Housebuilder Bellway revealed it has signed contracts to purchase £120m of land in the last 10 weeks, a sign perhaps that its period of "partial hibernation" may be over.
The news was announced alongside the company's full-year results which showed the full impact of the housing slump. Revenues were bulldozed by drastic cuts to its build programme and completions last year declined by a third to 4,380 homes. The average selling price also fell, by 10 per cent to £154,005, and management admit that sales incentives have been used on virtually every private sale. However, the cash generated from these sales has reduced debt from £237m a year ago to £57m and subsequent to the year-end a placing raised £43.7m to further underpin the company's finances.
Although the market has improved since its , when Bellway wrote down its landbank and work in progress by £66.3m, the mortgage market remains a worry. Tougher borrowing conditions mean Bellway has had to lend buyers their deposits on 14 per cent of sales through its Opening Doors shared equity scheme. And sales to housing associations made up a much greater proportion of the mix, accounting for 34 per cent of all sales, compared with 20 per cent last year.
This is partly due to government incentives such as the Clearing House, but Bellway has also sold a few whole blocks to housing associations at a discount. "We found that rich buy-to-let investor man wanted huge discounts so his rental yield would work," explains chief executive John Watson. "It is cheaper for the housing associations to buy on a small discount and get finished stock, rather than building from scratch themselves."
| BELLWAY (BWY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 788p | MARKET VALUE: | £951.6m | |
| TOUCH: | 787-788p | 12-MONTH HIGH: | 928p | LOW: 384p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | na | |
| NET ASSET VALUE: | 799p | NET DEBT: | 6% | |
| Year to 31 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 1.1.8 | 214 | 133 | 31.3 |
| 2006 | 1.24 | 221 | 138 | 34.5 |
| 2007 | 1.35 | 235 | 146 | 43.1 |
| 2008 | 1.15 | 35 | 24 | 24.1 |
| 2009 | 0.68 | -37 | -24 | 9.0 |
| % change | -41 | - | - | -63 |
Ex-div: 9 Dec Payment: 20 Jan | ||||
More analysis of company results
Bellway has instructed lawyers on nearly £90m of new land transactions, the majority in the south east, taking advantage of the weak market to obtain attractive margins. The remaining £32m of expenditure comes from historic land deals the company is obliged to complete.
Broker Panmure Gordon has upgraded pre-tax forecasts for 2010 from £15m to £25m, giving EPS of 15p.
