17th Oct 2006 07:01
Bellway PLC17 October 2006 NATIONAL HOUSEBUILDER BELLWAY p.l.c. TODAY, TUESDAY 17 OCTOBER 2006, ANNOUNCETHEIR PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2006. HIGHLIGHTS Year to 31 July 2006 2005 IncreaseRevenue - £m 1,240.2 1,178.1 5.3%Operating profit - £m 239.3 230.1 4.0%Profit before taxation - £m 220.7 213.8 3.2%Basic earnings per ordinary share - pence 137.5 133.1 3.3%Dividend per ordinary share - pence 34.5 31.25 10.4%Net asset value per ordinary share - pence 793 689 15.1% HOWARD DAWE, CHAIRMAN OF BELLWAY p.l.c. COMMENTING ON THE NEWCASTLE BASEDHOUSEBUILDER'S ANNUAL RESULTS SAID "I AM PLEASED TO REPORT THAT BELLWAY HASEXTENDED ITS TRACK RECORD OF GROWTH....". ON REVIEWING THE YEAR HE SAID "THE PROFIT BEFORE TAX HAS INCREASED....TO £220.7MILLION AND EARNINGS PER ORDINARY SHARE HAVE ADVANCED TO 137.5P.... BOTH OFWHICH ARE NEW RECORDS FOR THE GROUP". COMMENTING ON CURRENT TRADING MR DAWE SAID "ALTHOUGH SOME PARTS OF THE COUNTRYHAVE SHOWN RESILIENCE.....INCENTIVES ARE STILL REQUIRED TO CONCLUDE MOSTTRANSACTIONS". HE WAS DELIGHTED TO REPORT THAT "ON 30 SEPTEMBER 2006 THEFORWARD ORDER BOOK STOOD AT £647 MILLION" AND "INCLUDING COMPLETIONS TO DATE, WEHAVE SECURED AROUND 58% OF OUR PLANNED AND INCREASED OUTPUT FOR 2006/07". IN CONCLUSION THE CHAIRMAN SAID "WITH OUR EMPHASIS ON LOWER VALUE HOUSING,FORWARD SELLING, INCREASING VOLUMES AND TIGHT CONTROL OVER LAND BUYING, THEBOARD REMAINS CONFIDENT AS TO THE FUTURE PROSPECTS FOR THE GROUP". 2006 2005 * Homes sold - no. 7,117 7,001* Average selling price - £000 169.0 163.8* Operating margin - % 19.3 19.5* Return on average capital employed - % 23.4 27.0* Land bank - plots with planning permission 22,600 22,500* Net assets - £m 903.5 779.8 FOR FURTHER INFORMATION, PLEASE CONTACT JOHN WATSON, CHIEF EXECUTIVE OR ALISTAIRLEITCH, FINANCE DIRECTOR TUESDAY 17 OCTOBER - FRIDAY 20 OCTOBERJ WATSON: 07855 337007A LEITCH: 07855 337001THEREAFTER: 0191 217 0717 BELLWAY p.l.c. CHAIRMAN'S STATEMENT I am pleased to report that Bellway has extended its track record of growth involume, turnover and earnings to record levels over the last twelve months.Volume and turnover has grown for the fifteenth consecutive year and earningsper share have increased for the tenth consecutive year. I can confirm thatthese annual results have been prepared for the first time under InternationalFinancial Reporting Standards (IFRSs) and are summarised below. The number of homes sold in the year ended 31 July 2006 has increased from7,001 to 7,117 and the average price of these homes has increased from £163,800to £169,000. Total turnover for the Group advanced by 5.3% to £1,240 millionfrom £1,178 million. Due to the increased volume and tight control of costs,the Group has been able to restrict the attrition on the operating margin from19.5% to 19.3% resulting in operating profit increasing to £239.3 millioncompared with £230.1 million last year. Net financing costs have risen to £18.4million from £16.4 million. The profit before tax has increased by 3.2% from£213.8 million to £220.7 million and earnings per ordinary share have advancedto 137.5p from 133.1p, both of which are new records for the Group.Shareholders' equity has risen by almost £124 million to £903.6 million, and netassets per ordinary share are now 793p, up from 689p at the same time last year,an increase of some 15%. Gearing at the year end was 19% with net borrowings of£173.7 million, down from £191.6 million at the same time last year. Dividend To reflect the Group's creditable performance, and as a show of confidence infuture prospects, the Board has decided to recommend an increase in the totaldividend payable per ordinary share by 10.4% from 31.25p to 34.5p which iscovered just less than four times. This will result in a final dividend of20.2p (18.25p - 2005) being paid on Monday 15 January 2007 to all ordinaryshareholders on the Register of Members at the close of business on Friday 15December 2006. Current Trading Although some parts of the country have shown resilience, notably in the NorthEast, Scotland and the Thames Gateway, the rest of the country remainschallenging and, as a consequence, incentives are still required to concludemost transactions. However, these incentives are being well controlled andclosely managed by our divisions resulting in margins being held at satisfactorylevels. To grow earnings in this market, and with build cost pressures, theGroup intends to increase volumes this year from a greater number of outlets anddivisions. The foundations of this growth are in place as the number of outletshas risen by 7% and the divisional network has been augmented by a new divisionoperating in the South Midlands area, increasing the number of current operatingdivisions to eighteen. Our policy of forward selling, resulted in the Group'stotal order book having grown to £561 million as at 31 July 2006. Since 1August 2006 through to 30 September 2006 reservations have been some 9% ahead ofthe same period last year and on 30 September the forward order book stood at£647 million. Including completions to date, we have secured around 58% of ourplanned and increased output for 2006/07. Land Land is the lifeblood of the industry and the procurement process remains ascompetitive and as difficult as ever. Plots with planning permission held at 31July 2006 were 22,600, just ahead of last year's position. We are particularlypleased with the progress that has been made with our medium term land holdings,with plots pending planning permission having grown by 25% to 15,000 plotsgiving a total land bank of 37,600 plots, representing over five years supply.In addition, our City Solutions operation has been awarded preferred developerstatus for some 4,200 plots on regeneration schemes throughout the country. People These record results would not have been possible without the hard work, skilland commitment of all our employees, suppliers, sub-contractors and partnersacross the country and this is greatly appreciated by the Board. Future Prospects The current market, although stable, remains price competitive and is one inwhich Bellway has traditionally thrived. With our emphasis on lower valuehousing, forward selling, increasing volumes and tight control over land buying,the Board remains confident as to the future prospects for the Group. H C DaweChairman 16 October 2006 BELLWAY p.l.c. CHIEF EXECUTIVE'S OPERATING REVIEW Strategy I am delighted to report another year of significant progress with the number ofhomes sold increasing to 7,117 at an average selling price of £169,000. Thishas resulted in the revenue from the sale of homes reaching a new high of £1,203million up from £1,147 million last year. Other turnover of £37 million wasgenerated during the year which came mainly from land sales and the sales ofcommercial units taking the total turnover to a record high of £1,240 million. As long as the market remains competitive, the Group recognises that revenuegrowth must be generated primarily by increasing volume output. Our strategytherefore is to optimise and increase the divisional network and to improve thesize and quality of the land bank. In addition we continue to focus on costcontrol in all aspects of the business. New Appointments With regard to our volume growth objectives, we have recently appointed two newregional chairmen, covering the north and south of the country, to oversee theday to day divisional operations. Land acquisition and financial control willremain at Head Office to ensure strong controls remain in place. This change toour structure is an important initiative in driving output in those divisionstrading below optimum scale and also gives us the additional resource toestablish future new divisions. Divisional Performance Northern Divisions During the year the northern divisions sold 3,764 homes, an increase from theprevious year's 3,685 homes. Of this total, 221 homes were sold to housingassociations compared to 196 the previous year. Overall the average sellingprice in the north fell slightly to £154,569 but, with the volumes increasing,turnover increased to £581.8 million. The West Lancashire division, which is now building on several sites in theLiverpool Pathfinder area, has successfully completed 600 homes in the year withan average selling price of only £136,000. The North East division hascommenced two neighbourhood renewal schemes replacing areas of former localauthority housing. We anticipate the average selling price of these 950 newhomes to be in the region of £127,000. This is an extremely affordable priceeven for the North East and will help to grow volumes in future years. A newdivision was formed during the year to cover the South Midlands area. It isacquiring new land opportunities in the region as well as handling the Solihullregeneration project which has recently commenced. We will see production fromthe division in the 2006/07 financial year and it increases the number oftrading divisions to 18. Southern Divisions The southern divisions sold 3,353 homes, an increase from the previous year's3,316. Of this total, 569 homes were sold to housing associations compared to632 the previous year. Overall the average selling price in the south increasedto £185,200 and with volumes increasing, turnover lifted to £621.1 million, a7.8% increase on the previous year. The South West division, only formed in 2004, increased output to 153 homes andis set to continue growing helped by further land acquisitions in Devon andSomerset. The Thames Gateway South division has established itself as a majorprovider of affordable homes in East London, with an overall average sellingprice of only £169,000. The division has recently completed a development of214 apartments in the London Borough of Tower Hamlets and construction of afurther 532 houses and apartments is on-going in Stepney, in the same borough.Demand for these competitively priced homes is proving to be particularlystrong. The Thames Gateway North division which was only established in 2005completed 42 homes in the period. It has been successful in acquiring severalmore sites and production levels will steadily increase in the coming years. Land Bank The divisional network must also be supported by an expanding land bank and inparticular sales outlets. The Group presently has 22,600 plots owned withplanning permission on the balance sheet, similar to last year's levels.However, the medium term land bank, which is typically held by the companypending the receipt of a planning permission, has increased significantly from12,000 to 15,000 plots. These plots often take several years to convert intoactive sites but are a valuable source of land and often result in enhancedmargins. A start will be made on a site next year near Bedford, an old RAFdepot, which was acquired outright in 2001 and has now received planningpermission for around 600 homes. In addition, the Group's long term strategic land contains the 4,200 plots beingprocessed through the system by City Solutions. These plots together withapproximately 2,900 acres of greenfield land, typically held under option, willfurther enhance Bellway's land bank and underpin our long term growthaspirations. City Solutions City Solutions, a procurement team, is taking advantage of the Government'sregeneration initiatives and is focused on sourcing large scale regenerationopportunities where the operating margin is agreed in advance. Once a projectreaches development stage it is handed over to a division. So far CitySolutions has made its first contribution towards the land bank handing over 500plots to divisions and currently it has preferred bidder status on thepreviously mentioned 4,200 plots in cities such as Leeds, Liverpool,Middlesbrough and Newport. These new opportunities will be a sizeable boost toour land bank. Design and Cost Control During the year the Group received awards from the Commission for Architectureand the Built Environment (CABE) for outstanding design. Whilst it is pleasingto receive such recognition, it is important to ensure that we complement gooddesign with cost control. For example, with the new Part A building regulationsimposing additional design criteria on buildings over four storeys and above, wehave introduced more timber frame construction which represents a cost savingagainst concrete or steel construction. As a result, timber frame constructionaccounted for almost a third of output. This system brings a greaterstandardisation of floor design and has economy of scale benefits. As a highlyinsulated system, it helps to reduce CO(2) emissions, an item high on theGovernment's list of priorities, and as a consequence its use may well increasein the future. These measures, along with a greater use of standard materialspecifications, have helped to support the Group's operating margin. Environment Government statistics demonstrate that improvements in construction techniquesand materials have all contributed to a new home being 40% more energy efficienttoday than it was five years ago. New building regulations and other Governmentinitiatives will continue to improve the standard of new homes in the future. However, despite this, the effect of climate change cannot be underestimated ashousing is a major contributor in the production of CO(2). In an effort toimprove the environmental performance of our product, we are currently payingthe energy bills and monitoring the performance of several homes recentlyconstructed in the North West of England where more innovative methods ofgenerating heat and power have been employed. The Group has also increased the number of "Eco Homes" built during the year andour development at Broughton in Milton Keynes will see Bellway delivering ourfirst site of 234 homes to "Eco Homes Excellent" standard. To ensure the sustainability of raw materials, especially timber, this year weundertook a review of our major suppliers and introduced a new Group procurementpolicy. This is especially important considering the Group's increased use oftimber frame techniques. Waste is a significant by-product of development andan area we are continuing to focus upon. In the year under review, 150 siteshave segregated their waste, more importantly 4,708 tonnes of plasterboard havebeen recycled representing a substantial increase over the corresponding periodlast year. Throughout the course of the year the Group has agreed, pursuant to agreementsunder s106 of the Town and Country Planning Acts, to make payments which intotal amount to over £5m for such items as education, highway and open spacefacilities. These payments provide benefits for the whole community followingthe granting of a planning permission. Customers There is a strong requirement to deliver a quality product combined with a levelof service that satisfies customer demands. During the year the Group hasundertaken a comprehensive review of its customer care procedures and alsoappointed an independent survey company. The latest figures from this surveyshow that over 75% of purchasers would recommend their friend to buy a newBellway home. This, and future surveys, will be used to focus the Group'sefforts to produce quality homes and satisfy customers on a consistent basis. Health and Safety A review of our health and safety systems was carried out during the course ofthe year by an independent firm of consultants. Recommendations from the reviewhave been implemented resulting in the Group devoting more resources into thisarea of our business. In conjunction with the Health and Safety Executive,Bellway has been holding joint workshops throughout the Group to make bothsub-contractors and employees aware of good practice with regard to manualhandling. We have, as a result, made a number of changes to products being usedon site and now insist on the use of mechanical lifting devices when handlingheavy materials. I am pleased to report that the number of reportable accidents, namely thoseinvolving absence from work for over three days, has been reduced for the fourthconsecutive year, a trend we hope can be maintained in the coming years bysetting new targets and introducing initiatives on site to improve performance. Outlook Revenue growth in a low inflationary environment more than ever relies onincreasing our volume output. The foundations for this growth are in place withthe number of sales outlets increasing by around 7%, the divisional network hasbeen expanded and the land bank is being further enhanced by future urbanregeneration schemes. The cost base will benefit from more standardisationhelping to reduce inherent cost pressures. Bellway's strategy remains unalteredand is supported by a strong order book which has grown to £647 million at theend of September. This places the Group in an excellent position to maintainits track record into the future. J K WatsonChief Executive 16 October 2006 BELLWAY p.l.c.CONSOLIDATED INCOME STATEMENTFor the year ended 31 July 2006 Notes 2006 2005 £000 £000 Revenue 1,240,193 1,178,063 Cost of sales (947,921) (896,167) __________ __________ Gross profit 292,272 281,896 Administrative expenses (52,932) (51,784) __________ __________ Operating profit 239,340 230,112 Finance income 2 2,941 2,250 Finance expenses 2 (21,339) (18,627) Share of (losses) / profit of associates (233) 94 __________ __________ Profit before taxation 220,709 213,829 Income tax expense 3 (64,967) (64,667) __________ __________ Profit for the year (all attributable to equity holders of the parent) 155,742 149,162 Earnings per ordinary share - basic 5 137.5p 133.1p Earnings per ordinary share - diluted 5 136.2p 131.8p Statement of Recognised Income and ExpenseFor the year ended 31 July 2006 Group 2006 2005 £000 £000 Actuarial losses on defined benefit pension scheme (2,203) (5,040) Tax on items taken directly to equity 661 1,512 __________ __________Net expense recognised directly in equity (1,542) (3,528) Profit for the year 155,742 149,162 __________ __________ Total recognised income (all attributable to equity holders of the parent) 7 154,200 145,634 ====== ====== BELLWAY p.l.c. BALANCE SHEET At 31 July 2006 Consolidated 2006 2005 Notes £000 £000ASSETSNon-current assetsProperty, plant and equipment 13,749 17,631Investment property 1,713 -Investments in subsidiaries, associates and jointly controlled entities - 136Other receivables 5,736 7,462Deferred tax assets 10,174 11,475 ________ ________ 31,372 36,704Current assetsInventories 1,433,999 1,283,222Trade and other receivables 26,503 31,703Cash and cash equivalents 2,329 66,441 ________ ________ 1,462,831 1,381,366 ________ ________ Total assets 1,494,203 1,418,070 ===== =====LIABILITIESNon-current liabilitiesInterest bearing loans and borrowings 159,000 256,000Retirement benefit obligations 11,716 12,084Land payables 23,958 19,265 ________ ________ 194,674 287,349Current liabilitiesInterest bearing loans and borrowings 17,024 2,000Trade and other payables 349,995 316,591Current tax liabilities 29,010 32,302 ________ ________ 396,029 350,893 ________ ________ Total liabilities 590,703 638,242 ===== ===== ________ ________ Net assets 903,500 779,828 ===== =====EQUITYIssued capital 14,252 14,154Share premium 111,903 108,886Other reserves 1,492 1,492Retained earnings 775,919 655,362 ________ ________ Total equity attributable to equity holders of the parent 903,566 779,894Minority interest (66) (66) ________ ________ Total equity 7 903,500 779,828 ===== ===== Approved by the Board of Directors on 16 October 2006 and signed on its behalfby H C Dawe A M LeitchDirector Director BELLWAY p.l.c. CASH FLOW STATEMENT For the year ended 31 July 2006 Consolidated Notes 2006 2005 £000 £000Cash flows from operating activitiesProfit for the year 155,742 149,162 Depreciation charge 3,141 3,269Profit on sale of property, plant and equipment (1,152) (189)Finance income (2,941) (2,250)Finance expenses 21,339 18,627Dividends received - -Share based payment charge 2,550 1,575Income tax expense 64,967 64,667Increase in inventories (150,777) (227,574)Decrease / (increase) in trade and other receivables 6,895 (11,858)Increase in trade and other payables 32,243 9,249 ________ ________ Cash from operations 132,007 4,678 Interest paid (17,937) (15,374)Income tax paid (65,198) (68,062) ________ ________ Net cash inflow / (outflow) from operating activities 48,872 (78,758) Cash flows from investing activitiesAcquisition of property, plant and equipment (4,808) (5,153)Acquisition of investment property (1,713) -Proceeds from sale of property, plant and equipment 6,721 1,066Interest received 2,962 2,267Dividends received - - ________ ________ Net cash inflow / (outflow) from investing activities 3,162 (1,820) Cash flows from financing activities(Decrease) / increase in bank borrowings (97,000) 63,000Proceeds from the issue of share capital on exercise of share options 3,115 4,540Purchase of own shares by employee share option plans (403) (313)Dividends paid (36,882) (32,150) ________ ________ Net cash (outflow) / inflow from financing activities (131,170) 35,077 ________ ________ Net decrease in cash and cash equivalents (79,136) (45,501) Cash and cash equivalents at beginning of year 66,441 111,942 ________ ________ Cash and cash equivalents at end of year 6 (12,695) 66,441 ===== ===== BELLWAY p.l.c. NOTES TO THE FINANCIAL STATEMENTS 1 ACCOUNTING POLICIES The financial information has been prepared in accordance with InternationalFinancial Reporting Standards (IFRSs) as adopted by the European Union (EU) andeffective (or available for early adoption) at 31 July 2006. Comparativeinformation for the year ended 31 July 2005 has been stated on an IFRS basis. Full details of IFRS policies applied and reconciliations of comparative figuresbetween UK GAAP and IFRSs are available in our announcement of restatement offinancial information for 2005 issued on 31 March 2006. A copy of theannouncement is available under the Investor Relations section of our website,www.bellway.co.uk 2 FINANCE INCOME AND EXPENSE 2006 2005 £000 £000 Interest income 2,941 2,250 ===== ===== Interest payable on bank loans and overdrafts 16,358 13,533Interest on deferred term land payables 2,680 2,726Interest element of movement in pension scheme deficit 305 339Other interest expense 96 129Preference dividends 1,900 1,900 ________ ________ Finance expenses 21,339 18,627 ===== ===== 3 TAXATION Taxation has been calculated at an effective rate of 29.5% of profit before tax(2005: 30.2%). 4 DIVIDENDS ON EQUITY SHARES 2006 2005 £000 £000 Amounts recognised as distributions to equity holders in the year : Final dividend for the year ended 31 July 2005 of 18.25p per share (2004: 15.7p) 20,657 17,594Interim dividend for the year ended 31 July 2006 of 14.3p per share (2005: 13.0p) 16,232 14,599 ________ ________ 36,889 32,193 ===== ===== Proposed final dividend for the year ended 31 July 2006 of 20.2p per share (2005: 23,028 20,60018.25p) The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting on 12 January 2007 and, in accordance with IAS 10, has not beenincluded as a liability in these financial statements. 5 EARNINGS PER ORDINARY SHARE Basic earnings per ordinary share is calculated by dividing earnings by theweighted average number of ordinary shares in issue during the year (excludingthe weighted average number of ordinary shares held by the employee shareownership plans which are treated as cancelled). Diluted earnings per ordinary share uses the same earnings figure as the basiccalculation except that the weighted average number of shares has been adjustedto reflect the dilutive effect of outstanding share options allocated underemployee share schemes where the market value exceeds the option price. It isassumed that all dilutive potential ordinary shares are converted at thebeginning of the accounting period. Diluted earnings per ordinary share iscalculated by dividing earnings by the diluted weighted average number ofordinary shares. Reconciliations of the earnings and weighted average number of shares used inthe calculations are outlined below: Earnings Weighted Earnings Weighted average average number of number of ordinary ordinary shares shares 2006 2006 2005 2005 £000 £000 For basic earnings per ordinary share 155,742 113,248,814 149,162 112,054,913Options and awards - 1,121,473 - 1,134,149 __________ __________ _________ __________ For diluted earnings per ordinary share 155,742 114,370,287 149,162 113,189,062 ====== ====== ====== ====== 6 ANALYSIS OF NET DEBT Group At 1 August Cash At 31 July 2005 Flows 2006 £000 £000 £000 Cash and cash equivalents 66,441 (64,112) 2,329Bank overdrafts - (15,024) (15,024) ________ ________ ________ Net cash and cash equivalents 66,441 (79,136) (12,695) Bank loans (238,000) 97,000 (141,000)Preference shares redeemable after more than one year (20,000) - (20,000) ________ ________ ________ Net debt (191,559) 17,864 (173,695) ===== ===== ===== 7 RECONCILIATION OF MOVEMENTS IN CAPITAL AND RESERVES Group Attributable to equity holders of the parent Ordinary Share Other Retained Total Minority Total share premium reserves earnings interest equity capital £000 £000 £000 £000 £000 £000 £000 At 1 August 2004 14,008 104,492 1,492 540,754 660,746 (66) 660,680Total recognised income and expense - - - 145,634 145,634 - 145,634Dividends on equity shares - - - (32,193) (32,193) - (32,193)Shares issued 146 4,394 - - 4,540 - 4,540Charge in relation to share options and - - - 1,480 1,480 - 1,480tax thereonExercise of share options / share - - - (313) (313) - (313)awards ________ ________ ________ ________ ________ ________ ________ At 31 July 2005 14,154 108,886 1,492 655,362 779,894 (66) 779,828 Total recognised income and expense - - - 154,200 154,200 - 154,200Dividends on equity shares - - - (36,889) (36,889) - (36,889)Shares issued 98 3,017 - - 3,115 - 3,115Charge in relation to share options and - - - 3,649 3,649 - 3,649tax thereonExercise of share options / share - - - (403) (403) - (403)awards ________ ________ ________ ________ ________ ________ ________ At 31 July 2006 14,252 111,903 1,492 775,919 903,566 (66) 903,500 ===== ===== ===== ===== ===== ===== ===== Within retained earnings are amounts relating to ordinary shares held by theemployee share ownership plans. The number of shares held within these plans at31 July 2006 was 441,439 (2005: 488,624) which are held within the financialstatements at a value of £2,173,000 (2005: £2,175,000). 8 STATUTORY ACCOUNTS These financial statements do not constitute statutory accounts for the yearended 31 July 2006 or 2005 (as restated for IFRSs), which will be filed with theRegistrar of Companies for the year ended 31 July 2006 following the Company'sAnnual General Meeting. The comparative information has been prepared on an IFRS basis. The comparativefigures for the financial year ended 31 July 2005 are not the statutory accountsof the Group for that financial year. Those accounts, which were prepared underUK GAAP, have been reported on by the Company's auditors and delivered to theRegistrar of Companies. The Report of the Auditors was unqualified and did notcontain statements under Section 237 (2) or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Bellway