These record first-half earnings from Bellway (BWY) provided further evidence that demand for new homes remains unaffected by the UK's vote to leave the EU. Structural pillars such as low unemployment and cheap mortgages remain in place, and the government's Help to Buy scheme was used in nearly 35 per cent of all completions, from 29 per cent in the prior comparable period.
Sales rose by 7 per cent to 4,462 units. While the average selling price on private homes rose by over 4 per cent to £291,467, overall prices were slightly lower, reflecting a 69 per cent increase in affordable homes to 919. Average prices for the full year are expected to be up by 3 per cent to around £260,000. New sites added to an improved sales rate, with 50 new outlets opening, while a cancellation rate of 12 per cent remained low by historic standards.
Trading in the second half brings further encouragement, with reservation rates in the first six weeks 18 per cent ahead of the previous year, pushing the forward order book up from 5,048 plots to 5,465. For the full year, Bellway now expects volume growth of at least 5 per cent.
Cash flow remained strong, but net debt rose from £58.9m to £175m. Including £302m on land acquired on deferred terms, that took gearing up from 20 per cent to 24 per cent, although this is expected to be lower by the end of the financial year.
A fall in the return on capital employed from 27.6 per cent to 25.1 per cent highlights the effect of investing in more land, given the time lag between the investment and achieving a return. Together with work in progress, Bellway has increased spending by £446m over the past 12 months. Contracted land purchases rose from the equivalent of 5,445 plots to 6,287.
Analysts at Numis are forecasting adjusted pre-tax profits for the year to July 2017 of £533m and EPS of 351p (from £481m and 314p in FY2016).
| BELLWAY (BWY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,895p | MARKET VALUE: | £3.56bn | |
| TOUCH: | 2,894-2,896p | 12-MONTH HIGH: | 2,920p | LOW: 1,622p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 1,610p | NET DEBT: | 9% | |
| Half-year to 31 Jan | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2016 | 1.08 | 227 | 149 | 34 |
| 2017 | 1.15 | 248 | 164 | 37.5 |
| % change | +6 | +9 | +10 | +10 |
Ex-div: 18 May Payment: 3 Jul | ||||
