Final Results

Bellway PLC 19 October 2004 NATIONAL HOUSEBUILDER BELLWAY p.l.c. TODAY, TUESDAY 19 OCTOBER 2004, ANNOUNCE THEIR PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2004. HIGHLIGHTS Year to 31 July 2004 2003 Increase Turnover - Â£m 1,092.6 954.2 14.5% Operating profit - Â£m 213.3 172.8 23.5% Profit before taxation - Â£m 205.5 169.3 21.4% Basic earnings per ordinary share - pence 127.5 106.0 20.3% Dividend per ordinary share - pence 25 20 25.0% Net asset value per ordinary share - pence 585 482 21.4% THE CHAIRMAN HOWARD DAWE SAID 'I am delighted to announce that Bellway p.l.c., in its 25th year as a listed company, has produced yet another record set of annual results'. HE ADDED 'Profit before taxation lifted by 21.4%, exceeding Â£200 million for the first time, at Â£205.5 million, and basic earnings per share increased to 127.5p, up 20.3%'. HE WENT ON TO SAY 'The Group's average selling price of Â£161,400 is one of the lowest in the industry and we will continue to focus very much on selling quality product to the lower to middle market across a wide geographical spread'. HE CONCLUDED 'the Group has a robust balance sheet and, most importantly, a structure which operates with a high level of autonomy which has proven itself capable of creating successful returns in both strong and weaker markets. For all these reasons the Board remains confident that Bellway's successful track record will continue into the future'. 2004 2003 * Homes sold - no. 6,610 6,278 * Average selling price - Â£000 161.4 149.7 * Operating margin - % 19.5 18.1 * Return on average capital employed - % 31.9 31.4 * Land bank - plots with planning permission 20,700 18,400 * Shareholders' funds - Â£m 675.1 557.1 FOR FURTHER INFORMATION, PLEASE CONTACT JOHN WATSON, CHIEF EXECUTIVE OR ALISTAIR LEITCH, FINANCE DIRECTOR TUESDAY 19 OCTOBER - THURSDAY 21 OCTOBER J WATSON: 07855 337007 A LEITCH: 07855 337001 THEREAFTER: 0191 217 0717 BELLWAY p.l.c CHAIRMAN'S STATEMENT Results I am delighted to announce that Bellway p.l.c., in its 25th year as a listed company, has produced yet another record set of annual results. In the year to 31 July 2004 turnover increased to Â£1.093 billion from Â£954 million in the corresponding period last year after selling 6,610 homes at an average selling price of Â£161,400. Operating profit increased by 23.5% to Â£213.3 million whilst operating margins also increased to 19.5% from 18.1% in the previous year. Interest payable of Â£7.7 million is covered almost 28 times. Profit before taxation lifted by 21.4%, exceeding Â£200 million for the first time at Â£205.5 million, and basic earnings per share increased to 127.5p, up 20.3%. The Group balance sheet was further strengthened by retained earnings of Â£114.0 million, boosting shareholders' funds to Â£675.1million. The land bank, owned with planning permission, has been strengthened by the addition of some 2,300 plots to 20,700 plots. Our return on average capital employed is one of the highest in the industry at 31.9% and at the end of the year, net borrowings amounted to Â£63.1 million producing gearing of 9.3%. Dividend Last April I advised shareholders of a 50% increase in the interim dividend and indicated that the increase for the full year would be around 20%. In view of these outstanding results, the Board has recommended an increase in the final dividend from 13.8p to 15.7p per share. This produces a total dividend for the year of 25p per share compared with 20p last year, an increase of 25% and means that the level of dividend payout to shareholders has more than doubled in four years. Ordinary shareholders on the Register of Members at the close of business on Friday 17 December 2004 will receive the final dividend of 15.7p per ordinary share on Monday 17 January 2005. Current Trading As explained in the recent Trading Update, in Autumn 2003 the Board took a policy decision to sell forward as far as practicably possible and this has manifested itself in the value of Bellway's forward sales climbing from Â£380 million in July 2003 to Â£587 million in July 2004. This represents more than 50% of the Group's current target for the year to 31 July 2005. Five interest rate rises since November 2003 have had the desired effect of returning the housing market to more normal conditions. Looking forward, we believe that if interest rates stay at around their current levels, which are still historically low, then we are confident that the market will be sustainable. The Group's average selling price of Â£161,400 is one of the lowest in the industry and we will continue to focus very much on selling quality product to the lower to middle market across a wide geographical spread. I am pleased to say that the Group has presently either reserved, contracted or legally completed two thirds of the current year's target, an extremely strong position. I am pleased to inform you that Bellway is one of the first companies to commence construction in one of the Government's nine designated Pathfinder areas at Sefton, Liverpool, reinforcing the Group's commitment to urban regeneration. I also welcome the Chancellor of the Exchequer's recent announcement of an extra Â£1.3 billion of Government funds, amounting to Â£7.2 billion over the next three years, to be allocated to affordable housing as part of the Government's Sustainable Communities Plan. The Group continues to work closely with English Partnerships, Housing Associations, Regional Development Agencies and Local Authorities on a range of initiatives across the country. Corporate Social Responsibility Bellway takes its obligations in this important area very seriously and continues its ongoing commitment to enhancing the environment and the community throughout all its areas of operation. The Group's Environmental Policy Statement is set out in our Annual Report. In addition to the Annual Report, the Group will also be sending to shareholders and other key stakeholders a Corporate Responsibility Report detailing its performance achievements in the areas of health and safety, energy, waste and water. In addition, this document will also provide details of Bellway's many community involvement initiatives. Board Change As previously advised, my contractual retirement date is 1 November 2004 and the Board has invited me to become Non-Executive Chairman from that date. I am delighted to accept this new role and look forward to leading the Board in achieving the Group's long term growth plans. When I became Chief Executive of Bellway in 1985 the Group had, in that financial year, sold 1,408 homes, turnover was Â£52.8 million and pre-tax profit was Â£3.3 million. The Group has grown enormously since then and as my executive responsibilities are now coming to an end I am confident that the entrepreneurial spirit which has served Bellway so well over the years will be carried forward by the current management team. People The Board would like to express, yet again, its thanks to all who have worked so hard for Bellway during the year. These record results have been made possible by the skill, hard work and enthusiasm of the Group's employees together with its many suppliers, contractors and partners. Future Prospects Bellway sees increasing growth as a result of the Group's strengthening land position and its increasing commitment to Housing Association work. In addition, the Group has a robust balance sheet and, most importantly, a structure which operates with a high level of autonomy and has proven itself capable of creating successful returns in both strong and weaker markets. For all these reasons the Board remains confident that Bellway's successful track record will continue into the future. H C Dawe Chairman 18 October 2004 BELLWAY p.l.c. CHIEF EXECUTIVE'S OPERATING REVIEW Another Year of Growth I am pleased to report that this is the thirteenth consecutive year of organic growth for the Group. In the year ended 31 July 2004 we completed the sale of 6,610 homes, an increase of 5.3% on last year. This has generated record turnover, exceeding Â£1 billion for the first time, producing pre-tax profits of Â£205.5 million, an increase of 21.4% compared to the previous year and with the operating margin improving from 18.1% to 19.5%. Bellway's market place covers a wide spectrum of price and tenures with selling prices during the year ranging from Â£40,000 up to Â£800,000. Whilst the average selling price achieved in the period increased by 7.8% to Â£161,400, some 50% of the homes sold were Â£150,000 or less, and this is one of the lowest price profiles in the industry. The Group's focus continues to be firmly established in the lower to middle market and we continue to build relationships with various Government Agencies and Housing Associations. During the year the Group legally completed 566 homes for rent or shared ownership at an average price of Â£90,500. This section of the business will grow in the future as planning permissions are granted, particularly in the South East of England, imposing a 30-50% social housing content. In addition, in the North the Government designated Pathfinder schemes are also coming to fruition and we have been nominated as preferred partners in projects in Birmingham, Newcastle and two in Liverpool. Divisional Performance The Group's northern divisions, which operate from Perth down to Coventry, sold 3,367 homes representing 51% of legal completions. The average selling price in the North increased by 13.7% to Â£150,200 to yield an increase in turnover of 9.8%, at Â£505.8 million. Most notably, the East Midlands and Scottish divisions increased the number of units sold to over 500 for the first time. The Group's southern divisions increased turnover by 17.1% to Â£560.7 million, with average selling prices rising from Â£171,600 to Â£172,900 and unit sales increasing from 2,791 to 3,243 homes. The North London division achieved a turnover figure in excess of Â£100 million for the first time. The Group's wide geographical spread provides an excellent defence against the regional variances of the UK housing market and helps to smooth the impact of local price fluctuations. Organic Growth Each of the divisions develops the full spectrum of housing from traditional two storey homes to inner city apartments allowing local management the flexibility to exploit a diverse range of development opportunities. The new South West division traded profitably in its first year, completing 99 homes, and continues to grow. With only five divisions currently completing more than 500 units, there is great scope for further expansion through the existing structure. In addition, increasing production will start to come from our new divisions in East Scotland and Thames Gateway North, allowing the Group to move towards its target of selling 10,000 homes per annum by 2010. Urban Regeneration Augmenting our already considerable experience in urban regeneration is a team specialising in the procurement of new opportunities for our trading divisions. In the South, Government initiatives are aimed at the wholesale redevelopment of large post war local authority housing estates. In the North, the Government has announced nine designated Pathfinder areas aimed at the redevelopment of whole communities. Both forms of regeneration are given priority in the planning process but involve community liaison on a much wider scale. For these reasons our 'Bellway City Solutions' approach is being adopted, a natural extension to the grant aided schemes of the past. Two good examples of this can be seen at Haddo in the London Borough of Greenwich, where a council estate is being demolished and replaced with over 500 new homes. In Sefton, Liverpool, Bellway is one of the first housebuilders in the country to commence a Pathfinder project. An interesting by-product of the latter scheme involves the employment of a full time training officer and up to 40 local people engaged in the redevelopment of a whole community, helping to create 1,000 new homes. We are also pleased to see that our regeneration efforts have been recognised by the Royal Town Planning Institute who in October 2003 awarded our development of 95 homes at Littlehampton the best example of 'Town Regeneration'. Innovation Whilst it is not our intention to invest in a separate production facility, we are involved in many new housing initiatives as well as new construction techniques. During the year the Group constructed 20% of homes using timber frame and are presently constructing one of the largest timber frame projects in the country at Ochre Yards, a former British Rail marshalling yard on the banks of the River Tyne. In Cardiff Bay, land which was formerly under water has now been reclaimed and the construction of a new mixed use community of 900 homes is well underway. As a by-product of the planning process, the Group is currently involved in the construction and subsequent sale of over 40,000 square feet of office and retail space. Size and complexity of construction is not a deterrent as the Group looks to exploit every type and form of land opportunity. A good example of this is the construction of apartments in each of the four corners of the Matchroom Stadium at Brisbane Road, Leyton in east London, the home of Leyton Orient Football Club. The successful delivery of such a wide variety of projects highlights a management structure that is quick to respond to the many different challenges which present themselves. Land Holdings During the year the Group acquired 8,910 plots, 35% more than it sold, thereby increasing both the size and quality of the land bank. These plots are recorded on the balance sheet and have the benefit of a planning permission. This increases the total number of plots held at the year end from 18,400 to 20,700, a 12.5% improvement on the previous year. A large percentage of the 8,910 plots acquired during the year were converted by the Group's planning teams from medium term land holdings. In addition to the 20,700 plots held with planning permission, Bellway holds, either owned or contracted, a further 14,500 plots which we anticipate will receive planning permission in the near future. Furthermore, 3,200 acres of land, either owned or held under option, which are typically greenfield, are awaiting land release in the longer term. We are pleased to see that our land and planning teams have had another successful year despite a difficult planning environment. In March 2004 the former power station site we owned at Barking Reach in London was transferred into a company called 'Barking Riverside Limited', this company is a joint arrangement between Bellway and English Partnerships. It is anticipated that the new company will be submitting a planning application for a mixed-use development of up to 11,000 new homes, including a significant proportion of key worker, affordable housing and community facilities. Our land bank is therefore a blend of opportunities representing over five years of current production spread throughout the country. Health and Safety Ensuring the health and safety of our employees, sub-contractors and the general public is of the utmost importance to Bellway. Every three weeks, and more often on more complex sites, independent safety consultants undertake a health and safety audit on each site. The ensuing reports are discussed in detail to ensure that health and safety issues are being managed effectively. In addition review meetings are held with consultants every six months. We are a signatory to the HBF Health and Safety Charter and notwithstanding an increase in the number of sites under construction, we are pleased to see that the number of reportable accidents has shown a significant reduction during the year. Howard Dawe As Howard relinquishes his executive responsibilities, I would like to place on record the Board's sincere thanks to him for his unique contribution to the Group's success over the last 43 years. The Board will be pleased to continue to enjoy the benefit of his vast experience in his new role as Non-Executive Chairman with effect from 1 November 2004. J K Watson Chief Executive 18 October 2004 BELLWAY p.l.c. GROUP PROFIT AND LOSS ACCOUNT For the year ended 31 July 2004 Notes 2004 2003 Â£000 Â£000 Turnover 1,092,571 954,197 Cost of sales (829,598) (739,479) __________ __________ Gross profit 262,973 214,718 Administrative expenses (49,696) (41,956) __________ __________ Group operating profit 213,277 172,762 Share of operating (loss) / profit in associated undertakings (22) 367 __________ __________ Total operating profit: Group and share of associates 213,255 173,129 Exceptional items : Profit on disposal of freehold ground rents - 2,075 Net interest payable (including associated undertakings) (7,725) (5,953) __________ __________ Profit on ordinary activities before taxation 205,530 169,251 Taxation (61,700) (50,687) __________ __________ Profit after taxation 143,830 118,564 Minority interest - equity 5 - __________ __________ Profit for the financial year attributable to shareholders 143,835 118,564 Dividends on equity and non-equity shares 1 (29,864) (24,166) __________ __________ Retained profit for the financial year 113,971 94,398 ====== ====== Earnings per ordinary share - basic 2 127.5p 106.0p Earnings per ordinary share - diluted 2 126.1p 104.9p 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 Company's profit for the year was Â£135,000,000 (2003 - Â£110,000,000). 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 2004 Group Group Company Company 2004 2003 2004 2003 As restated Â£000 Â£000 Â£000 Â£000 Fixed assets Tangible assets 16,628 16,293 - - Investments 45 115 16,200 16,200 _________ _________ _________ _________ 16,673 16,408 16,200 16,200 _________ _________ _________ _________ Current assets Stocks 1,025,764 857,984 - - Debtors 38,176 33,420 587,635 478,935 Cash at bank and in hand 111,942 88,392 4,926 3,468 _________ _________ _________ _________ 1,175,882 979,796 592,561 482,403 Current liabilities Creditors due within one year (336,818) (269,360) (18,515) (16,276) _________ _________ _________ _________ Net current assets 839,064 710,436 574,046 466,127 _________ _________ _________ _________ Total assets less current liabilities 855,737 726,844 590,246 482,327 Creditors due after more than one year (180,752) (169,602) - - Provisions for liabilities and charges - (195) - - _________ _________ _________ _________ Net assets 674,985 557,047 590,246 482,327 ====== ====== ====== ====== Capital and reserves Equity share capital - Ordinary shares 14,008 13,926 14,008 13,926 Non-equity share capital - Preference shares 20,000 20,000 20,000 20,000 _________ _________ _________ _________ Called up share capital 34,008 33,926 34,008 33,926 Equity reserves Share premium account 104,492 101,791 104,492 101,791 Other reserves 1,492 1,492 2,145 2,145 Profit and loss account 535,059 419,899 449,601 344,465 _________ _________ _________ _________ Shareholders' funds - equity and non-equity 675,051 557,108 590,246 482,327 Equity minority interest (66) (61) - - _________ _________ _________ _________ 674,985 557,047 590,246 482,327 ====== ====== ====== ====== Approved by the Board of Directors on 18 October 2004 and signed on its behalf by H C Dawe A M Leitch Director Director BELLWAY p.l.c. GROUP CASH FLOW STATEMENT For the year ended 31 July 2004 Notes 2004 2003 As restated Â£000 Â£000 Â£000 Â£000 Net cash inflow from operating activities Group operating profit 213,277 172,762 Depreciation charge 3,583 3,631 Profit on sale of fixed assets (271) (220) Increase in stocks (167,780) (120,722) Increase in debtors (2,286) (12,542) Increase in creditors 26,502 19,370 ________ ________ 73,025 62,279 Net cash outflow from returns on investments and servicing of finance Interest paid (10,477) (5,811) Interest received 1,361 1,427 Dividends paid - non-equity (1,900) (1,900) ________ ________ (11,016) (6,284) Taxation (54,775) (44,271) Net cash (outflow) / inflow from capital expenditure and financial investment Purchase of tangible fixed assets (5,943) (4,127) Purchase of investments - (35) Sale of tangible fixed assets 2,277 112 Sale of freehold ground rents - 8,079 ________ ________ (3,666) 4,029 Equity dividends paid (25,725) (19,203) ________ ________ Net cash outflow before financing (22,157) (3,450) Net cash inflow from financing Issue of ordinary share capital on exercise of share 1,827 3,569 options Purchase of own shares by employee share option plans (1,106) (217) Increase / (decrease) in bank loans due within one year 15,000 (30,000) Increase in bank loans due after more than one year 30,000 45,000 ________ ________ 45,721 18,352 ________ ________ Increase in cash in year 3 23,564 14,902 ===== ===== NOTES 1 DIVIDENDS ON EQUITY AND NON-EQUITY SHARES 2004 2003 Â£000 Â£000 Ordinary share capital - equity Interim paid on 1 July 2004 - 9.3p per share (2003 - 6.2p) 10,370 6,879 Final proposed - 15.7p per share (2003 - 13.8p) 17,594 15,387 ________ ________ Total for year - 25.0p per share (2003 - 20.0p) 27,964 22,266 Preference share capital 9.5% - non-equity 1,900 1,900 ________ ________ 29,864 24,166 ===== ===== The directors recommend payment of the final dividend on Monday 17 January 2005 to shareholders on the Register at the close of business on Friday 17 December 2004. 2 EARNINGS The calculation of basic earnings per ordinary share is based on earnings of Â£141,935,000 (2003 - Â£116,664,000) 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 share ownership plans) in issue during the year of 111,303,849 (2003 - 110,102,928). 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 112,587,120 (2003 - 111,239,056 ) to reflect the dilutive effect of outstanding share options. 3 ANALYSIS OF NET BORROWINGS At 1 August Cash Exchange At 31 July 2003 flows differences 2004 As restated Â£000 Â£000 Â£000 Â£000 Cash at bank and in hand 88,392 23,564 (14) 111,942 Bank loans due within one year - (15,000) - (15,000) Bank loans due after more than one year (130,000) (30,000) - (160,000) _______ _______ _______ _______ Totals (41,608) (21,436) (14) (63,058) ===== ===== ===== ===== 4. PRIOR YEAR RESTATEMENT The Group has adopted Urgent Issues Task Force Abstract 38 : 'Accounting for ESOP Trusts' for the year ended 31 July 2004. Ordinary shares in Bellway p.l.c. held in employee share ownership plans were previously reported as fixed asset investments. The shares are now reported as a deduction from shareholders' funds. At 31 July 2004 the carrying value of these shares was Â£2,160,000 which has been set against profit and loss reserves. The comparative figures for fixed asset investments, cash at bank and in hand and profit and loss account reserves have been amended to reflect the change in treatment. The figures for 31 July 2003 have been restated such that fixed asset investments have been reduced by Â£1,436,000, cash at bank and in hand has been increased by Â£91,000 and profit and loss account reserves has been reduced by Â£1,345,000. 5. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 July 2003 or 2004 but is derived from those accounts. Statutory accounts for 2003 have been delivered to the registrar of companies and those for 2004 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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