REG - Bellway PLC - Preliminary Results
15/10/2024 07:00
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RNS Number : 1315I Bellway PLC 15 October 2024
Bellway p.l.c. ('Bellway' or the 'Group'), the national housebuilder,
announces today, Tuesday 15 October 2024, its Preliminary Results for the year
ended 31 July 2024.
Summary
Resilient performance and well-positioned for strong multi-year growth
Year ended Year ended Movement
31 July 31 July
2024 2023
Housing completions 7,654 10,945 (30.1%)
Revenue £2,380.2m £3,406.6m (30.1%)
Underlying performance measures:
Gross profit (underlying) £381.1m(2,3) £687.3m(2,3) (44.6%)
Gross margin (underlying) 16.0%(2,3) 20.2%(2,3) (420 bps)
Operating profit (underlying) £238.1m(2,3) £543.9m(2,3) (56.2%)
Operating margin (underlying) 10.0%(2,3) 16.0%(2,3) (600 bps)
Profit before taxation (underlying) £226.1m(2,3) £532.6m(2,3) (57.5%)
Earnings per share (underlying) 135.2p(2,3) 328.1p(2,3) (58.8%)
RoCE (underlying) 6.9%(2,3) 15.8%(2,3) (890 bps)
Statutory and other measures:
Adjusting items (pre-tax) £42.4m £49.6m (14.5%)
Profit before taxation £183.7m £483.0m (62.0%)
Earnings per share 109.8p 297.7p (63.1%)
Proposed total dividend per share 54.0p 140.0p (61.4%)
Net asset value per share 2,913p(2) 2,871p(2) +1.5%
Net (debt)/cash (£10.5m)(2) £232.0m(2) (104.5%)
Land bank (total plots) 95,292(4) 98,164(4) (2.9%)
Jason Honeyman, Group Chief Executive, commented:
"Bellway has delivered another resilient performance despite the challenging
operating conditions during the year. While a lower order book at the
beginning of the financial year drove the reduction in the number of housing
completions, customer demand through the second half benefitted from a
moderation in mortgage interest rates which has eased affordability pressures
and supported an increase in reservations.
The combination of these improving trading conditions and our strong outlet
opening programme has generated a healthy increase in the year end order
book. As a result, we are well-placed to deliver a material increase in
volume output in financial year 2025.
We welcome the new Government's plans to reform the planning system, which in
time is expected to unlock land supply and support an increase in new housing
across the country. Against this improving backdrop and if market conditions
remain stable, our operational strength and robust balance sheet, combined
with the depth and quality of our land bank, provide an excellent platform for
Bellway to deliver strong multi-year growth and to continue creating long-term
value for all our stakeholders."
Financial performance in line with our expectations
§ Total housing completions of 7,654 homes (2023 - 10,945), at an overall
average selling price of £307,909 (2023 - £310,306).
§ Total revenue reduced by 30.1% to £2,380.2 million (2023 - £3,406.6
million), due to the lower starting forward order book and challenging trading
conditions, particularly in the first half of the financial year.
§ Customer confidence gradually improved throughout the year, driven by a
moderation of both mortgage interest rates and consumer price inflation, and
an increase in wages. Combined with an increase in outlet numbers, this led
to a 13.8% rise in the private reservation rate to an average of 124 per week
(2023 - 109).
§ The private reservation rate per outlet per week increased by 10.9% to 0.51
(2023 - 0.46). The private reservation rate per outlet per week in the
second half of the financial year increased to 0.58 (six months to 31 July
2023 - 0.53) compared to 0.43 in the first half (six months to 31 January 2023
- 0.38), driven by the improving trading backdrop and a seasonal uplift
through the spring.
§ The underlying operating margin was in line with previous guidance at
10.0%(2,3) (2023 - 16.0%), with the reduction reflecting the effect of lower
volume output, cost inflation and the use of targeted sales incentives,
together with higher site-based overheads due to the slower sales market since
the summer of 2022.
§ Underlying profit before taxation was £226.1 million(2,3) (2023 - £532.6
million) and in line with our expectations.
§ Adjusting items relating to net expenses associated with legacy building
safety of £37.0 million (2023 - £49.6 million) and aborted transaction costs
of £5.4 million (2023 - £nil), resulted in reported profit before tax of
£183.7 million (2023 - £483.0 million).
§ Underlying RoCE was lower at 6.9%(2,3) (2023 - 15.8%) due to the decrease
in both asset turn and the underlying operating margin. The Group has a
strong platform from which to increase volume output, and the Board expects
this to support an improvement in RoCE from the current financial year.
High-quality land bank to support outlet opening programme and volume growth
ambitions
§ The Group has a high-quality land bank which comprises 95,292 plots(4)
(2023 - 98,164 plots).
§ Bellway's owned and controlled land bank of 48,887 plots (2023 - 53,629
plots) remains healthy and provides good visibility with regards to outlet
openings in the current financial year and beyond.
§ The Group traded from an average of 245 outlets (2023 - 238), an increase
of 2.9%, driven by the strength of our land bank and targeted approach to land
acquisition, and was achieved despite the delays in the planning system.
§ Our site teams successfully opened 80 new sales outlets during the year,
and in financial year 2025 we currently expect to open around 50 new sales
outlets and maintain the average number at around 245.
§ Overall, during financial year 2024, the Group contracted to purchase 4,621
owned and controlled plots (2023 - 4,715 plots) across 27 sites (2023 - 35
sites) with a total contract value of £344.8 million (2023 - £378.2
million).
§ The improving economic outlook in terms of both lower interest rates and
house price stability has supported an increase in our activity in the
shorter-term land market in recent months, with Heads of Terms agreed on
around 8,100 plots at 29 September 2024.
§ Building on the expansion of our strategic land bank in recent years, the
Group entered into option agreements for 35 sites (2023 - 19 sites), which has
enhanced our longer-term growth prospects and overall land supply for a
relatively low initial capital outlay.
§ Bellway's strategic land bank comprises 45,500 plots (2023 - 43,600 plots),
providing the Group with an excellent platform for growth in the years ahead,
with this further supported by the new Government's proposed reforms to the
planning system.
Robust and well-capitalised balance sheet
§ Bellway has a strong balance sheet, with low year-end net debt, in line
with expectations, at £10.5 million(2) (2023 - net cash of £232.0 million),
and modest adjusted gearing, inclusive of land creditors, of 6.8%(2) (2023 -
4.0%).
§ The Group has access to significant levels of committed debt finance,
totalling £530 million, and this provides ongoing financial resilience while
supporting land investment and our growth ambitions. We expect to end the
current financial year maintaining a low level of adjusted gearing(2).
§ The proposed total dividend per share is 54.0p (2023 - 140.0p) which
reflects reduced underlying earnings, and is in line with the Board's
previously stated policy of underlying dividend cover of 2.5 times(2,3).
'Better with Bellway' - our responsible and sustainable approach to business
§ The efforts of our colleagues in delivering our 'Better with Bellway'
sustainability strategy have been reflected through multiple industry awards,
including 'Large Housebuilder of the Year' and 'Best Staff Development Award'
at the 2023 Housebuilder Awards.
§ The Group's flagship 'Future Homes' research project into carbon reduction
at the University of Salford has also won several accolades, including 'Best
Sustainability Initiative' at the 2023 Housebuilder Awards and 'Major Project
of the Year' at the 2023 National Sustainability Awards.
§ Supported by several initiatives across the business, strong progress has
been made in lowering our carbon footprint as we continue reducing the Group's
emissions. This includes the Group's scope 1 and scope 2 carbon emissions,
which have reduced by 44.7% since our base year of 2019, and we are in an
excellent position to meet our goal of a 46% reduction significantly ahead of
the 2030 target.
§ Timber frame construction offers a proven range of operational, financial
and environmental benefits. Following successful trials across the Group in
recent years, Bellway is targeting an increase in timber frame usage, to
around 30% of housing output by 2030, and this will be delivered, in part,
through 'Bellway Home Space', our new proprietary timber frame production
facility.
§ Our ongoing focus on providing high-quality homes and service for our
customers has resulted in Bellway retaining its position as a five-star(5)
homebuilder for the eighth consecutive year.
§ Bellway remains fully committed to acting responsibly with regards to
building safety, and we continue to make good progress on assessing and
remediating legacy properties through our dedicated Building Safety
division. Since the start of our remediation programme, the Group has spent
£146.3 million on legacy building safety issues.
§ An additional net £37.0 million has been recognised in relation to legacy
building safety issues, as an adjusting item. This includes an additional
£15.3 million for structural defects in relation to an isolated design issue
with the reinforced concrete frame of an apartment scheme in London,
identified in financial year 2023.
Encouraging recent trading and improving outlook
§ The combination of the improvement in trading and growth in outlet numbers
led to a strong increase in the forward order book in financial year 2024.
This comprised 5,144 homes (2023 - 4,411 homes) and increased in value by
18.4% to £1,412.9 million(2) (2023 - £1,193.5 million) at 31 July 2024.
§ Since the start of the new financial year, customer demand has remained
robust and has been supported by an overall reduction in mortgage rates over
the summer.
§ In the nine weeks since 1 August, and against a weak comparative, the
private reservation rate increased by 48.5% to 147 per week (1 August to 1
October 2023 - 99), representing a private reservation rate per outlet per
week of 0.59 (1 August to 1 October 2023 - 0.41).
§ The private reservation rate includes bulk investor sales, on attractive
financial terms, totalling 232 homes (1 August to 1 October 2023 - 71 homes)
and representing a contribution of 0.10 to the private reservation rate (1
August to 1 October 2023 - 0.03).
§ Reflecting recent trading and volume output, the forward order book at 29
September 2024 remained at a healthy level, comprised 5,109 homes (1 October
2023 - 4,636 homes) and had a value of £1,427.9 million(2) (1 October 2023 -
£1,232.3 million).
§ The strength of the Group's forward order book, outlet opening programme
and work-in-progress position provides Bellway with an excellent platform to
deliver a material increase in volume output in financial year 2025.
§ If market conditions remain stable, the Group is targeting to deliver
completions of at least 8,500 homes in the current financial year (2024 -
7,654 homes), and as was the case in financial year 2024, volume output is
expected to be weighted towards the first half (half year ended 31 January
2024 - 53.5%).
§ We are aiming to retain a healthy forward order book at the end of the
current financial year (2024 - 5,144 homes) to serve as a platform for further
growth in volume output in financial year 2026.
§ Overall, pricing has remained firm across our regions, and in financial
year 2025 we currently expect the average selling price to be around £310,000
(2024 - £307,909), and the underlying operating margin to approach 11.0%(2,3)
(2024 - 10.0%).
§ The combination of Bellway's operational and financial strength leaves the
Group very well-placed to deliver long-term sustainable growth and ongoing
value creation for shareholders.
(1) All figures relating to completions, order book, reservations,
cancellations, and average selling price exclude the Group's share of its
joint ventures, unless otherwise stated.
(2) 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
14.
(3) Underlying refers to any statutory performance measure or alternative
performance measure before net legacy building safety expense and exceptional
items (note 3).
(4) Includes the Group's share of land owned and controlled through
joint venture partners comprising 905 plots (2023 - 935 plots).
(5) As measured by the Home Builders' Federation using the eight-week
NHBC Customer Satisfaction survey.
(6) Comparatives are for the year ended 31 July 2023 or as at 31 July
2023 ('2023') unless otherwise stated.
Results presentation, webcast and conference call
A presentation to investors and analysts will be held at the offices of
Deutsche Numis at 9.00am today.
A listen-only webcast and conference call will accompany the presentation. To
join the webcast, go to the Bellway p.l.c. corporate website,
www.bellwayplc.co.uk/investor-centre
(http://www.bellwayplc.co.uk/investor-centre) .
To join via the conference call, participants should dial +44 (0)33 0551 0200
and quote 'Bellway Full Year Results' when prompted by the operator.
A playback facility will be available on our corporate website shortly after
the presentation has finished.
For further information, please contact:
Jason Honeyman, Group Chief Executive
Keith Adey, Group Finance Director
Gavin Jago, Group Investor Relations Director
Tel: +44 (0) 191 217 0717
Chair's Statement
Introduction
Bellway has successfully navigated a period of challenging trading conditions
since the summer of 2022, and we are encouraged that the housing market
outlook is now improving. On behalf of the Board, I would like to thank our
colleagues, subcontractors and supply chain partners, who have shown continued
resourcefulness and commitment to providing high-quality homes and service for
our customers.
The hard work and dedication of our teams has been recognised through several
industry accolades, including 'Large Housebuilder of the Year' at the 2023
Housebuilder Awards. I am also delighted that Bellway has been awarded
five-star(5) homebuilder status by the HBF for the eighth consecutive
year.
Strategic priorities
The Group has a clear focus on maintaining financial and operational strength
to enable ongoing value creation for shareholders through the delivery of our
strategic priorities. Further details of these priorities are set out below:
§ Deliver long-term volume growth;
§ Drive a long-term improvement in RoCE; and
§ Operate responsibly and sustainably through our 'Better with Bellway'
strategy.
Long-term volume growth
The Group is encouraged by the improving economic outlook in terms of both
lower interest rates and house price stability. We also welcome the new
Government's focus on addressing the ongoing shortfall of housing and its
recognition of the importance of housebuilding to drive sustained economic
growth. Bellway supports the Government's plans to reform the planning
system to drive a marked increase in the supply of new homes across the
country.
Given this improving backdrop and the combination of our strong land bank,
healthy forward order book and work-in-progress position, the Board is
confident that the Group has an excellent platform to build on its proven
track record of organic volume growth in the current financial year and
beyond. Bellway's balance sheet strength will enable future investment to
further support our plans for multi-year volume growth.
Bellway has a strong operational structure, currently with 20 trading
divisions, which have capacity for material organic volume growth. The Group
also has the potential to scale up this structure, and given a mature division
can typically deliver annual volume output of around 650 completions in a
stable market, we have scope to significantly increase overall volume output
in the years ahead. The long-term fundamentals of the UK housebuilding
industry remain positive and Bellway will continue to play an important role
in meeting the growing need for new homes across the country.
Long-term improvement in RoCE
The Group is focused on driving both profitable growth and a long-term
improvement in RoCE, given the positive compounding effect on shareholder
value that this can create.
While lower profitability in financial year 2024 led to a reduction in
underlying RoCE to 6.9%(2,3) (2023 - 15.8%), we are pleased that the
significant industry headwinds faced in the last two years, including
affordability pressures and cost inflation, are receding from the previous
elevated levels. Given the improving market backdrop and the strength of our
order book and outlet opening programme, we have a strong platform from which
to begin a recovery in RoCE from the current financial year.
To help sustain this recovery, and in addition to our ongoing management of
costs, we expect to deliver additional volume output from our strategic land
bank in the years ahead. Supported by the Government's plans to reform the
planning system and unlock land supply, our strategic land bank will underpin
our long-term volume growth aspirations and, in turn, help to improve asset
turn and margin.
We are also increasing the use of timber frame construction across the Group,
which can improve build efficiencies and asset turn, as well as reducing
carbon emissions in the supply chain. As part of this strategy, we are
planning to open our own timber frame production facility, 'Bellway Home
Space', to help meet our target of growing timber frame construction to around
30% of housing output by 2030.
These areas of focus, together with an improvement in operating margin, can
support a recovery in underlying RoCE and, combined with our ongoing
investment in land with compelling financial returns, the Board remains
optimistic that Bellway is well-placed to deliver a normalised underlying RoCE
of up to 20%(2,3) over the longer-term.
'Better with Bellway'
'Better with Bellway' is the Group's strategy and long-term commitment with
regards to acting responsibly and sustainably. The strategy outlines
ambitious targets in respect of our three flagship areas of Carbon Reduction,
Customers and Communities, and becoming an Employer of Choice.
Supported by several research projects underway across the business, strong
headway has been made in laying the foundations for a lower carbon footprint
as we work towards a significant reduction in the Group's emissions by 2030.
The Group's scope 1 and scope 2 carbon emissions have reduced by 14.1%
compared to the prior year and by 44.7% since our base year of 2019, and we
are in an excellent position to meet our goal of a 46% reduction by 2030
significantly ahead of target.
Reflecting our focus on build quality and customer service, we are proud to
have retained our position as a five-star(5) homebuilder for the eighth
consecutive year. There has also been an excellent response to our most
recent employee engagement survey and, despite the ongoing challenges in the
market during the year, 87% of colleagues (2023 - 89%) said they would
recommend Bellway as 'a great place to work'.
In addition to the flagship priority areas, the 'Better with Bellway' strategy
includes targets in respect of biodiversity, resource efficiency, charitable
engagement, sustainability throughout the supply chain and building quality
homes, safely. Through a range of initiatives, we have embedded 'Better with
Bellway' across the Group's operations, and we are proud that the efforts of
our colleagues have been recognised through several industry awards. More
details are set out later in this report and are also available on our website
at www.bellwayplc.co.uk/sustainability
(http://www.bellwayplc.co.uk/sustainability) .
In relation to building safety, our ongoing focus on this serious matter is
reflected by the proactive approach to assessing and remediating schemes
through our dedicated Building Safety division, and the Group is making every
effort to further accelerate progress in this area.
Since the start of our remediation programme, the Group has spent £146.3
million on legacy building safety issues. Notwithstanding the ongoing
complexities with regards to building safety, Bellway is focused on completing
works as promptly and efficiently as possible, and we expect to continue
making strong progress with our programme of remediation in the current
financial year.
Delivering value creation for shareholders
The successful delivery against our strategic priorities will ensure the Group
continues to generate long-term value for shareholders, and the Board believes
this is best gauged through increasing NAV per share and supplemented by
regular dividends. Over the last decade, Bellway has delivered a strong
annualised accounting return in NAV and dividends paid of 13.6%(2).
In the year ended 31 July 2024, NAV per share rose modestly to 2,913p(2) (2023
- 2,871p), with the effect of lower volume output and earnings offset by the
benefits of our value-driven approach to capital allocation. This included
the positive effect of the final tranche of the £100 million share buyback,
which completed in October 2023, and £131.7 million of dividend payments made
during the year.
The Board has recommended a final dividend for financial year 2024 of 38.0p
per share (2023 - 95.0p). This brings the total proposed dividend to 54.0p
per share (2023 - 140.0p) and, if approved, the overall dividend will be
covered 2.5 times(2,3) by underlying earnings (2023 - 2.3 times), in line with
the Board's previously stated policy.
Looking ahead, the strength of our land bank and balance sheet provides the
Group with optionality, and the reinvestment of capital into compelling land
opportunities will continue to be balanced with future shareholder returns.
Board changes
Simon Scougall has recently joined the Board in the newly created executive
role of Chief Commercial Officer. Simon has held a number of senior
positions within Bellway over the past 13 years, including Group General
Counsel and Company Secretary, and joined the Board on 1 August 2024. We
look forward to working with Simon in the years ahead as he continues to
support the Group in the delivery of our strategy.
Cecily Davis joined the Board on 1 May 2024 as an independent Non-Executive
Director. Cecily's expertise as an engineering, procurement and construction
lawyer combined with her experience as a Non-Executive Director and strong
commitment to the improvement of ESG in the construction sector, has further
strengthened the Board.
As previously announced and following a successful career that has spanned
over 15 years with Bellway, Keith Adey, Group Finance Director, is to step
down from his role on 1 December 2024. Keith will remain on the Board as an
Executive Director until 21 March 2025. On behalf of the Board and everyone at
Bellway, I want to place on record our sincere gratitude for Keith's
significant and highly valued contribution to Bellway's growth and
sustainability strategy, and for his dedicated service over the years.
Following a thorough recruitment process for Keith's successor, and as
announced on 11 October 2024, Shane Doherty will join the Board as our new
Chief Financial Officer on 2 December 2024. Shane brings a wealth of
financial and sector experience to Bellway, having most recently held the same
position at Cairn Homes plc, and we look forward to welcoming him to the
Group.
Future long-term success
Bellway has an experienced leadership team with operational strength-in-depth
across the organisation. Given these qualities and our robust balance sheet,
I am confident that the Group is well-positioned to capitalise on future
growth opportunities, deliver against our strategic priorities and create a
positive outcome for our stakeholders over the long term.
John Tutte
Chair
14 October 2024
Chief Executive's Market and Operational Review
Market
Customer confidence gradually improved throughout the year, driven by a
moderation of both mortgage interest rates and consumer price inflation, and
an increase in wages. Trading patterns were less volatile than the prior
financial year when rapid changes in borrowing rates led to significant
variations in customer demand. We have been encouraged by the improvement in
affordability during the year and the relative stability in mortgage interest
rates since January 2024. Overall, this led to a reduction in the
cancellation rate to a normalised level of 14% (2023 - 18%).
The private reservation rate was 13.8% higher than the prior year at an
average of 124 per week (2023 - 109), with the improvement driven by stronger
demand and an increase in outlet numbers. The private reservation rate per
outlet per week increased by 10.9% to 0.51 (2023 - 0.46) including a small
contribution from bulk investor sales of 0.02 (2023 - 0.01). The private
reservation rate per outlet per week in the second half of the financial year
increased to 0.58 (six months to 31 July 2023 - 0.53) compared to 0.43 in the
first half (six months to 31 January 2023 - 0.38), reflecting the improving
trading backdrop and a seasonal uplift through the spring.
The overall reservation rate, including social homes, rose by 3.2% to 161 per
week (2023 - 156). The more modest rate of increase reflects the planned
reduction in social housing completions, in both financial years 2024 and
2025, compared to the elevated level achieved in financial year 2023. This
is in line with expectations and follows a period in which the Group
accelerated the construction of social homes as part of a wider programme of
cash generation and maintaining financial resilience when trading conditions
became challenging in late summer 2022.
The Group traded from an average of 245 outlets during the year (2023 - 238),
in line with our expectations, with a closing position of 250 outlets at 31
July 2024 (2023 - 240). The 2.9% increase in average outlets was driven by
the strength of our land bank and targeted approach to land acquisition and
was achieved despite the ongoing delays in the planning system.
Bellway's focus on traditional two-storey family housing attracts a wide range
of customers and, notwithstanding variations in mortgage rates during the
year, demand for our high-quality new homes was supported by good
availability, in general, of mortgage finance. The availability of mortgage
products and affordability does, however, remain relatively constrained for
those customers requiring higher loan-to-value mortgages, although we have
seen continuing demand from first-time buyers, which accounted for around 36%
of private reservations (2023 - 34%). We have continued to see relatively
healthy levels of underlying demand from second-time buyers, which accounted
for around 60% of private reservations (2023 - 64%). Sales to investors have
remained low and represented around 4% of private reservations (2023 - 2%),
with the increase partly reflecting the modest rise in bulk investor sales
during the year.
Overall, headline pricing across our regions has remained firm, and our sales
teams continue to use a range of targeted incentives to encourage further
customer interest and secure reservations. The use of selling incentives has
generally remained stable during the year, although there has been more
limited use in regions where affordability remains good in the context of the
local market and in areas with healthy employment levels.
High-quality land bank to support outlet opening programme and volume growth
ambitions
Bellway has a high-quality land bank with strength and depth to support our
growth plans, and our experienced land teams have continued with a disciplined
and targeted approach to land acquisition during the year. Our approach to
investment and rigorous approval process remains focused on securing land
interests which offer compelling financial returns and where possible, have
flexibility in the contract terms.
There is well-established Group-wide oversight for land approval at Bellway
which ensures we focus our investment resource in the areas where investment
returns are supported by strong demand. As part of this process, all sites
are reviewed by our divisional teams, a Regional Chair, and again by the
Group's Head Office land acquisition team, prior to entering into contract, in
order to assess and optimise the margin. This process also includes a review
of layouts, product offering and biodiversity solutions, to ensure we are
offering a sustainable and attractive product to our customers.
Given the cyclical nature of the housebuilding industry, maintaining Bellway's
financial strength forms the foundation of our capital allocation policy, and
enables the Group to swiftly respond to attractive land opportunities when
they arise. Our land bank was enhanced by a period of front-footed
investment prior to financial year 2023 and will help the Group to achieve its
strategic priority of long-term volume growth.
The table below analyses the Group's land holdings:
2024 2023
Plots Plots
DPP: plots with implementable detailed planning permission 30,787 32,229
Pipeline: plots pending an implementable DPP 18,100 21,400
Bellway owned and controlled plots 48,887 53,629
Bellway share of land owned and controlled by joint ventures 905 935
Total owned and controlled plots 49,792 54,564
Strategic land holdings 45,500 43,600
Total land bank(4) 95,292 98,164
Reflecting ongoing planning delays, volume output and the reduced level of
land buying during the year, Bellway's owned and controlled land bank has
decreased, yet remains healthy at 48,887 plots (2023 - 53,629 plots). This
represents a land bank length of 6.4 years (2023 - 4.9 years) when based on
the last 12 months' legal completions.
Within our land bank we have 30,787 plots (2023 - 32,229 plots) with an
implementable detailed planning permission ('DPP') and our pipeline land bank
comprises 18,100 plots (2023 - 21,400 plots). The reduction in the number of
pipeline plots reflects our lower land buying activity and several pipeline
sites receiving an implementable DPP in the year.
As noted earlier, the Group operated from an average of 245 outlets in the
year (2023 - 238) with 250 active outlets at 31 July 2024 (2023 - 240). We
have good visibility on the expected timing of near-term planning decisions,
and we currently expect to open around 50 new outlets in financial year 2025
(2024 - 80). The Group is well-positioned to maintain the average number of
outlets at around 245 during the year to 31 July 2025, with the outcome also
dependent on sales rates and therefore the number of outlets closing during
the year.
The improving economic outlook in terms of both lower interest rates and house
price stability has supported an increase in our activity in the shorter-term
land market, notably since the start of calendar year 2024. Overall, during
financial year 2024, the Group has contracted to purchase 4,621 owned and
controlled plots (2023 - 4,715 plots) across 27 sites (2023 - 35 sites) with a
total contract value of £344.8 million (2023 - £378.2 million). We have
also continued to rebuild our future pipeline of potential acquisitions, with
Heads of Terms agreed on around 8,100 plots at 29 September 2024.
The planning system has remained fraught with delays. The Competition and
Markets Authority ('CMA') published the results of its wide-ranging market
study into the housebuilding sector in England, Scotland and Wales in February
2024, concluding that the UK's complex and unpredictable planning system was
primarily responsible for the persistent under delivery of new homes. The
report highlighted that local authority planning departments are typically
under resourced, and several do not have up to date local plans, clear targets
or strong incentives to deliver the number of homes needed in their areas.
This has been exacerbated by the dilution of housing targets by the previous
Government in late 2023 and, as a result, planning permissions granted for
housing are currently at a 10-year low.
Against this backdrop, we welcome the new Government's clear plan to reform
the planning system and its longer-term approach to increase the supply of new
housing, which includes the reintroduction of mandatory housing targets.
While the Government's reforms will take some time to ease planning delays and
unlock land supply, our land teams are focused on progressing an increasing
number of planning applications from our high-quality land bank. Overall, we
remain well-placed to deliver further increases in outlet numbers by the end
of financial year 2026 and beyond to support our volume growth ambitions.
Strategic land investment to further support our long-term growth ambitions
Bellway's investment in strategic land has continued during the year, which
has enhanced our overall land supply for a relatively low initial capital
outlay. The Group's longer-term land opportunities are primarily sourced
through option agreements by the Group's dedicated strategic land function,
with commercial terms that will reflect future market values and conditions,
while also allowing for prevailing planning policy requirements at the time of
acquisition. Strategic land can also generate margin enhancement, in some
instances, due to option agreements prescribing that land values will
typically be agreed at a discount to open market cost, once planning
permission has been obtained.
The Group entered into option agreements for 35 sites (2023 - 19 sites) in the
year, building upon our increased activity in the strategic land market in
recent years. As at 31 July 2024 the strategic land holdings comprised
45,500 plots (2023 - 43,600 plots) and has grown by 77.7% in the last five
years (31 July 2019 - 25,600 plots).
The Group's experienced strategic land team is focused on promoting and
delivering sustainable sites through the planning system, and is adept at
navigating emerging planning policies and other legislative changes. Given
our increased focus on strategic land and the proposed positive planning
changes under the new Government, we expect to deliver a growing proportion of
volume output from our strategically sourced land bank over the medium term.
Overall, the Group's ongoing investment in strategic land continues to provide
balance sheet efficiency and financial flexibility through the use of option
and promotion agreements, while also supporting our longer-term growth
prospects, with plots usually expected to obtain planning permission over a
period of five years or more.
Production and cost control
Build cost inflation has continued to moderate with the easing of cost
increases driven by the combined effect of lower levels of construction
activity and the fall in energy costs since their peak in late 2022.
The industry-wide decline in construction activity has reduced the demand for
building materials, and there is currently limited overall material cost
inflation on new tenders. There are presently good levels of product
availability across the Group and our experienced procurement teams continue
to work closely with our wide range of supply chain partners on demand
planning, to ensure we are prepared for our targeted increase in volume output
from the current financial year.
Bellway has well-established relationships with its subcontract partners and
together with our strong commercial disciplines, the Group's subcontract
labour costs continue to be closely managed. As construction output has
declined across the country, requests for subcontract price increases remain
low for most trades. The Group's outlet opening programme has provided good
visibility on pipeline work for subcontractors and remains beneficial when
negotiating new labour contracts and pricing, with minimum fixed price periods
of 12 months secured for most trades.
Our subcontractors are also becoming increasingly familiar with our Artisan
Collection house-types, which continue to drive a range of other benefits
across the Group, including improved site layouts. The proportion of Artisan
homes within Group housing completions rose to 57% of total output in
financial year 2024 (2023 - 45%), and we expect further growth in the current
year.
To improve productivity and response times on site, we have also introduced a
new site-based quality management and compliance system across the Group.
The system, Field View, is a mobile application which significantly reduces
the need for office-based administrative work, thereby allowing construction
teams to spend more of their time to drive on-site quality improvements.
Digitalised forms and quality inspections, including those for key
construction stages, health and safety, and fire stopping, can be completed on
mobile tablets, while inspecting plots. Field View is also being used to
monitor all key build stages to drive further efficiencies in the management
of construction programmes.
Bellway has robust cost controls and an ongoing focus on margin protection.
During the year, and as a part of our programme of continuous improvement, we
have completed training sessions for all commercial colleagues at our Bellway
Academy to promote and reinforce our strong commercial culture, while
maintaining the high-quality of our homes. We have also completed a series
of build cost review meetings to enable inter-divisional benchmarking across
live developments and Artisan house-types. These meetings are scheduled to
continue on a regular basis in order to share best practice and help drive the
business towards improved consistency.
Looking ahead, as the industry works towards building to the requirements of
the Future Homes Standard, our Artisan Collection standard house-types and
centralised approach to design, procurement and site layout reviews will
continue to help the Group maintain efficiency and mitigate cost pressures.
'Bellway Home Space' - expanding the use of timber frame construction across
the Group
As part of our long-term growth strategy, we are increasing the use of
sustainably sourced timber frame construction across the Group. Timber frame
construction offers a proven range of operational, financial and environmental
benefits, and we have been expanding its use, on a trial basis, in several
Bellway divisions in recent years, in addition to its long-established use in
our two Scottish divisions.
As a modern method of construction ('MMC'), the use of timber frame in
housebuilding is of growing importance in the UK, and the Government is
supporting the increased use of MMC as part of its plans to increase the
supply of high-quality, sustainable new housing.
We expect to generate a range of benefits from the use of timber frame in the
years ahead and this has been corroborated from our onsite trials. These
include faster build speed, reduced waste and improved construction quality,
as off-site manufacturing can drive higher levels of quality control and
consistency compared to traditional construction methods. In turn, these
build efficiencies should support improvements in the Group's asset turn,
together with strengthening customer care scores. Compared to other
mainstream building materials, timber requires minimal processing and has very
low relative levels of embodied carbon.
To support our volume growth ambitions and carbon reduction goals, Bellway is
targeting an increase in timber frame use to around 30% of housing output by
2030 (2024 - 12%). The planned growth in timber frame output will be
achieved primarily by investing in our own proprietary timber frame
manufacturing facility, 'Bellway Home Space'. In addition, we will continue
to work with the UK's leading timber frame manufacturers for the supply and
installation of timber frame homes to Bellway sites across the Group.
The Group has recently taken possession of a 134,000 square foot industrial
unit for 'Bellway Home Space' under a long-term lease agreement. The
facility, chosen for its transport links, is located within a strong logistics
network near Mansfield, Nottinghamshire, and the Group has appointed an
experienced Managing Director to run its timber frame operations. In order
to drive efficiencies and quality, the facility will operate using computer
driven robotic machinery which will be supplied by a leading, well-established
manufacturer.
'Bellway Home Space' will have the capability to manufacture open-panel
systems, together with pre-insulated closed-panel systems, where both
insulation and the inner sheath are assembled within the factory environment,
further improving thermal efficiency and reducing on-site waste. We
currently expect to produce our first homes from the facility in mid-2026,
with a gradual increase to full capacity of up to 3,000 homes per annum by
2030. All management, manufacturing and materials control will be undertaken
by Bellway, ensuring the Group benefits from its overall investment in the
factory and machinery, while also providing the opportunity to innovate
product and control costs.
The full benefits of timber frame construction will require some operational
changes to the business, including the redesign of our Artisan house-types to
accommodate the requirements of timber frame and the Future Homes Standard.
We expect this process to complete by the end of calendar year 2025.
Overall, we are confident that our investment in timber frame in the years
ahead will underpin the delivery of our strategic priorities, to drive
long-term volume growth and an improvement in RoCE, and help meet the targets
set out in our 'Better with Bellway' sustainability strategy.
Recent trading and improving outlook
The combination of the improvement in trading and growth in outlet numbers led
to a strong increase in the forward order book in financial year 2024. This
comprised 5,144 homes (2023 - 4,411 homes) and increased in value by 18.4% to
£1,412.9 million(2) (2023 - £1,193.5 million) at 31 July 2024.
Since the start of the new financial year, customer demand has remained robust
and has been supported by an overall reduction in mortgage rates over the
summer.
In the nine weeks since 1 August and against a weak comparative, the private
reservation rate increased by 48.5% to 147 per week (1 August to 1 October
2023 - 99), representing a private reservation rate per outlet per week of
0.59 (1 August to 1 October 2023 - 0.41). The private reservation rate
includes bulk investor sales, on attractive financial terms, totalling 232
homes (1 August to 1 October 2023 - 71 homes). The bulk sales represented a
contribution of 0.10 to the private reservation rate (1 August to 1 October
2023 - 0.03).
Reflecting recent trading and volume output, the forward order book at 29
September 2024 remained at a healthy level, comprised 5,109 homes (1 October
2023 - 4,636 homes) and had a value of £1,427.9 million(2) (1 October 2023 -
£1,232.3 million).
Outlook
The strength of the Group's forward order book, outlet opening programme and
work-in-progress position provides Bellway with an excellent platform to
deliver a material increase in volume output in financial year 2025.
If market conditions remain stable, the Group is targeting to deliver
completions of at least 8,500 homes in the current financial year (2024 -
7,654 homes). As was the case in financial year 2024, volume output is
expected to be weighted to the first half (half year ended 31 January 2024 -
53.5%), with this completion profile supporting cash generation and ongoing
land investment. We are also aiming to retain a healthy forward order book
at the end of the current financial year (2024 - 5,144 homes) to serve as a
platform for further growth in volume output in financial year 2026.
Over the long term, Bellway's divisional structure has significant capacity to
deliver sustainable volume growth. Given the depth and quality of our land
bank and the Government's plans to support the increase of new housing supply,
we also have scope to scale up the Group's divisional structure to fully
capitalise on future growth opportunities. Combined with our operational
strength and robust balance sheet, the Group is very well-placed to deliver
strong multi-year growth and to continue creating value for all our
stakeholders.
Jason Honeyman
Group Chief Executive
14 October 2024
Group Finance Director's Review
Trading performance
The Group has delivered housing revenue of £2,356.7 million (2023 - £3,396.3
million), a reduction of 30.6%, which was in line with our expectations and
driven by the decrease in volume output. Other revenue was £23.5
million (2023 - £10.3 million) and comprises ancillary items such as land and
commercial sales, and management fee income earned on our joint venture
schemes. Total revenue was 30.1% lower at £2,380.2 million (2023 -
£3,406.6 million).
The table below shows the number and average selling price ('ASP') of homes
completed in the year, analysed between private and social homes, and against
the prior year comparative:
2024 2023 Variance (%)
Homes ASP (£000) Homes ASP (£000) Homes ASP
Private 5,758 347.7 8,166 359.0 (29.5%) (3.1%)
Social 1,896 186.9 2,779 167.3 (31.8%) 11.7%
Total 7,654 307.9 10,945 310.3 (30.1%) (0.8%)
Total housing completions reduced by 30.1% to 7,654 homes (2023 - 10,945
homes), with the decline reflecting the lower order book at 31 July 2023 and
the generally softer trading conditions in the first half of the financial
year. Overall private output reduced by 29.5% to 5,758 homes (2023 - 8,166
homes), with a 31.8% decline in social housing output to 1,896 homes (2023 -
2,779 homes). This resulted in the proportion of social completions
decreasing slightly to 24.8% of the total (2023 - 25.4%). We have good
visibility on our near-term build programmes, and we expect a similar number
of social housing completions in the current financial year.
The overall average selling price was £307,909 (2023 - £310,306), and this
modest change was driven by the increase in the level of sales incentives,
together with geographic and mix changes. Overall, headline pricing has
remained firm across our regions, and we currently expect the average selling
price in financial year 2025 to be around £310,000.
Underlying operating performance
The Group's commercial disciplines and proactive management of site-based
overheads helped to alleviate some of the margin pressures faced during the
year. Notwithstanding this, there has been a decrease in site profitability,
in line with expectations, arising from cost inflation and the use of sales
incentives, together with higher site-based overheads due to the generally
slower sales market since the summer of 2022. This led to a 420 basis point
reduction in the underlying gross margin to 16.0%(2,3) (2023 - 20.2%) and as a
result, underlying gross profit decreased by 44.6% to £381.1 million(2,3)
(2023 - £687.3 million).
Other operating income and expenses, which net to a modest expense of £1.2
million (2023 - £1.2 million), relate to the running of our part-exchange
programme. Part-exchange activity remained low and was used for only 2.8% of
completions (2023 - 1.7%), with a balance sheet investment as at 31 July 2024
of only £14.5 million (2023 - £18.0 million). The Group has strong
controls around the use of part-exchange as a selling tool, and we have the
financial capacity to increase its use, in a disciplined manner, if market
conditions require it.
The underlying administrative expense decreased slightly to £141.8
million(2,3) (2023 - £142.2 million), with strong cost control and the lower
headcount resulting from our workforce planning exercise in calendar year 2023
helping to offset underlying cost inflation. As a proportion of revenue,
underlying administrative expenses rose to 6.0%(2,3) (2023 - 4.2%), with this
due to the reduction in volume output in the year.
In financial year 2025, while we are maintaining a clear focus on costs, we
expect administrative expenses to rise by up to 10%. This follows two years
of broadly flat overheads and reflects the requirement to continue offering
competitive reward packages to attract and retain talent in order to support
our growth plans. It also includes the initial, pre-operational costs of our
new proprietary timber frame manufacturing operations.
The underlying operating margin was 10.0%(2,3) (2023 - 16.0%), with the
decrease driven by the lower underlying gross margin and the operational
gearing effect of the decline in volume output. Overall, underlying cost
pressures are beginning to ease, although residual cost inflation incurred in
earlier periods will be realised through the income statement for legal
completions in the months ahead. In financial year 2025, we expect the
underlying operating margin to approach 11.0%(2,3).
We will continue with our disciplined approach to land investment and cost
management through the cycle and, together with the support of stable
conditions in the housing market, the Board is confident that an underlying
operating margin in the mid-to high-teens(2,3) is sustainable over the longer
term.
Adjusting item: Net legacy building safety expense
Bellway continues to act responsibly with regards to building and resident
safety, and this is reflected by the significant resource and funding the
Group has committed to remediate its legacy apartments.
In March 2023 the Group signed the Self-Remediation Terms ('SRT') with the
Government, and we have also signed up to the Welsh Government Building Safety
Developer Remediation Pact (the 'Pact') and the Scottish Safer Buildings
Accord, reinforcing our responsible UK-wide approach to legacy building
safety.
In total, for the year ended 31 July 2024, a net £37.0 million (2023 - £49.6
million) has been recognised in relation to legacy building safety. The
following table shows the primary components of the net adjusting expense
relating to legacy building safety, split by half year:
H1 24 H2 24 FY24 FY23
£m £m £m £m
SRT and associated review - cost of sales expense/(credit) 8.0 (1.9) 6.1 58.1
SRT and associated review - cost of sales recoveries - (0.3) (0.3) (50.0)
Structural defects - cost of sales expense/(credit) (0.6) 14.7 14.1 30.5
Net cost of sales expense 7.4 12.5 19.9 38.6
SRT and associated review - finance expense 8.8 7.1 15.9 11.0
Structural defects - finance expense 0.6 0.6 1.2 -
Total net legacy building safety expense 16.8 20.2 37.0 49.6
The total adjusting expense includes a net adjusting expense of £19.9 million
through cost of sales, of which a net £5.8 million relates to the refinement
of overall cost estimates in relation to the SRT and associated review
provision, and a modest level of recoveries. It also comprises an additional
£14.1 million for the structural defects provision in relation to an isolated
design issue identified with the reinforced concrete frame of an apartment
scheme in Greenwich, London in financial year 2023.
The additional provision in relation to the Greenwich apartment scheme
reflects increases in the estimated costs due to changes in the approach to
remediation, following the completion of more intensive modelling work.
Bellway is actively pursuing recoveries from the entities involved in the
development of the Greenwich apartment scheme, primarily through their
insurers, however, given the complexity of this process, these have not yet
been recognised as an asset. The Group has undertaken a review of other
buildings constructed by, or on behalf of Bellway, where the same third
parties responsible for the design of the frame in the Greenwich development
have been involved, and no other similar design issues with reinforced
concrete frames have been identified.
The Group's legacy building safety provision has been calculated based on our
extensive experience to date, using analysis of previously tendered works and
prudent, professional estimates based on our knowledge of known issues. For
buildings where full investigations have not yet been undertaken or cost
reports obtained, an allowance has been made for as yet undiscovered problems,
based on experience to date from similar developments. Costs have been
provided regardless of whether Bellway still retains ownership of the freehold
interest in the building or whether warranty providers have a responsibility
to carry out remedial works.
As part of the industry's commitments under the SRT, developers are required
to submit quarterly data returns to the Ministry of Housing, Communities and
Local Government ('MHCLG'). These detail the progress on building
assessments and remediation works, although in some instances, the reporting
obligations can be subject to interpretation. Notwithstanding this, Bellway
has adopted a consistent and prudent approach, only reporting assessments to
have been undertaken when they are supported by a report from an independent
qualified fire engineer.
The total amount Bellway has set aside for legacy buildings in England,
Scotland and Wales since 2017 is £655.5 million. Demonstrating our ongoing
commitment to deliver appropriate solutions for legacy buildings, the Group
has spent £146.3 million since the start of the remediation programme,
including £36.3 million during financial year 2024 (2023 - £32.9 million).
The remaining provision at 31 July 2024 was £509.2 million.
The Group's established and dedicated Building Safety division is making every
effort to accelerate progress with assessment and remediation. As at 30
September 2024, and including those buildings that have been awarded an
application by the Building Safety Fund or ACM Funds, Bellway had a total of
137 buildings where work is complete or underway.
Our experienced site remediation teams are focused on completing works as
promptly and efficiently as possible and, despite ongoing industry-wide delays
in relation to obtaining building access licences, we expect to make further
strong progress with assessment and remediation in the current financial year
and beyond. Overall, Bellway has the operational and financial resources to
meet its commitments for legacy building safety.
The adjusting finance expense in financial year 2024 of £17.1 million (2023 -
£11.0 million) related to the unwinding of the discount on both the SRT and
associated review provision and the structural defects provision. This is a
technical interest unwind, based on prevailing gilt rates at 31 July 2023 and
31 January 2024.
We currently anticipate a total adjusting legacy building safety finance
expense, in relation to both the SRT and associated review provision and
structural defects provision, of around £8 million in the first half of
financial year 2025. The expense in the second half of the year will, in
part, be dependent upon the movement in gilt rates.
Adjusting item: Aborted transaction costs
During the year, the Group recognised costs of £5.4 million in relation to
the aborted Crest Nicholson Holdings plc transaction as an adjusting item
through administrative expenses.
Operating profit
After taking the cost of sales and administrative expenses adjusting items
into consideration, total operating profit decreased by 57.9% to £212.8
million (2023 - £505.3 million).
Underlying net finance expense
The underlying net interest expense was £9.7 million(2,3) (2023 - £9.9
million). This includes notional interest on land acquired on deferred terms
of £11.1 million (2023 - £13.1 million), with the decrease reflecting the
reduction in land creditors.
The expense also comprises interest on the Group's fully drawn fixed rate US
Private Placement ('USPP') loan notes of £3.4 million (2023 - £3.4 million)
and net bank interest income of £nil (2023 - £4.4 million). Net bank
interest income includes net interest receivable on cash balances, less loan
interest, commitment fees and refinancing costs, and the reduction largely
reflects the lower cash balances and higher borrowing in the period. Other
net interest receivable was £4.8 million (2023 - £2.2 million) and primarily
comprised £4.5 million (2023 - £2.2 million) in relation to interest
received on loans to joint ventures.
Based on prevailing interest rates, the net underlying interest expense in
financial year 2025 is currently expected to be around £16 million(2,3), with
the anticipated increase to be primarily driven by higher interest rates on
the Group's land creditor balance.
Profit before taxation
Including our share of loss from joint ventures of £2.3 million (2023 - £1.4
million), which reflects upfront financing costs on a long-term scheme,
underlying profit before taxation reduced by 57.5% to £226.1 million(2,3)
(2023 - £532.6 million). Reported profit before taxation decreased by 62.0%
to £183.7 million (2023 - £483.0 million).
Taxation
The income tax expense was £53.2 million (2023 - £118.0 million), reflecting
an effective tax rate of 29.0% (2023 - 24.4%). The increase in the tax rate
in the period was driven by the full year effect of the six percentage points
rise in the standard rate of UK corporation tax in April 2023.
The effective tax rate also includes the Residential Property Developer Tax
('RPDT'), which was introduced in April 2022 and charged at a rate of 4% of
relevant taxable profits.
Profit for the year
The underlying profit for the year was lower by 60.1%, at £160.6 million(2,3)
(2023 - £402.2 million) and underlying earnings per share was 135.2p(2,3)
(2023 - 328.1p).
After considering the adjusting items, reported profit for the year reduced by
64.2% to £130.5 million (2023 - £365.0 million). Basic earnings per share
was 109.8p (2023 - 297.7p).
Strong balance sheet and financial position
Bellway's well-capitalised balance sheet principally comprises amounts
invested in land and work-in-progress. Within total inventories of £4,714.8
million (2023 - £4,575.6 million), the carrying value of land was £2,431.4
million (2023 - £2,578.8 million) and work-in-progress increased by 14.1% to
£2,123.9 million (2023 - £1,861.6 million). The higher work-in-progress
balance has arisen, as expected, because of the slower sales market, but it
also reflects our investment in site infrastructure and early-stage foundation
work, for our ongoing strong programme of outlet openings.
Notwithstanding the lower profit in the year, we have maintained financial
resilience, and net debt at 31 July 2024 was low and in line with expectations
at £10.5 million(2) (2023 - net cash of £232.0 million). Average net debt
was £45.8 million(2) (2023 - average net cash of £192.0 million).
Expenditure on land, including payment of land creditors, was £465 million
(2023 - £467 million), primarily comprising cash payments on contracts
approved in previous financial years. Committed land obligations have
reduced significantly to £225.3 million (2023 - £368.8 million) and adjusted
gearing, inclusive of land creditors, remains low at 6.8%(2) (2023 - 4.0%).
In relation to its legacy, defined benefit pension scheme, the Group had a
retirement benefit asset of £0.9 million (2023 - £2.5 million) at 31 July
2024, reflecting an ongoing commitment to fund this future, long-term
obligation.
To support our growth plans and ongoing investment in land, the Group has
access to significant levels of committed, medium and long-term debt finance,
totalling £530 million. This comprises bank facilities of £400 million and
£130 million of fully drawn sterling USPP loan notes, which have maturity
dates that extend in tranches to February 2031. We remain focused on
preserving Bellway's balance sheet resilience and we expect to end the current
financial year maintaining a low level of adjusted gearing(2).
Long-term value creation
The Group's net asset value at 31 July 2024 was broadly in line with the prior
year at £3,465.4 million (2023 - £3,461.6 million), as lower profitability
was offset by cash dividend payments of £131.7 million (2023 - £171.7
million). The positive effect of the final tranche of the £100 million
share buyback, which completed in October 2023, led to a modest increase in
NAV per share to 2,913p(2) (2023 - 2,871p).
Underlying post-tax return on equity was 4.7%(2,3) (2023 - 11.7%) and
underlying RoCE was 6.9%(2,3) (2023 - 15.8%), or 6.4%(2,3) (2023 - 14.3%) when
including land creditors as part of the capital base. The reduction in these
return metrics was driven by the lower asset turn and underlying operating
margin. In the current financial year, we expect to deliver a strong
increase in volume output and, as a result, improvements in both asset turn
and margin will start a recovery in returns.
Over the last decade, and notwithstanding periods of significant challenge for
our industry, Bellway has delivered a strong annualised accounting return in
NAV and dividends paid of 13.6%(2). Given the Group's financial strength and
high-quality land bank, the Board is confident that Bellway is in an excellent
position to capitalise on future growth opportunities and to continue creating
value for our shareholders over the long term.
Keith Adey
Group Finance Director
14 October 2024
'Better with Bellway'
Our responsible and sustainable approach to business
'Better with Bellway' is the Group's strategy and long-term commitment with
regards to acting responsibly and sustainably, which encompasses issues around
people and the environment. Through a range of initiatives, we have embedded
the strategy across the Group's operations, and we are delighted that the
efforts of our colleagues have been recognised through several industry
awards, including 'Large Housebuilder of the Year' at the 2023 Housebuilder
Awards.
'Better with Bellway' covers eight priority areas each with their own specific
targets and KPIs linked to the underlying operations of the Group. The
strategy includes ambitious targets in respect of our three flagship priority
areas of Carbon Reduction, Customers and Communities, and becoming an Employer
of Choice. Some recent highlights in these areas are shown below:
Carbon Reduction
To achieve a lower carbon footprint at Bellway, we have committed to a
significant reduction in scope 1 to 3 greenhouse gas emissions by 2030. We
have continued to make strong headway in laying the foundations to meet our
stretching targets, which have been validated by the Science Based Targets
initiative ('SBTi').
Scope 3 emissions - targeting a 55% reduction by 2030
Around 99% of the Group's carbon footprint arises from scope 3 emissions,
which are from sources which Bellway does not own or control, including the
products used for the construction of our homes. By 2030 we are targeting a
reduction in scope 3 carbon intensity by 55% from our 2019 baseline of 1.53
tonnes per m(2) of floor area.
In financial year 2024, the Group's scope 3 carbon emissions decreased by 7.9%
to 1.40 tonnes per m(2) of floor area (2023 - 1.52 tonnes per m(2)). The
reduction was primarily driven by the inclusion of revised Energy and Emission
Projections, mandated by the Department for Energy Security and Net Zero,
which assume carbon emissions from the use of new homes will reduce, over
time, as UK energy production is decarbonised. We expect to drive a further
meaningful reduction in scope 3 carbon emissions in the years ahead as the
industry transitions towards building to the requirements of the Future Homes
Standard. This will reduce reliance on carbon intensive fossil fuels as a
source of heat and will ensure that new homes are built to a very high
standard of energy efficiency.
As part of our detailed plan to cut emissions, we have several research
projects underway across the business, where we are trialling new technologies
and working with our customers, to drive best practice for carbon
reduction.
Our flagship research project is at the University of Salford where a Bellway
'Future Homes' has been constructed in the 'Energy House 2.0' environmental
chamber, which can recreate a range of temperatures and weather conditions.
In this controlled environment, testing is underway for a variety of
innovative technologies and the project has already produced valuable data on
the performance of the fabric of the 'Future Homes'. The results from the
fabric performance testing showed that the thermal efficiency of the 'Future
Homes' was at the top end of expectations, providing further confidence that
Bellway can deliver energy efficient homes at scale using modern methods of
construction.
In recognition of the important work being carried out at 'Energy House 2.0',
we are delighted that the research project has won several accolades,
including 'Best Sustainability Initiative' at the 2023 Housebuilder Awards and
'Major Project of the Year' at the 2023 National Sustainability Awards.
During the year we have continued to actively engage with several of our
supply chain partners on joint sustainability solutions, and we are on track
to complete meetings with our top 50 suppliers by the end of calendar year
2024. In advance of the Future Homes Standard, we are also trialling air
source heat pumps at sites in each of Bellway's 20 trading divisions, as homes
built to the Future Homes Standard building regulations will not be reliant on
fossil fuels for their water and space heating.
In addition, as we work towards reducing the level of embodied carbon in the
supply chain, we are adopting new construction practices and the use of
alternative materials. In this regard, we have increased the use of timber
frame construction across the Group, as compared to other mainstream building
materials, timber requires minimal processing, has very low relative levels of
embodied carbon, and sequesters emissions throughout the tree growing and
replanting phase. Following successful trials across the Group, and its
long-established use in our two Scottish divisions, Bellway is targeting a
material increase in timber frame use to around 30% of housing output by
2030.
Scope 1 and 2 emissions - targeting a 46% reduction by 2030
The Group's scope 1 and scope 2 emissions are those generated by Bellway in
our own operations, and combined, these account for around 1% of our total
carbon footprint. These include direct emissions from diesel used in onsite
machinery
and gas used in office and construction site heating systems. They also
include indirect emissions generated remotely, from activities undertaken by
Bellway, such as our use of electricity in offices, sales centres and show
homes.
To align to the '1.5 degrees Celsius' pathway in the Paris Agreement, Bellway
is targeting a 46% reduction in these emissions by 2030, and we have a range
of initiatives underway to achieve this.
The Group has increased the proportion Renewable Energy Guarantees of Origin
('REGO') certified electricity procured across the business, with 90% of the
Bellway's electricity on REGO tariffs as at 31 July 2024. We have also
completed a large-scale switch to use hydrotreated vegetable oil ('HVO')
biodiesel across all divisions. The use of HVO can reduce carbon emissions
by over 90% compared to fossil diesel and this has played a significant role
in our scope 1 and 2 reductions.
As a result of our initiatives, the Group's scope 1 and scope 2 carbon
emissions have reduced by 14.1% compared to the prior year and by 44.7% since
our base year of 2019, and we are in an excellent position to meet our goal of
a 46% reduction significantly ahead of the 2030 target.
While scope 1 and 2 direct emissions account for a relatively small proportion
of our total carbon footprint, the initiatives to reduce emissions within
Bellway have helped to foster a positive cultural change, increase colleague
engagement and create a strong platform to deliver sustainability solutions
with our supply chain partners.
To achieve our ambitious targets and in addition to the measures highlighted,
we are considering several further initiatives to reduce scope 1 to 3 carbon
emissions in the years ahead.
Customers and Communities
Bellway aims to provide a consistently high service and quality homes to all
our customers, and the efforts under our Customer First programme have
resulted in the Group retaining its position as a five-star(5) homebuilder for
the eighth consecutive year. This was awarded with an improved score of
91.6% (2023 - 91.1%) in the HBF's most recent Customer Satisfaction survey,
which asks customers whether they would recommend Bellway to a friend, when
surveyed eight weeks after their moving date.
As part of our Customer First programme, we have successfully rolled out
Bellway's 'House to Home', with customer demonstration plots on over 100 sites
at 31 July 2024. On each of these developments, a 'House to Home'
standardised demonstration plot is divided into areas showing different
construction stages to help develop customers' knowledge of the materials used
in the build process, our sustainability principles, our commitment to energy
efficiency and the benefits of buying a Bellway home. This initiative has
received strong positive feedback, and we believe it will continue to enhance
the overall customer experience and underpin confidence in the quality of our
new homes.
Bellway's overall drive to deliver high-quality homes has been reflected by 45
of our site managers winning NHBC Pride in the Job Awards during the year
(2023 - 34). This is the NHBC's flagship competition for build quality
across the UK and, from a field of over 8,000 sites entering, only around 5%
receive these awards.
We are also proud to report further improvement in our NHBC Construction
Quality Review score, a measure of underlying construction quality. Our
score has risen to 89.9% at 31 July 2024 (2023 - 87.9%) and ahead of the
target of 87.0% we set for the year.
While the Group maintained its five-star(5) homebuilder status for the
eight-week HBF survey, we have seen a slight moderation in our score in the
nine-month survey to 80.1% (2023 - 80.6%). This was in part driven by the
challenging operating environment throughout the year, which led to extended
response times to minor snagging issues in our new homes. We recognise that
there are areas where we can do better and, in this regard, we are launching a
new customer care portal to drive an improvement in service levels and
communications with our customers.
We are working hard to continually improve levels of customer service and
there are a range of other initiatives underway within the business to achieve
this, including additional training across our sales, customer care and
construction teams.
Employer of Choice
Bellway is aiming to be an 'Employer of Choice' in the industry by creating a
safe, diverse and inclusive environment that our colleagues can thrive in, and
we are very proud that this priority area of our 'Better with Bellway'
strategy won the 'Best Staff Development Award' at the 2023 Housebuilder
Awards.
There has also been an excellent response to our most recent employee
engagement survey and despite the ongoing challenges in the market during the
year, 87% of colleagues (2023 - 89%) said they would recommend Bellway as 'a
great place to work'.
Bellway has an ongoing programme of structured apprenticeships and graduate
training, and we continue to operate as a fully accredited Living Wage
Employer, which covers both directly employed and subcontracted staff.
Overall, these measures will help to achieve our aim of increasing the
proportion of employees in 'earn and learn' positions and support the ongoing
success of the business.
A standard, consistent induction and onboarding process has also been
introduced for all new starters at Bellway and we have seen a further
reduction in voluntary staff turnover during the year to 18.3% (2023 -
21.9%). The Group is aiming to improve on our high level of employee
satisfaction, and we continue to seek feedback from our colleagues to attract
talent and further improve staff retention.
The Group has several initiatives in place to promote diversity and inclusion
and, together with a range of opportunities for career progression through our
Bellway Academy, will help to ensure Bellway continues to be a rewarding place
to work in the years ahead.
Further initiatives
The Group has made good progress against the targets and KPIs set for the
other priority areas of the 'Better with Bellway' strategy.
At Bellway, the health, safety, and wellbeing of our colleagues and
subcontractors is our highest priority and we have set ambitious targets to
raise the quality and safety of our work to even higher levels. Bellway's
standards and practices are subject to continual review to challenge unsafe
behaviours and drive improvements, and during the year we rolled out improved
safety inductions and training across the Group. This included strengthening
internal communications on near-miss reporting to enhance the identification
of key risk areas on Bellway sites.
Across the Group, we have a responsibility to manage our resources effectively
and efficiently. We aim to minimise waste, measured in tonnes per home built
and, where waste is unavoidable, reuse and recycle as much as possible.
During the year we have made excellent progress in this area, achieving a 17%
reduction in waste to 7.1 tonnes per home built (2023 - 8.6 tonnes). In
doing so, we have reached our 2025 target one year ahead of our original plan.
Biodiversity is also a key focus within Bellway and, to meet new regulations,
we have identified and incorporated an approach on how to achieve a 10%
biodiversity net gain on all new sites to be submitted for planning.
Bellway's Head of Biodiversity is leading on this area and working with our
land teams to help the Group meet these important environmental targets.
Charitable engagement is a core part of Bellway's culture and during the year
we have launched partnerships with several charities to support disabled and
disadvantaged people, which include opportunities for work placements within
Bellway. We are also delighted that our colleagues have raised over
£610,000 for Cancer Research UK in the year to 31 July 2024. Over the last
eight years we have raised over £3.7 million for this important charity. We
have since extended our partnership with Cancer Research UK and we are
targeting an increase in the cumulative amount raised to £5.0 million by
December 2025.
We look forward to reporting further progress on our sustainability strategy
with our interim results in March 2025.
Jason Honeyman
Group Chief Executive
14 October 2024
Group Income Statement
for the year ended 31 July 2024
Note 2024 2023
£m £m
Revenue 2 2,380.2 3,406.6
Cost of sales (2,019.0) (2,757.9)
Analysed as:
Underlying cost of sales (1,999.1) (2,719.3)
Adjusting item: net legacy building safety expense 3 (19.9) (38.6)
Gross profit 361.2 648.7
Other operating income 50.6 29.1
Other operating expenses (51.8) (30.3)
Administrative expenses (147.2) (142.2)
Analysed as:
Underlying administrative expenses (141.8) (142.2)
Adjusting item: aborted transaction costs 3 (5.4) -
Operating profit 212.8 505.3
Finance income 9 9.5 9.9
Finance expenses 9 (36.3) (30.8)
Analysed as:
Underlying finance expenses (19.2) (19.8)
Adjusting item: net legacy building safety expense 3, 9 (17.1) (11.0)
Share of result of joint ventures (2.3) (1.4)
Profit before taxation 183.7 483.0
Income tax expense 5 (53.2) (118.0)
Profit for the year * 130.5 365.0
Earnings per ordinary share - Basic 4 109.8p 297.7p
Earnings per ordinary share - Diluted 4 109.0p 296.3p
* All attributable to equity holders of the parent.
Adjusting items
Note 2024 2023
£m £m
Gross profit
Gross profit per the Group Income Statement 361.2 648.7
Adjusting item: net legacy building safety expense 3 19.9 38.6
Underlying gross profit 381.1 687.3
Operating profit
Operating profit per the Group Income Statement 212.8 505.3
Adjusting item: net legacy building safety expense 3 19.9 38.6
Adjusting item: aborted transaction costs 3 5.4 -
Underlying operating profit 238.1 543.9
Profit before taxation
Profit before taxation per the Group Income Statement 183.7 483.0
Adjusting item: net legacy building safety expense 3 37.0 49.6
Adjusting item: aborted transaction costs 3 5.4 -
Underlying profit before taxation 226.1 532.6
Profit for the year
Profit for the year per the Group Income Statement 130.5 365.0
Adjusting item: net legacy building safety expense 3 37.0 49.6
Adjusting item: aborted transaction costs 3 5.4 -
Adjusting item: income tax on exceptional items 3 (12.3) (12.4)
Underlying profit for the year 160.6 402.2
Group Statement of Comprehensive Income
for the year ended 31 July 2024
Note 2024 2023
£m £m
Profit for the year 130.5 365.0
Other comprehensive expense
Items that will not be recycled to the income statement:
Remeasurement losses on defined benefit pension plans (1.6) (4.9)
Income tax on other comprehensive expense 5 0.5 1.4
Other comprehensive expense for the year, net of income tax (1.1) (3.5)
Total comprehensive income for the year * 129.4 361.5
* All attributable to equity holders of the parent.
Group Statement of Changes in Equity
at 31 July 2024
Note Issued capital Share premium Capital redemption Other reserves Retained earnings Total
reserve equity
£m £m £m £m £m £m
Balance at 1 August 2022 15.4 182.0 20.0 1.5 3,148.9 3,367.8
Total comprehensive income for the year
Profit for the year - - - - 365.0 365.0
Other comprehensive expense * - - - - (3.5) (3.5)
Total comprehensive income for the year - - - - 361.5 361.5
Transactions with shareholders recorded directly in equity:
Dividends on equity shares 12 - - - - (171.7) (171.7)
Credit in relation to share options and tax thereon
5 - - - - 4.5 4.5
Share buyback programme and cancellation of shares
11 (0.4) - 0.4 - (100.5) (100.5)
Total contributions by and distributions to shareholders
(0.4) - 0.4 - (267.7) (267.7)
Balance at 31 July 2023 15.0 182.0 20.4 1.5 3,242.7 3,461.6
Total comprehensive income for the year
Profit for the year - - - - 130.5 130.5
Other comprehensive expense * - - - - (1.1) (1.1)
Total comprehensive income for the year - - - - 129.4 129.4
Transactions with shareholders recorded directly in equity:
Dividends on equity shares 12 - - - - (131.7) (131.7)
Shares issued - 1.2 - - - 1.2
Credit in relation to share options and tax thereon
5 - - - - 5.3 5.3
Share buyback programme and cancellation of shares
11 (0.2) - 0.2 - (0.4) (0.4)
Total contributions by and distributions to shareholders
(0.2) 1.2 0.2 - (126.8) (125.6)
Balance at 31 July 2024 14.8 183.2 20.6 1.5 3,245.3 3,465.4
* An additional breakdown is provided in the Group Statement of
Comprehensive Income.
Group Balance Sheet
at 31 July 2024
Note 2024 2023
£m £m
ASSETS
Non-current assets
Property, plant and equipment 30.2 31.7
Financial assets 47.7 38.6
Equity accounted joint arrangements 9.8 4.9
Deferred tax assets 5 - 1.7
Retirement benefit assets 0.9 2.5
88.6 79.4
Current assets
Inventories 6 4,714.8 4,575.6
Trade and other receivables 76.8 88.3
Corporation tax receivable - 8.8
Cash and cash equivalents 8 119.5 362.0
4,911.1 5,034.7
Total assets 4,999.7 5,114.1
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 8 130.0 130.0
Trade and other payables 93.6 107.3
Deferred tax liabilities 5 0.7 6.2
Provisions 7 376.5 403.5
600.8 647.0
Current liabilities
Corporation tax payable 7.9 -
Trade and other payables 792.9 900.8
Provisions 7 132.7 104.7
933.5 1,005.5
Total liabilities 1,534.3 1,652.5
Net assets 3,465.4 3,461.6
EQUITY
Issued capital 14.8 15.0
Share premium 11 183.2 182.0
Capital redemption reserve 11 20.6 20.4
Other reserves 1.5 1.5
Retained earnings 11 3,245.3 3,242.7
Total equity 3,465.4 3,461.6
Group Cash Flow Statement
for the year ended 31 July 2024
Note 2024 2023
£m £m
Cash flows from operating activities
Profit for the year 130.5 365.0
Depreciation charge 5.1 6.0
Finance income 9 (9.5) (9.9)
Finance expenses 9 36.3 30.8
Share-based payment expense 4.5 4.5
Share of post tax result of joint ventures 2.3 1.4
Income tax expense 5 53.2 118.0
Increase in inventories 6 (139.2) (152.0)
Decrease in trade and other receivables 11.5 28.7
Decrease in trade and other payables (98.8) (75.3)
(Decrease)/increase in provisions 7 (16.1) 55.7
Cash (utilised in)/from operations (20.2) 372.9
Interest paid (6.8) (6.9)
Income tax paid (38.5) (129.8)
Net cash (outflow)/inflow from operating activities (65.5) 236.2
Cash flows from investing activities
Acquisition of property, plant and equipment (1.4) (2.7)
Proceeds from sale of property, plant and equipment - 0.1
Increase in loans to joint ventures (13.9) (15.6)
Dividends from joint ventures 2.0 3.0
Interest received 5.3 6.9
Net cash outflow from investing activities (8.0) (8.3)
Cash flows from financing activities
Payment of lease liabilities (3.6) (3.5)
Proceeds from the issue of share capital on exercise of share options 1.2 -
Share buyback programme (34.9) (66.0)
Dividends paid 12 (131.7) (171.7)
Net cash outflow from financing activities (169.0) (241.2)
Net decrease in cash and cash equivalents (242.5) (13.3)
Cash and cash equivalents at beginning of year 362.0 375.3
Cash and cash equivalents at end of year 8 119.5 362.0
Notes
1. Basis of preparation and accounting policies
a) Basis of consolidation
Bellway p.l.c. (the 'Company') is a company incorporated in England and Wales.
The financial information set out above does not constitute the Group's
statutory financial statements for the years ended 31 July 2024 or 2023, but
is derived from those financial statements. Statutory financial statements for
2023 have been delivered to the registrar of companies, and those for 2024
will be delivered in due course. The auditor, Ernst & Young LLP, has
reported on those financial statements; their reports were (i) unqualified,
(ii) did not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Whilst the financial information included in this announcement has been
prepared in accordance with Adopted IFRSs,
this announcement does not itself contain sufficient information to comply
with Adopted IFRSs. The Group expects to
send its 2024 Annual Report and Accounts to shareholders on 8 November 2024.
b) Other financial statement considerations
In preparing the Group financial statements, management has considered the
impact of climate change, and the possible impact of climate-related and other
emerging business risks. A rigorous assessment of the impact of
climate-related risks has been performed. This included an assessment of
inventories and how they could be affected by measures taken to address global
warming. No issues were identified that would materially impact the carrying
values of the Group's assets or liabilities, or have any other material impact
on the financial statements.
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates.
The accounting policies set out within the notes to the financial statements
have been applied consistently to all periods presented in these consolidated
financial statements.
c) Going concern
The Group's activities are financed principally by a combination of ordinary
shares and cash in hand less debt. At 31 July 2024, Bellway had net debt of
£10.5 million(2) (note 8), having utilised cash of £242.5 million during the
year, including £20.2 million of cash utilised in operations.
The Group has operated within all its debt covenants throughout the year, and
covenant compliance was considered as part of the going concern assessment.
In addition, the Group had bank facilities of £400.0 million at 31 July 2024,
expiring in tranches up to December 2028. Furthermore, in February 2021 the
Group entered into a contractual arrangement to issue a sterling US Private
Placement ('USPP') for a total amount of £130.0 million, as part of its
ordinary course of business financing arrangements, which has maturity dates
in 2028 and 2031. In aggregate, the Group had committed debt lines of
£530.0 million at 31 July 2024.
Including committed debt lines and cash, Bellway had access to total funds of
£519.5 million, along with net current assets (excluding cash) of £3,858.1
million at 31 July 2024, providing the Group with appropriate liquidity to
meet its current liabilities as they fall due.
The Group's internal forecasts have been regularly updated, incorporating our
actual experience along with our expected future outturn. The latest
available base forecast has been sensitised, setting out the Group's
resilience to the principal risks and uncertainties in the most severe but
plausible scenario. The sensitivity includes a recession due to economic
uncertainty and a deterioration in customer confidence. This could lead to a
reduction in both the total number of legal completions and private average
selling price, with overheads, land spend and construction spend reducing
accordingly.
This sensitivity includes the following principal assumptions:
§ Private completions in H1 FY25 are supported by the forward order book.
In the 12 months to 31 January 2026, private completions reduce by around 50%
compared to the 12 month pre-stress peak achieved in FY22. This is followed
by a gradual recovery based on the lower base position.
§ Private average selling price in H1 FY25 remains in line with internal
forecasts due to the forward order book position. In the 12 months to 31
January 2026, the private average selling price reduces by 10% compared to the
latest achieved pricing. This is followed by a gradual recovery based on the
lower base position.
§ These assumptions reflect the Group's experience in the 2008-09 Global
Financial Crisis.
A number of prudent mitigating actions within the Directors' control were
incorporated into the plausible but severe downside scenario, including:
§ Plots in the land bank only being replaced at the same rate that they are
utilised.
§ Construction spend reducing in line with housing revenue.
§ Dividends reducing in line with earnings.
The sensitivity analysis was modelled over the period to 31 July 2026 for the
going concern assessment, but extended to 31 July 2028 for the Directors'
long-term viability assessment. In addition to the above, several additional
mitigating measures remain available to management that were not included in
the scenario. These include withholding discretionary land spend and instead
trading out of the substantial existing land holdings.
In the scenario, the Group had significant headroom in both its financial debt
covenants and existing debt facilities and met its liabilities as they fall
due. In relation to climate risks, and in particular the requirement of the
Group to reduce carbon emissions, the going concern assessment is not
considered to be materially affected by the Future Homes Standard.
The Directors consider that the Group is well placed to manage business and
financial risks in the current economic environment. Consequently, the
Directors are confident that the Group and Company will have sufficient funds
to continue to meet its liabilities as they fall due for the period to 31 July
2026, aligning with the first year end after the minimum 12 month assessment
period, and have therefore prepared the financial statements on a going
concern basis.
d) Accounting policies
Effect of new standards and amendments effective for the first time
The Group adopted and applied the following standards and amendments in the
year, none of which had a material effect on the financial statements:
§ IFRS 17 'Insurance Contracts';
§ Definition of Accounting Estimates - amendments to IAS 8 'Accounting
Policies, Changes in Accounting Estimates and Errors';
§ Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - amendments to IAS 12 'Income Taxes'; and
§ Disclosure of Accounting Policies - Amendments to IAS 1 'Presentation of
Financial Statements' and IFRS Practice Statement 2.
Standards and amendments in issue but not yet effective
At the date of authorisation of these financial statements there were a number
of standards and amendments which were in issue but not yet effective. These
have not been applied in these financial statements and are not expected to
have a material effect when adopted.
e) Accounting estimates and judgements
While preparing these financial statements, the directors are required to make
significant estimates and judgements that could have a significant effect on
these financial statements when applying the Group's accounting policies.
When preparing these financial statements, the major judgements in applying
the Group's accounting policies and the major sources of estimation
uncertainty were those applied in the Group's 2023 Annual Report and Accounts.
2. Segmental analysis
The Executive Board (the Chief Operating Decision Maker as defined in IFRS 8
'Operating Segments') regularly reviews the Group's performance and balance
sheet position at both a consolidated and divisional level. Each division is
an operating segment as defined by IFRS 8 in that the Executive Board assesses
performance and allocates resources at this level. All of the divisions have
been aggregated in to one reporting segment on the basis that they share
similar economic characteristics including:
§ National supply agreements are in place for key inputs including materials.
§ Debt is raised centrally and the cost of capital is the same at each
division.
§ Sales demand at each division is subject to the same macroeconomic factors,
such as mortgage availability and Government policy.
Additional information on average selling prices and the unit sales split
between private and social has been included in the Group Finance Director's
Review. The Board does not, however, consider these categories to be
separate reportable segments as they review the entire operations at a
consolidated and divisional level when assessing performance and making
decisions about the allocation of resources.
Revenue from contracts with customers
An analysis of the Group's revenue is as follows:
Housing completions Revenue
2024 2023 2024 2023
Number Number £m £m
Housing - private 5,758 8,166 2,002.3 2,931.3
Housing - social 1,896 2,779 354.4 465.0
Total housing revenue 7,654 10,945 2,356.7 3,396.3
Non-housing revenue - - 23.5 10.3
Total 7,654 10,945 2,380.2 3,406.6
3. Net legacy building safety expense and exceptional items
Profit before taxation for the years ended 31 July 2024 and 31 July 2023 has
been arrived at after recognising the following items in the income statement:
2024
SRT and associated review Structural defects Total net legacy building safety expense Aborted transaction costs Total
adjusting items
£m £m £m £m £m
Provisions (note 7) 6.1 14.1 20.2 - 20.2
Reimbursement assets (note 7) (0.3) - (0.3) - (0.3)
Net cost of sales 5.8 14.1 19.9 - 19.9
Administrative expenses - - - 5.4 5.4
Finance expenses (notes 7, 9) 15.9 1.2 17.1 - 17.1
Total net legacy building safety expense and exceptional items 21.7 15.3 37.0 5.4 42.4
2023
SRT and associated review Structural defects Total net legacy building safety expense Aborted transaction costs Total
adjusting items
£m £m £m £m £m
Provisions 58.1 30.5 88.6 - 88.6
Reimbursement assets (50.0) - (50.0) - (50.0)
Net cost of sales 8.1 30.5 38.6 - 38.6
Finance expenses (note 9) 11.0 - 11.0 - 11.0
Total net legacy building safety expense and exceptional items 19.1 30.5 49.6 - 49.6
The income tax rate applied to the exceptional items in the income statement
is the Group's standard rate of income tax, including both corporation tax and
Residential Property Developer Tax ('RPDT'), of 29.0% (2023 - 25.0%).
SRT and associated review
Bellway continues to act responsibly with regards to building and resident
safety, and this is reflected by the significant resource and funding the
Group has committed to remediate its legacy apartments.
In March 2023 the Group signed the SRT with DLUHC. Under the terms of the SRT,
developers have agreed to identify and remediate, life-critical fire safety
defects in residential buildings over 11 metres in height that they have
developed or refurbished since April 1992. The Group contractually committed
to remediate its legacy buildings in both Wales and Scotland by signing the
Pact with The Welsh Ministers (the 'Pact') in May 2023 and the Scottish Safer
Buildings Accord in July 2023.
Signing the SRT has led to improved clarity on the standards required for
internal and external remediation, including Publicly Available Specification
('PAS') 9980:2022, which is the code of practice for Fire Risk Appraisals of
External Wall construction ('FRAEW'). Buildings are deemed to be assessed
under the requirements of the SRT when a qualifying assessment has been
approved by the DLUHC. This requires the completion of both a FRAEW and a Fire
Safety Assessment ('FSA').
In total, for the year ended 31 July 2024 Bellway set aside a net exceptional
pre-tax expense of £21.7 million (2023 - £19.1 million), in relation to the
SRT and associated review. Of this expense, a net £5.8 million (2023 - £8.1
million) is recognised in cost of sales and an adjusting finance expense of
£15.9 million (2023 - £11.0 million) in relation to the unwinding of the
discount of the provision to present value. The net expense recognised in cost
of sales includes an expense of £32.7 million (2023 - £129.7 million)
relating to cost estimate increases, and a further expense of £6.7 million
(2023 - £33.0 million reduction) following a decrease (2023 - increase) in
discount rates during the period (note 7), which are offset by provision
releases of £33.3 million (2023 - £38.6 million). The net exceptional cost
of sales expense includes one-off cost recoveries of £0.3 million (2023 -
£50.0 million), across several sites, which have been pursued for several
years.
The total amount Bellway has set aside in relation to the SRT and associated
review since 2017 is £609.7 million (2023 - £582.8 million). Costs have been
provided regardless of whether Bellway still retains ownership of the freehold
interest in the building or whether warranty providers have a responsibility
to carry out remedial works.
The provision has been calculated using cost estimates based on our extensive
experience to date, using analysis of previously tendered works and prudent,
professional estimates based on knowledge of known issues. In addition, on
developments where full investigations have not yet been undertaken or cost
reports obtained, costs to date on similar developments have been used to
estimate the likely cost. We have also made assumptions with regards to the
likely cost of resolving potential issues, that we have not yet been made
aware of, on blocks constructed since 1992.
Cost estimates have been reviewed and updated in the year based on the latest
scopes following surveys undertaken, tendered works and progress with
remediation.
The provision calculation uses the expected timings of cash outflows which are
adjusted for future estimated cost inflation in accordance with the Build Cost
Information Service ('BCIS') index, a leading provider of cost and price
information to the construction industry. The provision is discounted back to
a present value using UK gilt rates with maturities which reflect the expected
timing of cash outflows. The unwinding of this discount is charged through the
income statement as an adjusting finance expense. The majority of the cash
outflow is expected to be over the next five years, although there will be
some residual expenditure beyond this. The anticipated timing reflects the
complex issues around remediation including identifying the works required,
design and planning obligations, interpretation of the PAS 9980:2022, liaison
and negotiations with building owners, appointment of contractors and time
taken to obtain access licences. As at 30 September 2024, and including those
buildings that have been awarded an application by the Building Safety Fund or
ACM Funds, Bellway had a total of 137 buildings where work is complete or
underway.
Total recoveries recognised since 2017 are £80.3 million (2023 - £80.0
million). Reimbursement assets of £0.1 million (2023 - £nil) remained
outstanding at the year end.
Structural defects
During the year ended 31 July 2023 a structural defect relating to the
reinforced concrete frame was identified at a historical high-rise apartment
scheme in Greenwich, London. The current provision for the cost of the
remediation work is £45.6 million (2023 - £30.5 million).
During the year, the remediation design and strategy evolved and following
significant progress in the year, both are now at advanced stages. As a
result, the scope and extent of required works has increased. This cost
estimate is based on an expert third-party report and reflects management's
expected scope of works.
In total, for the year ended 31 July 2024 Bellway set aside an exceptional
pre-tax expense of £15.3 million (2023 - £30.5 million), in relation to the
structural defects. Of this, £14.1 million (2023 - £30.5 million) is
recognised in cost of sales. The amount recognised in cost of sales includes
expenses of £13.8 million (2023 - £30.5 million) relating to cost estimate
increases and £0.3 million (2023 - £nil) following a decrease in discount
rates during the period (note 7). In addition, there is an adjusting finance
expense of £1.2 million (2023 - £nil) relating to the unwinding of the
discount of the provision to present value.
The provision calculation uses the expected timings of cash outflows which are
adjusted for future estimated cost inflation in accordance with the BCIS
index. The provision is discounted back to a present value using UK gilt rates
with maturities which reflect the expected timing of cash outflows. The
unwinding of this discount is charged through the income statement as an
adjusting finance expense.
The Group has carried out a review of other buildings constructed by, or on
behalf of Bellway, where the same third parties responsible for the design of
the frame in the Greenwich development have been involved. To date, no other
similar design issues with reinforced concrete frames have been identified.
We are actively seeking recoveries in relation to the structural defect
identified, but as these are not virtually certain at the balance sheet date,
no reimbursement assets have been recognised.
The cash outflow is expected to be over the next three years.
Aborted transaction costs
During the year, the Group announced that it made an all-share offer to
acquire Crest Nicholson Holdings plc. On 13 August 2024, the Board decided
not to progress with this acquisition and have recognised £5.4 million (2023
- £nil) of costs associated with this aborted transaction as exceptional.
4. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing profit for the
year by the weighted average number of ordinary shares in issue during the
year (excluding the weighted average number of ordinary shares held by the
Company or Trust which are treated as cancelled).
Diluted earnings per ordinary share uses the same profit for the year figure
as the basic calculation. The weighted average number of shares has been
adjusted to reflect the dilutive effect of outstanding share options allocated
under employee share schemes where the market value exceeds the option
price. Diluted earnings per ordinary share is calculated by dividing profit
for the year by the diluted weighted average number of ordinary shares.
Reconciliations of the profit for the year and weighted average number of
shares used in the calculations are outlined below:
( ) Profit Weighted average number of ordinary shares Earnings per share Profit Weighted average number of ordinary shares Earnings per share
for the for the
year year
2024 2024 2024 2023 2023 2023
£m Number p £m Number p
For basic earnings per ordinary share 130.5 118,830,821 109.8 365.0 122,593,350 297.7
Dilutive effect of options and awards 846,522 (0.8) 600,864 (1.4)
For diluted earnings per ordinary share 130.5 119,677,343 109.0 365.0 123,194,214 296.3
Underlying basic and underlying diluted earnings per share exclude the effect
of adjusting items and any associated net tax amounts. Reconciliations of
these are outlined below:
( ) Underlying Weighted average number of ordinary shares Underlying earnings Underlying Weighted average number of ordinary shares Underlying
profit for per share profit for earnings
the year the year per share
2024 2024 2024 2023 2023 2023
£m Number p £m Number p
For basic underlying earnings per ordinary share 160.6 118,830,821 135.2 402.2 122,593,350 328.1
Dilutive effect of options and awards 846,522 (1.0) 600,864 (1.6)
For diluted underlying earnings per ordinary share 160.6 119,677,343 134.2 402.2 123,194,214 326.5
5. Taxation
The effective tax expense is 29.0% of profit before taxation (2023 - 24.4%).
Both the standard tax rate and effective tax rate include RPDT.
As part of the UK adoption of the Organisation for Economic Cooperation and
Development ('OECD') Pillar Two rules, the UK Government announced two new
taxes, the Multinational Top-up Tax and the Domestic Top-up Tax which are
designed to ensure corporations pay tax at a rate of at least 15%. The
Domestic Top-up Tax applied to the Group from 1 August 2024. As the Group's
current effective tax rate is in excess of 15%, it is expected the
introduction of this tax will not affect Bellway. The Multinational Top-up
Tax is not expected to affect Bellway. The Group applies the exception to
recognising and disclosing information about deferred tax assets and
liabilities relating to Pillar Two income taxes, as provided in the amendments
to IAS 12 issued in May 2023.
The carrying amount of the gross deferred tax assets are reviewed at each
balance sheet date and are recognised to the extent that there will be
sufficient taxable profits to allow the asset to be recovered.
The deferred tax assets/(liabilities) held by the Group are valued at the
substantively enacted corporation tax and RPDT rates totalling 29% that will
be effective when they are expected to be realised.
It is currently expected that the Group's standard rate of tax, including
RPDT, for the year ending 31 July 2025 will be 29%.
6. Inventories
2024 2023
£m £m
Land 2,431.4 2,578.8
Work-in-progress 2,123.9 1,861.6
Showhomes 145.0 117.2
Part-exchange properties 14.5 18.0
Total 4,714.8 4,575.6
In the ordinary course of business, inventories have been written down by a
net £8.2 million in the year (2023 - £18.4 million).
The Directors consider all inventories to be essentially current in nature
although the Group's operational cycle is such that a proportion of
inventories will not be realised within 12 months. It is not possible to
determine with accuracy when specific inventory will be realised as this is
subject to a number of factors including consumer demand and planning
permission delays.
7. Provisions and reimbursement assets
SRT and associated review Structural defects Total legacy building safety improvements
Provision Reimbursement Total Provision Reimbursement Total Provision Reimbursement Total
assets assets assets
£m £m £m £m £m £m £m £m £m
At 1 August 2023 (477.7) - (477.7) (30.5) - (30.5) (508.2) - (508.2)
Adjusting item - cost of sales (note 3) (6.1) 0.3 (5.8) (14.1) - (14.1) (20.2) 0.3 (19.9)
Analysed as:
Additions (32.7) 0.3 (32.4) (13.8) - (13.8) (46.5) 0.3 (46.2)
Released 33.3 - 33.3 - - - 33.3 - 33.3
Change in discount rate (6.7) - (6.7) (0.3) - (0.3) (7.0) - (7.0)
Utilised/(received) 36.1 (0.2) 35.9 0.2 - 0.2 36.3 (0.2) 36.1
Unwinding of discount (notes 3, 9) (15.9) - (15.9) (1.2) - (1.2) (17.1) - (17.1)
At 31 July 2024 0.1 (463.5) (45.6) - (45.6) (509.2) 0.1 (509.1)
(463.6)
The provision is classified as follows:
SRT and associated review Structural defects Total
legacy building safety improvements
£m £m £m
Current (132.5) (0.2) (132.7)
Non-current (331.1) (45.4) (376.5)
Total (463.6) (45.6) (509.2)
The Group has established a provision for the cost of performing fire remedial
works on a number of legacy developments and a structural defect relating to a
historical high rise apartment scheme (note 3).
8. Analysis of net cash/(debt)
At 1 August Cash At 31 July
2023 flows 2024
£m £m £m
Cash and cash equivalents 362.0 (242.5) 119.5
Fixed rate sterling USPP notes (130.0) - (130.0)
Net cash/(debt) 232.0 (242.5) (10.5)
9. Finance income and expenses
2024 2023
£m £m
Interest receivable on short-term bank deposits 3.8 7.2
Net interest on defined benefit asset - 0.3
Other interest receivable 5.7 2.4
Finance income 9.5 9.9
Interest payable on bank loans 3.8 2.8
Interest payable on fixed rate sterling USPP notes 3.4 3.4
Interest on deferred term land payables 11.1 13.1
Unwinding of the discount on the legacy building safety improvements (notes 3, 17.1 11.0
7)
Interest payable on leases 0.4 0.5
Other interest payable 0.5 -
Finance expenses 36.3 30.8
The unwinding of the discount on the legacy building safety improvements
provision is an adjusting item (note 3).
10. Financial instruments - fair value disclosures
The fair value of financial assets and liabilities are determined based on
discounted cash flow analysis using prevailing market rates for similar
instruments.
The carrying values of financial assets and liabilities reasonably approximate
the fair value of the instruments.
11. Reserves
Share premium
This reserve is not distributable.
Own shares held
The Group holds shares within the Bellway Employee Share Trust (1992) (the
'Trust') for on which dividends have been waived, for participants of certain
share-based payment schemes. The cost of these is charged to retained
earnings.
2024 2023
Number Number
At start of year 327,202 331,115
Transferred to employees or Directors (1,088) (3,913)
At end of year 326,114 327,202
2024 2023
£m £m
Cost of shares held in the Trust 8.8 8.8
Market value of shares held in the Trust 9.3 7.3
Capital redemption reserve
On 7 April 2014 the Group redeemed 20,000,000 £1 preference shares, being all
of the preference shares in issue. An amount of £20.0 million, equivalent
to the nominal value of the shares redeemed, was transferred to a capital
redemption reserve on the same date.
During the year, the Group purchased 1,631,263 (2023 - 2,928,794) of its own
shares which it cancelled. On cancellation of the shares, the aggregate
nominal value was transferred from issued capital to the capital redemption
reserve.
This reserve is not distributable.
2024 2023
£m £m
At start of year 20.4 20.0
Amounts transferred in respect of own shares purchased and cancelled during 0.2 0.4
the year
At end of year 20.6 20.4
12. Dividends on equity shares
2024 2023
£m £m
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2023 of 95.0p per share (2022 - 112.7 117.0
95.0p)
Interim dividend for the year ended 31 July 2024 of 16.0p per share (2023 - 19.0 54.7
45.0p)
131.7 171.7
Proposed final dividend for the year ended 31 July 2024 of 38.0p per share 45.1 114.5
(2023 - 95.0p)
The 2024 proposed final dividend is subject to approval by shareholders at the
Annual General Meeting on 12 December 2024 and, in accordance with IAS 10
'Events after the Reporting Period', has not been included as a liability in
these financial statements. The proposed final dividend, subject to
shareholder approval, will be paid on 8 January 2025 to all ordinary
shareholders on the Register of Members on 29 November 2024. The ex-dividend
date is 28 November 2024. At the record date for the final dividend for the
year ended 31 July 2023, shares were held by the Bellway Employee Share Trust
(1992) (the 'Trust') on which dividends had been waived (see note 11).
The level of distributable reserves are sufficient in comparison to the
proposed dividend.
13. Contingent liabilities
SRT and associated review
We continue to take a proactive approach to nationwide concerns with regards
to fire safety in high-rise buildings across the UK. Bellway recognises its
responsibilities in its legacy apartment portfolio and continues to review
combustion risks, in external wall systems, on past high-rise developments.
As detailed in note 3, Bellway has identified a number of developments, which
obtained building regulation approval at the time of construction, where the
building materials used may not fully comply with the most recent Government
guidance or where remedial works may need to be performed in line with the
SRT, Welsh Pact or Scottish Safer Buildings Accord. For these developments we
have established that the cost of the remedial works satisfies the accounting
requirements of a provision at the balance sheet date. While a prudent
approach has been taken, the extent of the provision could increase or reduce
in line with normal accounting practice, if new issues are identified or if
estimates change, as Bellway and building owners continue to undertake
investigative works on these and other schemes within the legacy portfolio.
Market investigation by the Competition and Markets Authority
The UK Competition and Markets Authority ('CMA') launched a market study into
the housebuilding sector in England, Scotland and Wales in February 2023, the
results of which were published in the CMA's final report on 26 February 2024.
During the study, the CMA stated that it also found evidence which indicated
some housebuilders may be sharing commercially sensitive information with
competitors, which could be influencing the build-out rate of sites and the
prices of new homes. While the CMA does not consider such sharing of
information to be one of the main factors in the persistent under delivery of
homes, the CMA is concerned that it may weaken competition in the market. As a
result, the CMA has launched an investigation under the Competition Act 1998
into eight housebuilders, including Bellway. The CMA has not yet reached any
conclusions, and Bellway will continue to engage positively and co-operate
fully with the CMA during the investigation.
14. Alternative performance measures
Bellway uses a variety of alternative performance measures ('APMs') which,
although financial measures of either historical or future performance,
financial position or cash flows, are not defined or specified by IFRSs. The
Directors use a combination of APMs and IFRS measures when reviewing the
performance, position and cash of the Group.
The APMs used by the Group are defined below:
§ Underlying gross profit and underlying operating profit - Both of these
measures are stated before net legacy building safety expense and exceptional
items, and are reconciled to total gross profit and total operating profit on
the face of the consolidated income statement. The Directors consider that
the removal of the net legacy building safety expense and exceptional items
provides a better understanding of the underlying performance of the Group.
§ Underlying gross margin - This is gross profit before net legacy building
safety expense and exceptional items, divided by total revenue. The
Directors consider this to be an important indicator of the underlying trading
performance of the Group.
§ Underlying administrative expenses as a percentage of revenue - This is
calculated as the administrative expenses before any directly attributable
administrative expenses relating to the net legacy building safety expense and
exceptional items divided by total revenue. The Directors consider this to
be an important indicator of how efficiently the Group is managing its
administrative overhead base.
§ Administrative expenses as a percentage of revenue - This is calculated
as the total administrative expenses divided by total revenue. The Directors
consider this to be an important indicator of how efficiently the Group is
managing its administrative overhead base.
§ Underlying operating margin - This is operating profit before net legacy
building safety expense and exceptional items divided by total revenue. The
Directors consider this to be an important indicator of the operating
performance of the Group.
§ Net underlying finance expense - This is the net finance expense before
any directly attributable finance expense or finance income relating to the
net legacy building safety expense and exceptional items. The Directors
consider this to be an important measure when assessing whether the Group is
using the most cost effective source of finance.
§ Net finance expense - This is finance expenses less finance income. The
Directors consider this to be an important measure when assessing whether the
Group is using the most cost effective source of finance.
§ Underlying profit before taxation - This is the profit before taxation
before net legacy building safety expense and exceptional items. The
Directors consider this to be an important indicator of the profitability of
the Group before taxation.
§ Underlying profit for the year - This is the profit for the year before
net legacy building safety expense and exceptional items. The Directors
consider this to be an important indicator of the profitability of the Group.
§ Underlying earnings per share - This is calculated as underlying profit
for the year divided by the weighted average number of ordinary shares in
issue during the year (excluding the weighted average number of ordinary
shares held by the Company or Trust which are treated as cancelled). This is
calculated in note 4.
§ Underlying dividend cover - This is calculated as underlying profit for
the year per ordinary share divided by the dividend per ordinary share
relating to that period. At the half year the dividend per ordinary share is
the proposed interim ordinary dividend, and for the full year it is the
interim dividend paid plus the proposed final dividend. The Directors
consider this an important indicator of the proportion of underlying earnings
paid to shareholders and reinvested in the business.
§ Dividend cover - This is calculated as earnings per ordinary share for
the period divided by the dividend per ordinary share relating to that
period. At the half year the dividend per ordinary share is the proposed
interim ordinary dividend, and for the full year it is the interim dividend
paid plus the proposed final dividend. The Directors consider this an
important indicator of the proportion of earnings paid to shareholders and
reinvested in the business.
§ Capital invested in land, net of land creditors, and work-in-progress -
This is calculated as shown in the table below. The Directors consider this
as an indicator of the net investment by the Group in the period to achieve
future growth.
2024 2023 Mvt 2023 2022 Mvt
Per balance sheet £m £m £m £m £m £m
Land 2,431.4 2,578.8 (147.4) 2,578.8 2,786.4 (207.6)
Work-in-progress 2,123.9 1,861.6 262.3 1,861.6 1,524.8 336.8
Increase in capital invested in land and work-in-progress in the year
114.9 129.2
Land creditors (225.3) (368.8) 143.5 (368.8) (393.4) 24.6
Increase in capital invested in land, net of land creditors, and work-in-
progress in the year
258.4 153.8
§ Net asset value per ordinary share ('NAV') - This is calculated as total
net assets divided by the number of ordinary shares in issue at the end of
each period. The Directors consider this to be a proxy when reviewing
whether value, on a share by share basis, has increased or decreased in the
period.
§ Capital employed - Capital employed is defined as the total of equity and
net debt. Equity is not adjusted where the Group has net cash. The
Directors consider this to be an important indicator of the operating
efficiency and performance of the Group.
§ Underlying return on capital employed ('underlying RoCE') - This is
calculated as operating profit before net legacy building safety expense and
exceptional items divided by the average capital employed. Average capital
employed is calculated based on opening, half year and closing capital
employed. The calculation is shown in the table below. The Directors
consider this to be an important indicator of whether the Group is achieving a
sufficient return on its investments.
2024 2024 2024 2023 2023 2023
Capital employed Land creditors Capital employed including land creditors Capital employed Land Capital employed including land
creditors creditors
£m £m £m £m £m £m
Underlying operating profit 238.1 238.1 543.9 543.9
Capital employed/land creditors:
Opening 3,461.6 368.8 3,830.4 3,367.8 393.4 3,761.2
Half year 3,434.2 238.5 3,672.7 3,481.4 372.4 3,853.8
Closing 3,475.9 225.3 3,701.2 3,461.6 368.8 3,830.4
Average 3,457.2 277.5 3,734.7 3,436.9 378.2 3,815.1
Underlying return on capital employed
6.9% 6.4% 15.8% 14.3%
§ Return on capital employed ('RoCE') - This is calculated as operating
profit divided by the average capital employed. Average capital employed is
calculated based on opening, half year and closing capital employed. The
calculation is shown in the table below. The Directors consider this to be
an important indicator of whether the Group is achieving a sufficient return
on its investments.
2024 2024 2024 2023 2023 2023
Capital employed Land creditors Capital employed including land creditors Capital employed Land Capital employed including land
creditors creditors
£m £m £m £m £m £m
Operating profit 212.8 212.8 505.3 505.3
Capital employed/land creditors:
Opening 3,461.6 368.8 3,830.4 3,367.8 393.4 3,761.2
Half year 3,434.2 238.5 3,672.7 3,481.4 372.4 3,853.8
Closing 3,475.9 225.3 3,701.2 3,461.6 368.8 3,830.4
Average 3,457.2 277.5 3,734.7 3,436.9 378.2 3,815.1
Return on capital employed 6.2% 5.7% 14.7% 13.2%
§ Asset turn - Asset turn is calculated as revenue divided by the average
capital employed. Average capital employed is calculated based on opening,
half year and closing capital employed. The Directors consider this to be an
important indicator of how efficiently the Group is using its assets to
generate revenue
§ Underlying post tax return on equity - This is calculated as profit for the
year before net legacy building safety expense and exceptional items, divided
by the average of the opening, half year and closing net assets. The
Directors consider this to be a good indicator of the operating efficiency of
the Group.
2024 2023
£m £m
Underlying profit for the year 160.6 402.2
Net assets:
Opening 3,461.6 3,367.8
Half year 3,434.2 3,481.4
Closing 3,465.4 3,461.6
Average 3,453.7 3,436.9
Underlying post tax return on equity 4.7% 11.7%
§ Post tax return on equity - This is calculated as profit for the year
divided by the average of the opening, half year and closing net assets. The
Directors consider this to be a good indicator of the operating efficiency of
the Group.
2024 2023
£m £m
Profit for the year 130.5 365.0
Net assets:
Opening 3,461.6 3,367.8
Half year 3,434.2 3,481.4
Closing 3,465.4 3,461.6
Average 3,453.7 3,436.9
Post tax return on equity 3.8% 10.6%
§ Total growth in value per ordinary share - The Directors use this as a
proxy for the increase in shareholder value since 31 July 2021. A period of
3 years is used to reflect medium-term growth.
Net asset value per ordinary share:
At 31 July 2024 2,913p
At 31 July 2021 2,664p
Net asset value growth per ordinary share 249p
Dividend paid per ordinary share:
Year ended 31 July 2024 111.0p
Year ended 31 July 2023 140.0p
Year ended 31 July 2022 127.5p
Cumulative dividends paid per ordinary share 378.5p
Total growth in value per ordinary share 627.5p
§ Annualised accounting return in NAV and dividends paid since 31 July 2021 -
This is calculated as the annualised increase in net asset value per ordinary
share plus cumulative ordinary dividends paid per ordinary share since 31 July
2021 (as detailed above) divided by the net asset value per ordinary share at
31 July 2021. The Directors use this as a proxy for the increase in
shareholder value since 31 July 2021.
Net asset value growth per ordinary share 249p
Cumulative dividends paid per ordinary share 378.5p
Total growth in value per ordinary share 627.5p
Net asset value per ordinary share at 31 July 2021 2,664p
Total value per ordinary share 3,291.5p
Annualised accounting return 7.3%
§ Annualised accounting return in NAV and dividends paid since 31 July 2014 -
This is calculated as the annualised increase in net asset value per ordinary
share plus cumulative ordinary dividends paid per ordinary share since 31 July
2014 divided by the net asset value per ordinary share at 31 July 2014. The
Directors use this as a proxy for the increase in shareholder value since 31
July 2014.
Net asset value per ordinary share:
At 31 July 2024 2,913p
At 31 July 2014 1,118p
Net asset value growth per ordinary share 1,795p
Dividend paid per ordinary share:
Year ended 31 July 2024 111.0p
Year ended 31 July 2023 140.0p
Year ended 31 July 2022 127.5p
Year ended 31 July 2021 85.0p
Year ended 31 July 2020 100.0p
Year ended 31 July 2019 145.4p
Year ended 31 July 2018 132.5p
Year ended 31 July 2017 111.5p
Year ended 31 July 2016 86.0p
Year ended 31 July 2015 61.0p
Cumulative dividends paid per ordinary share 1,099.9p
Total growth in value per ordinary share 2,894.9p
Net asset value per ordinary share at 31 July 2014 1,118p
Total value per ordinary share 4,012.9p
Annualised accounting return = -1 13.6%
§ Underlying capital growth in the period - This is calculated as capital
growth in the period before net legacy building safety expense and exceptional
items per share.
Capital growth in the period 153.0p
Net legacy building safety expense and exceptional items per share 25.3p
Underlying capital growth in the period 178.3p
Net asset value at 31 July 2023 2,871p
Underlying capital growth 6.2%
(178.3p/2,871p)
§ Capital growth in the period - This is calculated as the increase in NAV in
the period combined with the ordinary dividend paid in the year.
Net asset value per ordinary share:
At 31 July 2024 2,913p
At 31 July 2023 2,871p
Net asset value growth per ordinary share 42p
Dividend paid per ordinary share:
Year ended 31 July 2024 111.0p
Capital growth in the period 153.0p
§ Net cash/(debt) - This is the cash and cash equivalents less bank debt and
fixed rate sterling USPP notes. Net cash/(debt) does not include lease
liabilities, which are reported within trade and other payables on the balance
sheet. The Directors consider this to be a good indicator of the financing
position of the Group. This is reconciled in note 8.
§ Average net cash/(debt) - This is calculated by averaging the net
cash/(debt) position at 1 August and each month end during the year. The
Directors consider this to be a good indicator of the financing position of
the Group throughout the year.
§ Cash generated from operations before investment in land, net of land
creditors, and work-in-progress - This is calculated as shown in the table
below. The Directors consider this as an indicator of whether the Group is
generating cash before investing in land and work-in-progress to achieve
future growth.
2024 2023
£m £m
Cash (utilised in)/from operations (20.2) 372.9
Add: increase in capital invested in land, net of land creditors, and 258.4 153.8
work-in-progress (as described above)
Cash generated from operations before investment in land, net of land 238.2 526.7
creditors, and work-in-progress
§ Adjusted gearing - This is calculated as the total of net cash/(debt) and
land creditors divided by total equity. The Directors believe that land
creditors are a source of long-term finance so this provides an alternative
indicator of the financial stability of the Group.
§ Gearing - This is calculated as net debt divided by total equity. The
Directors consider this to be a good indicator of the financial stability of
the Group.
§ Order book - This is calculated as the total expected sales value of
current reservations that have not legally completed. The Directors consider
this to be an important indicator of the likely future operating performance
of the Group.
15. Post balance sheet events
Post year end, the Group entered into both a lease agreement for an industrial
unit where Bellway will set up its own timber frame manufacturing facility and
placed an order for robotic equipment which has the capability to manufacture
both open panel systems and pre-insulated closed panel timber frame systems.
This has increased capital commitments by around £20 million.
Principal risks and uncertainties
A risk register is maintained detailing all potential risks and our risk
management processes ensure that all aspects of the Group are considered, from
strategy through to operational execution which includes any specialist
business areas.
The risk register is reviewed as part of our management reporting processes,
resulting in the regular assessment of risk, severity and any required
mitigating actions. The severity of risk is determined based on a defined
scoring system assessing risk impact and likelihood.
A summary of risks is reported to management, the Audit Committee and the
Board, which is mainly, but not exclusively, comprised of risks considered to
be outside of our risk appetite after mitigation. This summary is reviewed
throughout the year, with the Board systematically considering the risks and
any changes that have occurred.
Once a year, via the Audit Committee, the Board determines whether the risk
management framework is appropriately designed and operating effectively. The
Directors confirm that they have conducted a robust assessment of the
principal risks facing the Group.
The Board has completed its assessment of the Group's emerging and principal
risks. The following nine principal risks to our business have been
identified:
Risk and description Strategic relevance KPIs Mitigation
Construction resources
Shortages of building materials and appropriately skilled § Failure to secure the required quantity and quality of resources causes § Number of homes sold. § Robust forecasting and forward planning of labour and materials
subcontractors at competitive prices. delays, impacting the ability to deliver volume growth targets.
requirements.
§ Operating profit.
§ Pricing pressures / increased costs impact returns.
§ Processes are in place to select, appoint, manage, and build long-term
§ Operating margin. relationships with subcontractors and suppliers.
§ EPS.
§ Gross margin.
§ Customer satisfaction score.
Climate change and the environment
Failure to evolve sustainable business practices and operations in response to § There is an increased focus on the actions taken by businesses in response § Tonnes of carbon emissions per legal completion. § Continual monitoring of new and evolving requirements as part of our legal
climate change, including physical environmental impacts and transition risks to climate change and the disclosures made. Failure to improve policies,
and regulatory compliance framework, including TCFD, the Future Homes Standard
associated with new regulation, reporting requirements, and increased social / reporting and performance in line with new Government regulations and § Percentage of renewable electricity. and the Environment Act.
market expectations. heightened social / market expectations could lead to financial penalties and
reputational damage. § Tonnes of waste per home built. § Climate change and carbon reduction is a key priority under the Group's
'Better with Bellway' sustainability strategy.
The physical impacts of climate change (such as extreme weather) could lead to Percentage of waste diverted from landfill.
disruptions within the supply chain and build programmes. § Dedicated sustainability, innovations and biodiversity resource in place to
assess risks relating to climate change, monitor performance and drive
improvement.
§ Consultation with specialist external advisers and subject matter experts
(e.g. sustainability consultants).
§ Regular review of the design and features of new homes, along with
construction methods and the sustainability of materials, to increase energy
efficiency and reduce waste.
§ Investment in energy-saving measures for offices and sites, including
transition to REGO certified electricity.
§ Development and monitoring of science-based carbon reduction targets.
Economy and market
Changes in the external environment (including, but not limited to, house § Reduced affordability has a negative impact on customer demand for new § Number of homes sold. § Board level monitoring of the housing market and economic environment
price inflation, interest rates, mortgage availability, unemployment, homes and consequently our ability to generate sales at good returns.
alongside key business metrics, leading to development of action plans as
Government housing policy and post-Brexit trade agreements) reduce the § Operating profit. necessary.
affordability of new homes.
§ Operating margin. § Disciplined operating framework, strong balance sheet and low financial
gearing.
§ RoCE.
§ Product range and pricing strategy based on regional market conditions.
§ EPS.
§ Regular engagement with industry peers, representative bodies, and new
§ Gross margin. build mortgage lenders.
§ Customer Satisfaction score. § Use of sales incentives such as part-exchange, and Government-backed
schemes to encourage the selling process.
§ Reservation rate.
§ Quarterly site valuations and monthly budget reviews based on latest market
§ Order book value. data.
Health and safety
A serious health and safety breach and/or incident occurs. § Failure to maintain safe working conditions would impact employee wellbeing § Number of RIDDOR seven-day reportable incidents per 100,000 site § Health and safety policy and procedures in place, supported by Group-wide
and the creation of a positive working environment. operatives. training.
§ Injury to an individual while at one of our business locations could delay § Health and safety incident rate. § Regular visits to sites by both our Group Health and Safety function
construction and result in criminal prosecution, civil litigation, and
(independent of divisions) and external specialist consultants to monitor
reputational damage. § Number of NHBC Pride in the Job Awards. standards and performance against health and safety policies and legislation.
§ The Board considers health and safety matters at each meeting.
Human resources
Inability to attract, recruit and retain high quality people. § Failure to attract and retain people with appropriate skills would affect § Employee turnover. § Continued development of our Group HR function and implementation of our
our ability to perform and deliver our strategy and volume growth targets.
people strategy.
§ Number of graduates, trainees, and apprentices.
§ Established human resources programme for apprentices, graduates, and site
§ Employees who have worked for the Group for ten years or more. management.
§ Training days per employee. § Monitoring of staff turnover, absence data and analysis of feedback from
exit interviews.
§ Senior management gender split.
§ Competitive salary and benefits packages, which are regularly reviewed and
§ Percentage of staff in earn and learn roles. benchmarked.
§ Employee engagement survey response rate. § Employee engagement activities undertaken, including an annual survey, with
results communicated to the Board.
§ Succession plans in place and key person dependencies identified and
mitigated.
§ Robust programme of training provided to employees which is regularly
updated and refreshed.
§ Development programmes for senior leaders and middle managers in place.
IT and security
Failure to have suitable IT systems in place that are appropriately supported § Poor performance of our systems would disrupt operational activity and § Operating profit. § Continued investment in infrastructure and systems.
and secured. impact the delivery of our strategy.
§ Operating margin. § Group-wide systems in operation which are centrally controlled by an
§ An IT security breach could result in the loss of data, with significant
in-house IT function, supported by a specialist outsourced provider.
potential fines and reputational damage. § RoCE.
§ IT security policy and procedures in place with regular Group-wide
§ EPS. training.
§ Gross margin. § Regular review and testing of our IT security measures, contingency plans
and policies.
§ Customer Satisfaction score.
§ Security Committee in place.
Land and planning
Inability to source suitable land at appropriate gross margins and return on § Insufficient land at appropriate margins, onerous planning conditions or a § Number of homes sold. § Continued development of our Group Strategic Land function and
capital employed. failure to obtain planning approval within appropriate timescales would
implementation of our land strategy.
exacerbate the challenge of developing new homes, restrict our ability to § Operating profit.
deliver volume growth targets and impact future returns.
§ Increased investment in land and more sites with detailed planning
§ Operating margin. permission ('DPP').
Delays and complexity in the planning process.
§ RoCE. § Regular review by both Group and divisions of the quantity, location, and
planning status of land against growth targets to ensure our land bank
§ EPS. supports immediate, medium-term, and strategic requirements.
§ Gross margin. § Formal land acquisition process in place for the appraisal and approval of
all land purchases, including pre-purchase due diligence and Group level
§ Number of plots in owned and controlled land bank with DPP. challenge of viability assumptions.
§ Number of plots in 'pipeline'. § Group and divisional planning specialists in place to support the securing
of implementable planning permissions.
§ Number of plots in strategic land bank - positive planning status.
§ Number of plots in strategic land bank - longer-term interests.
§ Number of plots acquired with DPP.
§ Number of plots converted from medium-term 'pipeline'.
Legal and regulatory compliance
Failure to comply with legislation and regulatory requirements, including the § Lack of an appropriate compliance framework and/or compliance breaches § Number of homes sold. § In-house expertise from Group functions such as Company Secretariat, Legal,
Self Remediation Terms. could incur fines, delay business operations and lead to re-work across sites,
Health and Safety and Technical / Design, who advise and support divisions on
which will impact our reputation and profitability. § Operating profit. legal compliance and regulatory matters.
§ Operating margin. § Consultation with Government agencies, specialist external legal advisers
and subject matter experts, (e.g., fire safety engineers).
§ RoCE.
§ Strengthened Group-wide policies, guidance, and training in place supported
§ EPS. by externally facilitated whistleblowing and reporting procedures.
§ Gross margin. § Continual monitoring and review of changes to legislation and regulation,
including Government guidance, advice notes and sector specific updates.
§ Regular liaison with industry peers and the HBF on compliance requirements
and matters.
Unforeseen significant event
An unforeseen significant national or global event occurs. § The economic uncertainty brought about by an unforeseen significant event, § NAV. § Strong balance sheet, low financial gearing, committed bank loan facilities
could materially impact the Group's operations and liquidity.
and USPP debt which would help ensure resilience during a recession.
§ Operating profit.
§ Damage to reputation if the Group is not perceived to be following
§ Maintenance of business resilience and continuity plans covering offices,
Government guidelines and acting responsibly. § Operating margin. sites, and IT.
§ RoCE. § Experienced and well-established senior management team.
§ EPS. § Continued investment in systems and infrastructure to enable robust agile
working.
§ Total dividend per ordinary share.
§ Monitoring of Government guidelines (including the Construction Leadership
§ Gross margin. Council).
§ Reservation rate. § Regular communications with subcontractors and suppliers to understand any
potential issues as a result of the event on their own business and supply
§ Order book value. chain.
§ Employee turnover.
The Group also considers any emerging risks that have the potential to impact
the achievement of our strategy, but which cannot yet be fully defined and
assessed. These uncertainties are reviewed as part of our established risk
management framework, discussed regularly by management, the Audit Committee
and the Board of Directors, and elevated to principal risks (either as new
risks or an extension of existing risks) when warranted.
Glossary
Affordable Housing
Social rented and intermediate housing provided to specified eligible
households whose needs are not met by the market, at a cost low enough for
them to afford, determined with regard to local incomes and local house
prices. It is generally provided by councils and not-for-profit organisations
such as housing associations.
Average Selling Price
Calculated by dividing the total housing revenue by the number of homes sold.
Biodiversity Net Gain ('BNG')
Is an approach to development and land management, that aims to leave the
natural environment in a measurably better state than it was beforehand.
Cancellation Rate
The rate at which customers withdraw from a house purchase after paying the
reservation fee, but before contracts are exchanged, usually due to
difficulties in obtaining mortgage finance. Reservation fees are refunded in
accordance with the New Homes Quality Code.
Earnings per Share ('EPS')
Profit attributable to ordinary equity shareholders divided by the weighted
average number of ordinary shares in issue during the financial year,
excluding the weighted average number of ordinary shares held by the Company
or Trust which are treated as cancelled.
Executive Board
The Executive Board is made up of the Executive Directors of Bellway p.l.c.
Home Builders' Federation ('HBF')
The HBF is an industry body representing the homebuilding industry in England
and Wales. It represents member interests on a national and regional level to
create the best possible environment in which to deliver new homes.
Land Bank
The land bank is comprised of three tiers: i) owned or unconditionally
contracted land with an implementable detailed planning permission ('DPP');
ii) medium-term 'pipeline' land owned or controlled by the Group, pending an
implementable DPP; iii) strategic long-term plots which are typically held
under option or through a promotion agreement.
Land with DPP
Plots owned or unconditionally contracted by the Group where there is an
implementable detailed planning permission.
Legacy Building Safety Improvements Provision
Included within this provision, there are two components (i) SRT and
associated review, and (ii) Structural defects provision.
MHCLG
Ministry of Housing, Communities and Local Government formally called
Department for Levelling Up, Housing and Communities ('DLUHC').
National House Building Council ('NHBC')
The NHBC is the leading warranty insurance provider and body responsible for
setting standards of construction for UK housebuilding for new and newly
converted homes.
Net Legacy Building Safety Expense
This contains the income statement movements in relation to the legacy
building safety improvements provision and any associated reimbursement
assets.
New Homes Quality Board ('NHQB')
An independent not-for-profit body which was established for the purpose of
developing a new framework to oversee reforms in the build quality of new
homes and the customer service provided by developers.
New Homes Quality Code ('NHQC')
An industry code of practice that lays out a mandatory set of requirements
which must be adopted and observed by all registered developers.
Pipeline
Plots owned or contracted by the Group, pending an implementable detailed
planning permission, with development generally expected to commence within
the next three years.
Planning Permission
Usually granted by the local planning authority, this permission allows a plot
of land to be built on, change its use or for an existing building to be
redeveloped or altered.
Permission is either 'outline' when detailed plans are still to be approved,
or 'detailed' when detailed plans have been approved.
REGO
Renewable Energy Guarantees of Origin.
Residential Property Developer Tax ('RPDT')
RPDT is a tax, introduced in April 2022, which is charged at a rate of 4% on
certain profits of companies carrying out
residential property development.
Science Based Target initiative ('SBTi')
Science-based targets provide companies and financial institutions with a
clearly defined pathway to future-proof growth by specifying how much and how
quickly they need to reduce their greenhouse gas emissions.
Self-Remediation Terms ('SRT')
Is a commitment to remediate buildings over 11 metres in height with
identified life critical fire safety issues, which were constructed in England
since 5 April 1992.
Site/Phase
A site is a concise area of land on which homes are being constructed. Larger
sites may be divided into a number of phases which are developed at different
times.
Social Housing
Housing that is let at low rents and on a secure basis to people in housing
need. It is generally provided by councils and not-for-profit organisations
such as housing associations.
Strategic Land Holdings
These are plots which are typically held under option or through a promotion
agreement.
The 5% Club
Members of The 5% Club aspire to achieve 5% of their workforce in 'earn and
learn' positions (including apprentices, sponsored students and graduates on
formalised training schemes) within 5 years of joining.
Underlying
Underlying refers to any statutory performance measure or alternative
performance measure which is before net legacy building safety expense and
exceptional items. The Group believes that underlying metrics are useful for
investors as these
measures are closely monitored by the Directors in assessing Bellway's
operating performance, thereby allowing investors to understand and evaluate
performance on the same basis as management.
Certain statements in this presentation are forward-looking statements which
are based on Bellway p.l.c.'s expectations, intentions and projections
regarding its future performance, anticipated events or trends and other
matters that are not historical facts. Such forward-looking statements can be
identified by the fact that they do not relate only to historical or current
facts. Forward-looking statements sometimes use words such as "aim",
"anticipate", "target", "expect", "estimate", "intend", "plan", "goal",
"believe", "may", "could", "should" or other words of similar meaning.
These statements are not guarantees of future performance and are subject to
known and unknown risks, uncertainties and other factors that could cause
actual results to differ materially from those expressed or implied by such
forward-looking statements including, but not limited to, those risks set out
in the "Principal Risks" section in our most recently published annual report
and accounts. Given these risks and uncertainties, no assurance can be given
that any particular expectation will be met and reliance should not be placed
on any forward-looking statement. Forward-looking statements speak only as
of the date of such statements and, except as required by applicable law or
regulation, Bellway p.l.c. undertakes no obligation to update or revise
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
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