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Bellway plc

Bellway plc Solid results coupled with a strong balance sheet

Bellway plc (LON:BWY) has today provided interim results for the half year ended 31st January 2020.

 Half year ended31 January2020Half year ended31 January2019Movement
Gross profit£356.5m£377.5m(5.6%)
Gross margin23.1%25.4%(230 bps)
Operating profit£297.2m£319.8m(7.1%)
Operating margin19.3%21.5%(220 bps)
Profit before taxation£291.8m£313.9m(7.0%)
Earnings per share194.4p207.5p(6.3%)
Interim dividend per shareNil50.4p(100.0%)
Net asset value per share (‘NAV’)12,467p2,189p+12.7%
Return on capital employed119.9%24.2%(430 bps)

Coronavirus (‘COVID-19’)

  • The unprecedented challenge and uncertainty presented by COVID-19 will result in a period of substantial disruption.
  • Our priority is the health and wellbeing of our employees, subcontractors and customers and we are making every effort to ensure that the Group’s operating divisions, construction sites and sales offices are as safe as possible.
  • There is a significant risk to production capability and customer demand in the weeks and months ahead.
  • There is also a threat to liquidity across the wider economy and the Board is therefore taking immediate action to preserve the strength and resilience of the balance sheet. This includes a pause in new site acquisitions and a re-prioritisation of production expenditure to focus on plots which are in the later stages of construction programmes.
  • In addition, the decision to pay an interim dividend will be postponed until later in the calendar year, when there is more certainty with regards to the economic outlook.
  • These measures are designed to preserve liquidity without impacting upon the long-term health and operational capacity of the business.

Solid results coupled with a strong balance sheet

  • The trading period was successful with housing completions rising by 6.3% to a record 5,321 homes (2019 – 5,007).
  • Total revenue increased by 3.6% to £1,541.4 million (2019 – £1,488.0 million).
  • The operating margin was in line with expectations at 19.3% (2019 – 21.5%), following moderation, as previously guided, to a more normalised level.
  • The Group has a strong balance sheet with net cash of £4.6 million1 (2019 – net bank debt of £26.6 million) and committed bank facilities of £545 million, providing a robust financial foundation.
  • Longer term, the Group has the ability to be highly cash generative should we enter a prolonged period in which land and WIP spend are curtailed.

Continued operational strength

  • Delivery of a programme of outlet openings in good quality locations and strong demand for new homes resulted in the private reservation rate rising by 11.0% to 151 per week (2019 – 136), with the overall reservation rate rising by 6.0% to 194 per week (2019 – 183).
  • A continued focus on quality and customer care should ensure that the Group is recognised as a five-star homebuilder2 for the fourth year in succession.
  • Our ‘Artisan Collection’ standard house type range, which embodies our focus on quality and will enable further long-term cost savings through standardisation, is progressing well, having been plotted across 128 developments (2019 – 53 developments).
  • Continued investment in land, with 7,005 plots contracted in the period (2019 – 5,980 plots), contributing to the number of plots within the owned and controlled land bank rising by 4.3% to 44,077 plots (2019 – 42,261 plots).

Current trading and outlook

  • In the six weeks since 1 February, reservations increased by 7.3% to 278 per week (2019 – 259 per week) confirming encouraging underlying customer sentiment for new build housing.
  • Reservations have fallen in the past two weeks as the introduction of measures to delay the spread of COVID-19 inevitably affect demand.
  • Substantial order book, with a value of £1,515.8 million1 at 8 March 2020 (10 March 2019 – £1,485.2 million), comprising 5,772 homes (10 March 2019 – 5,724 homes).
  • The outlook will be determined by the U.K.’s ability to recover from the threat posed by COVID-19. Looking beyond this risk, Bellway has a strong balance sheet and a good operational capacity to continue supplying much needed new homes in the future.

1 Bellway uses a range of statutory performance measures and alternative performance measures when reviewing the performance of the Group against its strategy. Definitions of the alternative performance measures, and a reconciliation to statutory performance measures, are included in note 10.

2 As measured by the Home Builders’ Federation Customer Satisfaction survey.

3 All figures relating to completions, order book, reservations, cancellations, average selling price and land exclude the Group’s share of its joint ventures.

Chairman’s Overview

Commenting on the results, Chairman, Paul Hampden Smith, said:


The unprecedented uncertainty arising as a result of COVID-19 presents a real and ongoing threat to the wider economy and our society which will result in all businesses experiencing a significant period of disruption. First and foremost, every effort is being made to safeguard our employees, customers and wider stakeholders, with measures such as home working and intensified cleaning regimes already implemented across the organisation.

The introduction of social distancing measures, together with the effect that this has on consumer confidence, will mean that there will be a slowdown in production and sales activity in the weeks and possibly months ahead. Our focus, therefore, is to secure the liquidity of the Group and to maintain the strength of the balance sheet, thereby ensuring the long-term health of the business.

Bellway starts this global crisis from a robust position, with a solid, ungeared balance sheet at 31 January 2020. Nonetheless, ensuring liquidity requires the Board to prepare for a potential ‘lockdown’ scenario in which completions could be severely delayed, but historic obligations still fall due. We have therefore introduced a moratorium on all new land contracts and production expenditure will be focussed on plots which are approaching completion.

In addition, the Board will adopt a prudent and cautious approach towards shareholder returns, prioritising cash generation over the coming months. As a result, the decision to pay an interim dividend has been postponed until later in the calendar year when there should be more certainty with regards to the economic outlook. This is a responsible approach given the present circumstances and it will help to ensure the continued health of the balance sheet. Longer term, our fundamental view of the business still envisages an opportunity for growth.

A robust six-month trading period

In respect to the period under review, Bellway continued to make a significant contribution to the supply of much needed new homes, delivering a record number of housing completions and further building upon the growth achieved in the same period last year. The strong growth in volume was a result of continued investment in new outlets and the market demand for reasonably priced, good quality housing. Notwithstanding the growth in completions, earnings reduced by 6.3% to 194.4p per share (2019 – 207.5p), primarily as the prior year, as previously highlighted, benefited from an unusually high selling price and gross margin contribution from our flagship development, ‘The Residence’ in Nine Elms, Battersea.

As a leading, national housebuilder, our operations are underpinned by a long-term and responsible approach, through which we endeavour to create a positive experience for our stakeholders. A continued focus on quality remains integral to how Bellway operates, and to this end, we expect to maintain our status as a five-star homebuilder2 for a fourth successive year. In addition, our recently launched Bellway Academy will help to ensure that our trainees, graduates, apprentices and site personnel have the right skills to enable the Group to continue building good quality new homes in the future.

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