14th Oct 2014 08:08
LONDON (Alliance News) - UK housebuilder Bellway PLC Tuesday reported a jump in full-year profit as higher sales volumes at higher average prices lifted revenue by a third, and the company predicted further volume growth in the current year, albeit at a slower rate.
The company reported a pretax profit of GBP245.9 million for the year to end-July, up from GBP140.9 million a year earlier, as revenue rose to GBP1.49 billion, from GBP1.11 billion.
It raised its total dividend to 52.0 pence, from 30.0 pence, on the back of the strong results, meaning it will have returned over GBP220 million to shareholders since 2007. The final dividend will be 36.0p, up from 21.0p. It said the total dividend is covered by earnings 3.0 times, a level it expects to maintain for the foreseeable future.
Bellway, like peers, was hit hard by the financial crisis and ensuing economic downturn, with housebuilding almost grinding to a halt as the builders shored up their balance sheets. The recovery over the past two years has been swift, with housebuilders quickly ramping up building rates, as well as shareholder payouts, as profits have recovered.
Like peers, Bellway has been helped by UK government schemes to encourage more mortgage lending. However, concerned about the pace of the recovery in UK house prices, the Bank of England recently moved to restrict mortgage lending by forcing lenders to further tighten up their lending criteria. Bellway Tuesday welcomed this move, saying it should ensure a "long-term, sustainable supply of mortgage finance".
Its legal completions rose 21.2% in its last financial year to 6,851, from 5.652 a year earlier, and the average selling price it achieved rose to GBP213,182, from GBP193,025.
"The outlook remains positive with a record forward order book and this should enable the group to deliver volume growth of around 10% in the current financial year," Chairman John Watson said in a statement.
It said its forward order book stood at 4,435 homes at the end of September, up from 3,316 a year earlier and a record level. Reservations in the nine weeks since August 1 have averaged 128 per week, up from 122 a week in the comparable period in 2013.
Its owned and controlled land bank has risen to 35,434 plots, from 32,991 plots a year earlier, and it has swung to a net cash position of GBP5.1 million, from net bank debt of GBP5.8 million, providing "operational and balance sheet capacity for future growth".
"There continues to be good availability of high quality land that either meets or exceeds our minimum acquisition criteria in respect of gross margin and return on capital employed. This availability, together with a more positive planning environment, is providing the group with attractive opportunities for investment," it said.
Bellway added that the recent shortage of bricks and building materials has eased, although the shortage of available skilled tradesmen sub-contractors, like bricklayers, was pushing up costs.
Bellway shares were up 2.8% at 1,524.00 pence early Tuesday, one of the best-performing stocks on the FTSE 250.
Numis Securities said the results had beaten its expectations, and it has upgraded its earnings forecast for both 2015 and 2016. It said it thinks the housebuilder's current share price "materially undervalues" the business and doesn't reflect the future growth potential of the business or its prudent balance sheet.
"This is a strong start to the financial year against the strong comparative last year and if sustained should make Bellway's objective of growing volumes 10% in 2015 highly achievable," Numis analyst Chris Millington wrote in a note to clients.
By Steve McGrath; [email protected]; @stevemcgrath1
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