 Â£000 Â£000 Â£000 Cash inflow from operating activities 61,971 85,234 Net cash outflow from returns on investments and servicing of finance Interest paid (5,811) (8,577) Interest received 1,427 740 Dividends paid - non-equity (1,900) (1,900) _________ _________ (6,284) (9,737) Taxation (44,271) (35,633) Net cash inflow / (outflow) from capital expenditure and financial investment Purchase of tangible fixed assets (4,127) (7,619) Purchase of investments (35) (410) Sale of tangible fixed assets 112 1,791 Sale of freehold ground rents 8,079 - _________ _________ 4,029 (6,238) Equity dividends paid (19,203) (16,121) _________ _________ Net cash (outflow) / inflow before financing (3,758) 17,505 Net cash inflow from financing Issue of ordinary share capital on exercise of share 3,569 807 options (Decrease) / Increase in bank loans due within one year (30,000) 30,000 Increase in bank loans due after more than one year 45,000 30,000 _________ _________ 18,569 60,807 _________ _________ Increase in cash in year 3 14,811 78,312 ====== ====== NOTES 1 DIVIDENDS ON EQUITY AND NON-EQUITY SHARES 2003 2002 Â£000 Â£000 Ordinary share capital - equity Interim paid on 1 July 2003 - 6.2p per share (2002 - 4.55p) 6,879 5,018 Final proposed - 13.8p per share (2002 - 11.2p) 15,387 12,354 ________ ________ Total for year - 20.0p per share (2002 - 15.75p) 22,266 17,372 Preference share capital 9.5% - non-equity 1,900 1,900 ________ ________ 24,166 19,272 ===== ===== The directors recommend payment of the final dividend on Monday 19 January 2004 to shareholders on the Register at the close of business on Friday 12 December 2003. 2 EARNINGS The calculation of basic earnings per ordinary share is based on earnings of Â£116,664,000 (2002 - Â£86,001,000) 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 110,102,928 (2002 - 109,481,485). 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 111,239,056 (2002 - 110,573,636) to reflect the dilutive effect of outstanding share options. 3 ANALYSIS OF NET BORROWINGS At 1 August Cash Exchange At 31 July 2002 flows differences 2003 Â£000 Â£000 Â£000 Â£000 Cash at bank and in hand 73,381 14,811 109 88,301 Bank loans due within one year (30,000) 30,000 - - Bank loans due after more than one year (85,000) (45,000) - (130,000) _______ _______ _______ _______ Totals (41,619) (189) 109 (41,699) ===== ===== ===== ===== 4. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 July 2002 or 2003 but is derived from those accounts. Statutory accounts for 2002 have been delivered to the registrar of companies and those for 2003 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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