Newcastle’s Bellway has £1.12bn order book

Shares of Newcastle-based house builder Bellway plc rose after it delivered a strong trading update for the six months ended January 31, 2017, and revealed its forward order book has a value of £1.12 billion and comprises 4,487 homes.

Bellway shares were up about 4% at around 2,618p to give the firm a current stock market value of just more than £3 billion.

Bellway said it delivered a 6.5% increase in housing completions during the six months to 4,462, and invested £380 million on land and land creditors.

The firm said social homes now made up almost 21% of its completions.

Bellway CEO Ted Ayres said: “Bellway has delivered another strong half year result, increasing both the number of legal completions and the value of the forward order book.

“Market conditions remain positive and accordingly Bellway is continuing to invest in a controlled manner, both in land and work in progress, in order to achieve further disciplined volume growth, thereby creating additional value for shareholders.”

The firm said customer demand continued to be robust supported by a competitive mortgage environment and the continued availability of the UK government’s Help to Buy scheme.

“This strong demand, together with an ongoing programme of site openings, has helped the group achieve a reservation rate of 166 homes per week (2016 – 156), an increase of over 6% compared to the same period last year,” said Bellway in its update.

The average selling price of private home completions rose by over 4% to £291,000.

“For the full financial year, the group should achieve at least this rate of growth in private average selling price (31 July 2016– £278,403), following investment in higher value locations over recent years,” said the firm.

“The overall average selling price of completions was £256,000 (2016 – £257,280), slightly dampened by a greater proportion of lower value social homes, with this percentage rising, as previously guided, to almost 21% of the total (2016 – 13%).

“The overall average selling price is still expected to rise to around £260,000 for the year ending 31 July 2017 (31 July 2016 – £252,793).”

Bellway said that geographically, all its divisions across the UK were performing well and while the rate of house price inflation had moderated, sales prices achieved on reservations “have been in line with or modestly ahead of expectations.”

It said sales prices and demand for Bellway homes remained firm in London, where there continued to be “a significant requirement for affordable homes.”

“Housing completions taken from land bought at attractive returns, which have been improved by historical house price inflation and strong cost control, should result in an operating margin of around 22% for the six months ended 31 January 2017,” said Bellway.

“The group should be able to maintain an operating margin at a similar level for the full financial year, provided that current market conditions continue.”

Bellway said it remained mindful of the economic uncertainty following the vote to leave the EU, but that the land market “does however remain attractive and our land teams continue to identify opportunities that meet or exceed the group’s minimum financial acquisition criteria in respect of gross margin and return on capital employed.”

Bellway contracted to acquire 6,287 plots in the period, up from 5,445 plots.

The firm added: “After taking into consideration this increased investment in land and work in progress and following the dividend payment of £90.6 million in January 2017, Bellway ended the period with net bank debt of £175 million (31 January 2016 – £58.9 million), representing modest gearing of around 9% (31 January 2016 – 3.5%).

“This level of net bank debt is expected to reduce by the end of the financial year.”

In its outlook, Bellway said its strong order book and investment in work in progress should mean that the group “is able to deliver further volume growth of around 5% in the current financial year.”