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Booming Bellway

Bellway ticked all the right boxes in its interim results as the housebuilding boom continues
March 25, 2015

Interim figures from Bellway (BWY) serve to highlight the rude health of the UK housebuilding sector. Judging by the progression in the number of reservations made per week, demand for housing is set to continue for some time yet.

IC TIP: Buy at 2096p

In the six months to January these rose from 137 in the previous year to 139. But for the weeks up to 8 March this accelerated to 152 per week - a 10 per cent increase over the previous year. And the forward order book has swelled from 3,944 homes to 4,794, with an estimated sales value of £1.12bn - up 35 per cent. The strength of the spring selling season and any effect from the general election will, in part, determine the rate of growth in the second half. But Bellway estimates that, given the strong forward sales position, volume growth for the whole year will be in excess of 10 per cent.

Average selling prices rose by 3.4 per cent, slower than in previous years, but moderation in house price inflation should underpin a more sustainable growth cycle. The number of homes sold rose by nearly 16 per cent to 3,754, with the north leading the way, where completions rose by nearly a quarter. London and the south remain important to Bellway, representing a quarter of group revenue. Output here was up by just over 9 per cent. The government's Help to Buy scheme accounted for nearly a quarter of all reservations.

Bellway has also been busy replenishing its land bank. Spending here rose by nearly a half to £355m, and the owned and controlled land bank rose slightly to 35,837 plots - equivalent to 4.8 years of output at the current rate.

Construction costs experienced some upward pressure, although these have been managed through effective relationships with suppliers and subcontractors. In fact, strict cost control helped boost the operating margin from 15.6 per cent to 19.9 per cent, and the return on capital employed rose from 17 per cent to 22.8 per cent.

Analysts at Numis Securities are forecasting full-year adjusted pre-tax profits of £335m and EPS of 218p (from £245.9m and 157p in 2014).

BELLWAY (BWY)
ORD PRICE:2,096pMARKET VALUE:£2.57bn
TOUCH:2,094-2,100p12-MONTH HIGH:2,100pLOW: 1,333p
DIVIDEND YIELD:2.9%PE RATIO:11
NET ASSET VALUE:1,180pNET DEBT:6%

Half-year to 31 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20147001046616
201583115910425
% change+19+53+56+56

Ex-div: 28 May

Payment: 1 Jul