■ Completions expected to hit 7,700
■ Record £500m spent on land
■ Strong forward sales position
A strong trading statement from housebuilder Bellway (BWY) came as little surprise. Perhaps more surprising was that the group saw no dip in consumer sentiment in the run-up to the general election: the period from 1 February to 31 May saw a 3 per cent rise in weekly reservations to 182, even against very strong comparative figures last year. At about 7,700, completions for the full year to 31 July are expected to be around 850 ahead of last year's total.
House price inflation may be showing signs of moderating, but Bellway still expects to see average selling prices for the year to 31 July rise from £213,182 to about £220,000. This will cover any increases in construction and administrative costs, so operating margins are expected to grow from 17.2 per cent to over 20 per cent.
Competition for land in the south-east remains brisk, but the group has still found plenty of plots that meet or exceed its minimum acquisition criteria. Since August it has spent a record £500m on new land - up from £400m last year. Demand continues to grow, with the forward order book at the end of May standing at £1.27bn, up 22 per cent year on year.
Numis Securities says...
Add. Bellway's expansion of its regional network should support significant volume growth. The group's track record of prudence and this growth potential are not reflected in its share price, which is currently about 1.6 times 2016 net tangible asset value against a sector average of over 2.0. With margins expected to top 20 per cent this year, we are upgrading our July 2015 pre-tax profit estimate by 1.5 per cent to £340m, giving an EPS of 221p. And for full-year 2016 we are upgrading our numbers by 2.5 per cent to £373m and 245p (from £246m and 157p in full-year 2015).
Peel Hunt says...
Hold. Bellway's entire portfolio of shared equity loans has been sold for a profit of £6.9m, and the proceeds will be used to fund further land investment. Land purchases have pushed net debt up to £191m, but this represents a modest 13 per cent gearing, and net cash inflows over the next few months are likely to drive net debt back down again. The group already has land in place to support output in the year to July 2016, and a further pipeline of 14,600 plots for longer-term development. We forecast adjusted pre-tax profit for the year to July 2015 of £338m and EPS of 219p, but given the lower dividend payout than peers we maintain our view at hold.
