07:00 Tue 09 Feb 2021
Bellway PLC - Trading Update
Bellway p.l.c.
Trading Update
Tuesday
Final
Bellway p.l.c. is today issuing a Trading Update for the six months ended
Highlights
§ Record first half volume output, with the completion of 5,656 new homes (2020 - 5,321), a rise of 6.3%.
§ Strong underlying demand, with a 3.3% increase in the private reservation rate to 156 per week (2020 - 151), building upon last year's robust first half trading performance.
§ Record half year investment in land providing a strong platform for growth and margin recovery in future years, with 8,848 plots contracted (2020 - 7,005 plots) across 54 sites (2020 - 41 sites) at attractive rates of return.
§ Strong balance sheet with net cash of
§ A robust forward sales position, with an order book comprising 5,889 homes (2020 - 4,598 homes) and a value of
§ Housing completions for the full year to
"Bellway's priority remains the health, safety and wellbeing of our colleagues and subcontractors, whose collective efforts are enabling the Group to proceed responsibly as businesses throughout the
In the context of challenging circumstances, the Group has delivered an excellent first half performance, achieving growth in volume to a record level, while maintaining high build standards and a focus on customer service. I am therefore delighted that Bellway continues to maintain its five-star homebuilder6 rating. While uncertainty remains in the wider economy, the underlying demand for good quality new homes remains robust and we have therefore made further, disciplined investment in attractive land opportunities.
Looking forward, we have a sizeable forward order book, which provides a solid platform for the second half of the financial year and beyond. In addition, our balance sheet is strong, with significant cash resource and this provides the Group with the necessary resilience and flexibility to respond positively to the evolving economic environment."
Market conditions and trading
The housing market remains robust, supported by good affordability, low interest rates and the temporary stamp duty holiday. Bellway has delivered a positive six-month trading period, benefiting from its elevated investment in work-in-progress at the start of the financial year, together with ongoing customer demand for our mid-market, high quality housing.
Sales rates were more pronounced at the start of the financial year, given the pent-up demand arising from the Spring national 'lockdown'. The reservation rate slowed during November, as the sector transitioned to the new Help-to-Buy rules and more widespread 'lockdown' measures were reintroduced. Despite the escalation of these 'lockdown' measures in the new calendar year, sales rates have since recovered to a more normalised level, boosted by the effective transition to the new Help-to-Buy scheme, which has been well received by our customers.
For the whole period, the private reservation rate rose by 3.3% to 156 per week (2020 - 151), and the overall reservation rate was resilient at 191 per week (2020 - 194). In line with respective Government guidance, sales centres have remained open in
Progress has also continued on construction sites, with strict COVID-secure policies in place and no discernible effect on the supply chain as a result of the
The pricing environment has remained firm, with some modest house price inflation benefiting selected sites in localities where demand is particularly strong, with this most pronounced on developments in the north west of
Results
Bellway has achieved an excellent first half performance, with housing revenue rising by over 12% to around
The robust growth in volume is a result of the exceptionally high order book and elevated construction progress at the start of the financial year, in part a consequence of the COVID-19 related completion delays in the year ended
The average selling price rose by 5.8% to around
Legacy building safety improvements
As previously reported, Bellway has identified a number of developments, which were given building regulation approval at the time of construction, but where the building materials used may not fully comply with the most recent Government guidance in relation to fire safety. In that regard, the Group is continuing to help building owners where it may have a legal liability and fire remedial works are required and remains engaged with third parties to seek constructive solutions to these issues. This is a complex area and a further update will be provided with the release of the Interim Results.
Land buying
Given the strong underlying demand for new homes, we have continued our programme of land acquisition, with our land teams tasked with identifying attractive investment opportunities which meet our minimum hurdle rates in respect of both gross margin and return on capital employed.
Accordingly, the Group has contracted to acquire 8,848 plots (2020 - 7,005 plots) across 54 sites (2020 - 41 sites) in good quality locations, with a contract value of
The sites acquired are geographically spread across the country and will enable Bellway to offer its customers an affordable product, with less reliance on Help-to-Buy. This responsible, but front-footed investment strategy, will contribute to the recovery in both volume and operating margin in the years ahead.
Funding and liquidity
The Group benefits from a strong balance sheet and notwithstanding the investment in land, net cash has risen to
Outlook
There remains uncertainty in the wider economy, with the ongoing threat of COVID-19 presenting a risk of future disruption to operations and, if employment conditions worsen, customer demand. In addition, the end of the stamp duty holiday and the changes in the Help-to-Buy rules will make it more difficult for some customers to achieve the necessary deposit requirements to purchase a new home.
Nevertheless, the roll out of the COVID-19 vaccine provides some optimism and there remains an underlying requirement for new homes in the
With this expected increased level of output, the underlying operating margin5 for the full year is likely to improve by at least 200 basis points (
Beyond this financial year, Bellway is in a robust position. Its long-term approach, strong operational focus and offering of high-quality homes should enable it to continue meeting underlying market demand. At the same time, our strong financial position and flexible capital structure provides ongoing resilience to respond to any unexpected changes in the economic environment.
1 All figures relating to completions, order book, reservations, cancellations, and average selling price exclude the Group's share of its joint ventures.
2 All comparatives are to the prior year equivalent six-month period ended
3 Net cash / bank debt is cash and cash equivalents less bank debt.
4 Order book is the total expected sales value of reservations that have not legally completed.
5 Pre-exceptional operating margin is the pre-exceptional operating profited divided by total revenue.
6 As measured by the Home Builders' Federation customer satisfaction survey.
For further information, please contact:
Bellway p.l.c.
0191 217 0717
0191 217 0717
Media enquiries
07813 392 669
Smithfield
07540 412 301
07715 375 443
Certain statements in this announcement are forward-looking statements which are based on Bellway p.l.c.'s expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. Such forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as 'aim', 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', or other words of similar meaning. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, Bellway p.l.c. undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
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