Final Results
Bellway PLC
16 October 2007
NATIONAL HOUSEBUILDER BELLWAY p.l.c. TODAY, TUESDAY 16 OCTOBER, ANNOUNCE THEIR
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2007.
HIGHLIGHTS Year Ended
31 July
2007 2006
• Homes sold 7,638 7,117 + 7.3%
• Average selling price £173.3k £169.0k + 2.5%
• Revenue £1,354.0m £1,240.2m + 9.2%
• Operating profit £253.1m £239.3m + 5.8%
• Operating margin 18.7% 19.3%
• Profit before taxation £234.8m £220.7m + 6.4%
• Basic earnings per ordinary share 146.1p 137.5p + 6.3%
• Dividend per ordinary share 43.125p 34.5p + 25.0%
• Land bank - plots with planning permission 23,500 22,600 + 4.0%
• Total equity £1,035.8m £903.5m + 14.6%
• Net asset value per ordinary share 903p 793p + 13.9%
• Return on average capital employed 22.7% 23.4%
Chairman, howard dawe said 'I am pleased to report that Bellway has, yet again,
produced a very good set of results' and that 'profit before tax rose to a new
record of £234.8 million'.
Furthermore 'the directors are recommending an increase in the final dividend
of 32%'.
He added 'Bellway's policy of forward selling continued to prove fruitful' and
that 'at 30 September, the forward order book of £667 million compares
favourably with the position last year'.
He concluded 'The coming weeks will give a better indication of the overall
national sentiment towards the housing market but the Board.... remains
confident about the future prospects for the Group'.
FOR FURTHER INFORMATION, PLEASE CONTACT JOHN WATSON, CHIEF EXECUTIVE OR ALISTAIR
LEITCH, FINANCE DIRECTOR.
TUESDAY 16 OCTOBER - FRIDAY 19 OCTOBER
J WATSON: 07855 337007
A LEITCH: 07855 337001
THEREAFTER: 0191 217 0717
CHAIRMAN'S STATEMENT
I am pleased to report that Bellway has, yet again, produced a very good set of
results for the year ended 31 July. The Group continues to deliver organic
growth in volumes and earnings despite the challenging market conditions
experienced by the housing industry over the last twelve months.
Results
The number of new homes sold increased by 7.3% to 7,638 from 7,117 and their
average price rose by 2.5% from £169,000 to £173,300. Total turnover for the
Group was a new high at £1,354 million, an increase of £114 million from last
year's level. As expected, the operating margin declined, moving from 19.3% to
18.7%, however, profit before tax rose to a new record of £234.8 million, an
increase of 6.4%. Earnings per ordinary share have risen by 6.3% to 146.1 pence
from 137.5 pence last year. Total equity has risen to over £1 billion for the
first time at £1,036 million resulting in net assets per ordinary share now
standing at 903 pence. Gearing at 31 July was a relatively modest 11%, however,
during the year the average gearing was around 20%, with the finance expenses of
£17.9 million covered over 14 times.
Dividend
Having raised the interim dividend by 15%, I am pleased to report that the
directors are recommending an increase in the final dividend of 32% to 26.675
pence, to reflect the financial health of the Group. Accordingly the total
dividend for the year will rise by 25% to 43.125 pence. We aim to continue our
progressive dividend policy and further reduce cover as appropriate. The final
dividend will be paid on Wednesday 16 January 2008 to ordinary shareholders on
the Company's Register of Members at the close of business on Friday 7 December
2007. The ex-dividend date is Wednesday 5 December 2007.
Trading
During our financial year the housing market saw a succession of five interest
rate rises as the Bank of England tried to ease inflationary pressures across
the country. In Yorkshire, North West England and the Midlands, where
incentives were more widely used to maintain volumes, there was a tightening in
demand during the twelve months. The markets in Scotland, North East England
and in and around London have not been as affected by these actions and our
divisions in these areas have traded well during the period. Bellway's policy
of forward selling continued to prove fruitful, offering us a degree of shelter
from these market conditions and our order book at 31 July stood at £594 million
representing, at that time, 45% of our planned increased output.
The Group was successful in bringing through plots from the pipeline into our
land with planning permission and this primary part of our land bank increased
to 23,500 plots. In addition, land awaiting permission stands at 15,800 plots
and when combined with plots with permission gives a land bank totalling 39,300
plots. Furthermore, the Group also holds, for the longer term, some 3,000 acres
where planning will be sought in the coming years. This is further augmented by
sites where Bellway has preferred developer status with local authorities
accounting for around a further 3,500 plots.
I am pleased to confirm that, in August, outline planning permission for 10,800
plots was granted on the site held, in a joint venture with English
Partnerships, at Barking Riverside where there is River Thames frontage
extending to almost one and a half miles. The Group has the right to call down
to develop from the joint venture 50% of this site.
People
The Board is extremely grateful to its employees, sub-contractors, suppliers and
partners, without whose continuing support and contribution these results would
not have been possible.
Outlook
The market since August remained competitive and incentive led. Recent events
in both global and UK financial markets would appear to have softened consumer
confidence. Nevertheless, at 30 September, the forward order book of £667
million compares favourably with the position last year of £647 million. When
combined with completions to date this represents 57% of planned output after
just two months of this financial year.
The coming weeks will give a better indication of the overall national sentiment
towards the housing market but the Board, at this time, believe that the key
fundamentals remain unaltered. With modest gearing the Group is well positioned
to capitalise on opportunities should they arise in the coming months. The
Group remains focussed on the delivery of lower value housing and the Board is
convinced that its current operational model will continue to serve it well.
The Board therefore remains confident about the future prospects for the Group.
H C Dawe
Chairman
15 October 2007
Chief Executive's Operating Review
Introduction
Throughout the year the housing market continued to adjust to the higher cost of
borrowing. The figures outlined in the Chairman's Statement clearly demonstrate
that the Group performed very well during the period, increasing legal
completions, delivering a record profit and strong operating margins.
The Group commenced the year with a robust forward order book of £561 million -
one of the strongest positions in the industry. In addition, the number of
sales outlets had increased to 210 by the beginning of August 2006. The forward
order book, supported by the additional outlets, helped to deliver the Group's
sixteenth year of organic growth and a record pre-tax profit of £234.8 million.
Divisional Operations
The 18 housing divisions worked diligently throughout the year to deliver this
forward sales position and, as a consequence, the number of legal completions
rose by 7.3% to 7,638, an increase of 521 units. The average selling price
increased by 2.5% to £173,300 and was achieved primarily as a result of a change
in product mix.
Of the 521 increase in legal completions, 404 were obtained from our northern
divisions where turnover increased by 13.6% to £660.7 million. The combined
output of our two Scottish divisions has increased to 840 homes and this region
continues to experience some of the most buoyant market conditions in the
country. The planning system in Scotland allows a higher percentage of detached
homes and this has helped to increase the overall average selling price referred
to earlier. With a new 650 homes scheme coming to the market in North Tyneside,
the North East division was also able to increase volume to 717 new homes.
Whilst the city centre of Manchester is, in our opinion, over supplied with
apartments, the Manchester division overcame this problem by moving into the
suburbs and thereby increasing its output. When combined with the West
Lancashire division, operating in the Liverpool area, the Group delivered a
healthy 1,182 legal completions from these two North West based divisions.
Volume also increased in the southern divisions by some 117 homes resulting in a
6.7% increase in turnover to £663 million. Most notably, legal completions in
the two Thames Gateway divisions have now reached 775 and with a comparatively
low average selling price for this region of £183,000, demand is still strong in
this government designated expansion area. Furthermore, exciting new
developments are planned in this region alongside the Group's existing large,
strategic land holding held in a joint venture with English Partnerships at
Barking which has recently received outline planning permission. The Essex
division embarked upon the final phase of its Docklands development at Limehouse
Basin in London and a major waterfront regeneration scheme being developed by
our Welsh division in Cardiff Bay continues to sell well as this once derelict
area has now been transformed into a vibrant suburb of Cardiff, with views
overlooking the Bay.
Three new divisions have now been opened in the last four years taking the total
number of divisions to 18. Thames Gateway North and the South West divisions
from a cold start last year produced 291 completions. In the year under review
the South Midlands division commenced operations and, whilst only 32 legal
completions were achieved, the Group anticipates output increasing from this
division as the North Solihull regeneration project gathers pace.
Land and Planning
The quality and strength of the Group's land bank is pivotal to the future
success of the Group. The land bank is divided into three sections. Firstly,
the plots held with planning permission have increased from 22,600 to 23,500
plots. Secondly, the land owned, contracted or optioned, currently awaiting
planning permission, which is referred to as pipeline has increased from 15,000
to 15,800 plots. Thirdly, long term land, which represents around 5,500 plots,
is typically made up of greenfield land held under option and brownfield
regeneration opportunities generated by the Group's urban regeneration
specialists, Bellway City Solutions. Together the first two categories amount
to 39,300 plots, representing approximately five year's supply at current output
levels.
Significant land acquisitions in the year include two schemes in Sittingbourne
and Belvedere in Kent representing around 670 plots, with proposed average
selling prices of around £150,000. A further site in Thamesmead in the London
borough of Bexley has also been contracted, conditional on acquiring planning
permission for 500 plots at an average selling price of £172,000. In addition,
two further sites at Greenwich and Bromley were acquired, representing 316
plots, both of which are within a five mile radius of the Olympic site.
In the north, two large schemes in the Scottish central belt at Carntyne in
Glasgow and Airdrie in Lanarkshire, representing 875 plots, were acquired,
again, at relatively low average selling prices of less than £150,000. I am
also pleased to report that an appeal against refusal of a planning permission
was successful for 172 plots, just outside Morpeth in Northumberland.
Regeneration
Land continues to take an inordinate length of time to come through the planning
system. To try and counter this, the Group has targeted large scale urban
regeneration projects where it is anticipated that planning permission will be
granted ahead of other opportunities. Large regeneration projects are already
underway in Liverpool and Birmingham and it is hoped that similar projects in
Manchester and Middlesbrough will commence shortly. The Group's City Solutions
team has, during the year, been awarded preferred developer status on potential
new schemes in Hull and Ilford town centre representing, in total, some 1,000
plots. The new schemes will allow the company to work in partnership with
various government agencies targeting, in particular, the undersupplied first
time buyer market.
As a result of government planning policies, many planning permissions are now
being granted which allow the company to build rented or shared ownership homes
alongside private homes. These units are constructed and passed over to housing
associations to manage. During the year this type of output increased to 900
homes with an average selling price of about £95,500.
Cost Base
The Group has, during the year, spent a considerable amount of time reviewing
the efficiency of the supply chain. The industry faces the challenge of
reducing carbon emissions which involves the employment of different building
techniques. By engaging with the Group's main suppliers we are engendering a
spirit of partnership which in turn produces a more stable cost base for the
company. In addition, the Group continues to employ timber frame systems,
especially in relation to the housing association output referred to earlier,
and this building technique now represents about one third of the Group's
output. This system is highly insulated, reduces waste on site and leads to
more standardisation. These measures are helping to mitigate the effect of
annual labour and material cost increases.
Environment
The effect of climate change is one of the main challenges facing the
housebuilding industry today. In response to this, in April 2007, the
Government launched the Code for Sustainable Homes which seeks to establish a
target of achieving carbon neutrality in all new homes by 2016.
Bellway has made significant progress during the year in reducing the Group's
own impact on the environment. In the period, 326 homes were constructed to Eco
Homes 'Very Good' standard or higher and developments, particularly in the south
of England, have commenced utilising new renewable energy. An example of this
approach can be found at a development at Redhill in Surrey, where 250 homes
will have their heating and hot water supplied from a biomass boiler fired by
locally sourced wood chip.
Inevitably, the demolition and remediation process of brownfield sites results
in considerable quantities of waste materials. Bellway's excellent ongoing
relationship with plasterboard suppliers has resulted in 3,900 tonnes of
plasterboard being removed from site to be recycled. An ongoing priority is to
improve the efficiency of handling these materials. At Barking Riverside,
working with a sub-contractor, a recycling plant with the capacity to produce
350,000 tonnes of aggregates per annum has been constructed. The plant enables
the capture and recycling of materials that would otherwise have been sent to
landfill.
Arising from planning agreements, Bellway has contributed somewhere in the
region of £10 million towards enhanced community amenities, including, inter
alia, improved educational facilities, enhancements to parks, roads and local
biodiversity schemes.
Customers
The Group continually monitors customer reaction to its product and service
levels, from initial enquiry through to legal completion and after-sales
support. During the year several surveys were undertaken and, of those who
responded, around 75% of Bellway purchasers were satisfied with their new home.
The Group is striving to improve this performance and, as part of our
commitment, a Customer Service Charter is being utilised to monitor performance
and to improve service levels in future.
Site managers play a pivotal role in this important area, helping to co-ordinate
all elements of the building process and we are pleased to see that the NHBC
have awarded Bellway with 19 'Pride in the Job' awards. In order to improve
service levels further, the Group has undertaken additional training to ensure
that standards of service remain high and we will continue to monitor customer
responses as well as adapt procedures and strive to ensure that customer
satisfaction levels are improved.
Health and Safety
Health and safety awareness is one of the most important messages that the Group
instils in all its employees, whether they are site or office based. Bellway's
aim is to ensure the highest level of awareness of safety standards. The Group
is therefore particularly pleased to report that the Manchester division has
received an occupational health and safety award from the Royal Society for the
Prevention of Accidents (RoSPA) in recognition of its commitment and high
standards in this crucial area.
Although the number of lost time accidents has risen by one this year to 48, the
number of major injuries has fallen from six to five and overall the Group's
health and safety performance has again improved since last year.
The Group's aim is for Bellway to be one of the safest companies to work for in
the industry. In line with achieving this goal, specific initiatives have been
undertaken, including the issue of action notices to sub-contractors where
unsafe working practices have been identified. Regular health and safety visits
to all our sites are undertaken by the NHBC and these result in health and
safety briefings and dialogue with all employees and sub-contractors. Slips,
trips and falls remain the most common forms of accident and the Group, through
its health and safety managers and site management, is continuing to address
this area in an attempt to further improve its health and safety record.
Outlook
The Group welcomes the recent pronouncements by Government to significantly
increase housing output in this country by 2016 and 2020. Bellway is fully
committed to playing its part in hopefully achieving these targets.
With the support of the Group's expanding divisional network, combined with a
steady increase in the number of sales outlets, Bellway ended the year with its
highest ever forward order book of £594 million. Whilst reservations to date
have declined slightly, we remain in a strong position with 57% of planned
output in place at the end of September. We therefore believe the foundations
are in place for the Group to continue to deliver further sustainable growth and
added shareholder value into the future.
J K Watson
Chief Executive
15 October 2007
GROUP INCOME STATEMENT
For the year ended 31 July 2007
Notes 2007 2006
£000 £000
Revenue 1,354,022 1,240,193
Cost of sales (1,042,102) (947,921)
Gross profit 311,920 292,272
Administrative expenses (58,844) (52,932)
Operating profit 253,076 239,340
Finance income 2 5,050 2,941
Finance expenses 2 (22,961) (21,339)
Share of losses of associates (315) (233)
Profit before taxation 234,850 220,709
Income tax expense 3 (68,136) (64,967)
Profit for the year (all attributable to equity holders of the parent) 166,714 155,742
Earnings per ordinary share - basic 5 146.1p 137.5p
Earnings per ordinary share - diluted 5 144.7p 136.2p
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 31 July 2007
2007 2006
£000 £000
Actuarial gains / (losses) on defined benefit pension scheme 5,268 (2,203)
Tax on items taken directly to equity (1,475) 661
Net income / (expense) recognised directly in equity 3,793 (1,542)
Profit for the year 166,714 155,742
Total recognised income (all attributable to equity holders of the parent) 170,507 154,200
GROUP BALANCE SHEET
At 31 July 2007
Notes 2007 2006
£000 £000
ASSETS
Non-current assets
Property, plant and equipment 12,671 13,749
Investment property 2,417 1,713
Investments in subsidiaries, associates and jointly controlled entities - -
Other receivables 5,201 5,736
Deferred tax assets 7,826 10,174
28,115 31,372
Current assets
Inventories 1,537,874 1,433,999
Trade and other receivables 45,252 26,503
Cash and cash equivalents 25,381 2,329
1,608,507 1,462,831
Total assets 1,636,622 1,494,203
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings 77,000 159,000
Retirement benefit obligations 1,986 11,716
Land payables 47,875 23,958
126,861 194,674
Current liabilities
Interest bearing loans and borrowings 60,554 17,024
Trade and other payables 380,895 349,995
Current tax liabilities 32,498 29,010
473,947 396,029
Total liabilities 600,808 590,703
Net assets 1,035,814 903,500
EQUITY
Issued capital 7 14,337 14,252
Share premium 7 115,484 111,903
Other reserves 7 1,492 1,492
Retained earnings 7 904,567 775,919
Total equity attributable to equity holders of the parent 1,035,880 903,566
Minority interest 7 (66) (66)
Total equity 1,035,814 903,500
Approved by the Board of Directors on 15 October 2007 and signed on its behalf
by
H C Dawe A M Leitch
Director Director
GROUP CASH FLOW STATEMENT
For the year ended 31 July 2007
Notes 2007 2006
£000 £000
Cash flows from operating activities
Profit for the year 166,714 155,742
Depreciation charge 3,102 3,141
Profit on sale of property, plant and equipment (188) (1,152)
Finance income (5,050) (2,941)
Finance expenses 22,961 21,339
Share-based payment charge 2,580 2,550
Income tax expense 68,136 64,967
Increase in inventories (103,875) (150,777)
(Increase) / decrease in trade and other receivables (17,151) 6,895
Increase in trade and other payables 46,584 32,243
Cash from operations 183,813 132,007
Interest paid (19,382) (17,937)
Income tax paid (63,867) (65,198)
Net cash inflow from operating activities 100,564 48,872
Cash flows from investing activities
Acquisition of property, plant and equipment (3,090) (4,808)
Acquisition of investment property (704) (1,713)
Proceeds from sale of property, plant and equipment 1,224 6,721
Interest received 3,988 2,962
Net cash inflow from investing activities 1,418 3,162
Cash flows from financing activities
Decrease in bank borrowings (67,000) (97,000)
Proceeds from the issue of share capital on exercise of share options 3,666 3,115
Purchase of own shares by employee share option plans (2,431) (403)
Dividends paid (41,695) (36,882)
Net cash outflow from financing activities (107,460) (131,170)
Net decrease in cash and cash equivalents (5,478) (79,136)
Cash and cash equivalents at beginning of year (12,695) 66,441
Cash and cash equivalents at end of year 6 (18,173) (12,695)
NOTES
1. ACCOUNTING POLICIES
The financial information has been prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and
effective (or available for early adoption) at 31 July 2007.
2. FINANCE AND INCOME EXPENSE
2007 2006
£000 £000
Interest income 5,050 2,941
Interest payable on bank loans and overdrafts 15,828 16,358
Interest on deferred term land payables 4,749 2,680
Interest element of movement in pension scheme deficit 85 305
Other interest expense 399 96
Preference dividends 1,900 1,900
Finance expenses 22,961 21,339
3. TAXATION
Taxation has been calculated at an effective rate of 29.0% of profit before tax
(2006: 29.5%).
4. DIVIDENDS ON EQUITY SHARES
2007 2006
£000 £000
Amounts recognised as distributions to equity holders in the year :
Final dividend for the year ended 31 July 2006 of 20.2p per share (2005 : 18.25p) 23,103 20,657
Interim dividend for the year ended 31 July 2007 of 16.45p per share (2006 : 14.3p) 18,813 16,232
41,916 36,889
Proposed final dividend for the year ended 31 July 2007 of 26.675p per share (2006 - 30,810 23,028
20.2p)
The proposed final dividend is subject to approval by shareholders at the Annual
General Meeting on Friday 11 January 2008 and in accordance with IAS 10, has not
been included as a liability in these financial statements.
5. EARNINGS PER ORDINARY SHARE
Basic earnings per ordinary share is calculated by dividing earnings by the
weighted average number of ordinary shares in issue during the year (excluding
the weighted average number of ordinary shares held by the employee share
ownership plans which are treated as cancelled).
Diluted earnings per ordinary share uses the same earnings figure as the basic
calculation except that the weighted average number of shares has been adjusted
to reflect the dilutive effect of outstanding share options allocated under
employee share schemes where the market value exceeds the option price. It is
assumed that all dilutive potential ordinary shares are converted at the
beginning of the accounting period. Diluted earnings per ordinary share is
calculated by dividing earnings by the diluted weighted average number of
ordinary shares.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are outlined below:
Earnings Weighted Earnings Weighted
average average
number of number of
ordinary ordinary
shares shares
2007 2007 2006 2006
£000 £000
For basic earnings per ordinary share 166,714 114,108,350 155,742 113,248,814
Options and awards - 1,140,376 - 1,121,473
For diluted earnings per ordinary share 166,714 115,248,726 155,742 114,370,287
6. ANALYSIS OF NET DEBT
At 1 August Cash At 31 July
2006 flows 2007
£000 £000 £000
Cash and cash equivalents 2,329 23,052 25,381
Bank overdrafts (15,024) (28,530) (43,554)
Net cash and cash equivalents (12,695) (5,478) (18,173)
Bank loans (141,000) 67,000 (74,000)
Preference shares redeemable after more than one year (20,000) - (20,000)
Net debt (173,695) 61,522 (112,173)
7. RECONCILIATION OF MOVEMENTS IN CAPITAL AND RESERVES
Attributable to equity holders of the parent
Ordinary Share Other Retained Total Minority Total
share premium reserves earnings interest equity
capital
£000 £000 £000 £000 £000 £000 £000
At 1 August 2005 14,154 108,886 1,492 655,362 779,894 (66) 779,828
Total recognised income and expense - - - 154,200 154,200 - 154,200
Dividends on equity shares - - - (36,889) (36,889) - (36,889)
Shares issued 98 3,017 - - 3,115 - 3,115
Charge in relation to share options
and tax thereon - - - 3,649 3,649 - 3,649
Exercise of share options / share awards - - - (403) (403) - (403)
At 31 July 2006 14,252 111,903 1,492 775,919 903,566 (66) 903,500
Total recognised income and expense - - - 170,507 170,507 - 170,507
Dividends on equity shares - - - (41,916) (41,916) - (41,916)
Shares issued 85 3,581 - - 3,666 - 3,666
Charge in relation to share options
and tax thereon - - - 2,488 2,488 - 2,488
Exercise of share options / share awards - - - (2,431) (2,431) - (2,431)
At 31 July 2007 14,337 115,484 1,492 904,567 1,035,880 (66) 1,035,814
Within retained earnings are amounts relating to ordinary shares held by the
employee share ownership plans. The number of shares held within these plans at
31 July 2007 was 337,089 (2006: 441,439) which are held within the financial
statements at a value of £3,239,000 (2006: £2,173,000).
8. STATUTORY ACCOUNTS
The financial information set out above does not constitute statutory accounts
for the year ended 31 July 2007 nor 2006. The statutory accounts for the year
ended 31 July 2007 will be filed with the Registrar of Companies following the
Company's Annual General Meeting.
The financial information for the year ended 31 July 2006 is derived from the
statutory accounts for that year. Those accounts have been reported on by the
Company's auditors and delivered to the Registrar of Companies. The Report of
the Auditors was unqualified and did not contain statements under Section 237
(2) or (3) of the Companies Act 1985.
This information is provided by RNS
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