Interactive Investor

Bellway surges on 73% pre-tax profit boost

26th March 2014 10:57

Ceri Jones from interactive investor

Bellway is riding the crest of a wave, posting a 73% leap in pre-tax profit for the half year, to £103.8 million, and saying it plans to build a fifth more homes this year. Revenue at the UK residential housebuilder soared 40% to £701.1 million for the half year to the end of January.

Reporting "a strong start to the spring selling season", the company said its average selling price rose to £212,071, up from £187,426, while completions were up by one quarter to 3,425. Its forward order book at 9 March swelled to £829.5 million, from £507.4 million the previous year.

Headquartered in the north east of England, the housebuilder operates extensively throughout the UK, excluding Northern Ireland. House prices have increased across more than half the UK, highest coverage of growth by geography for a decade, according to the latest Hometrack index. While London and the south east continue to deliver the biggest headline price growth, all other regions are also registering steady increases in pricing and demand.

Demand overall rose by 17% in February, the highest monthly increase for two years. The main drivers are low interest rates, more easily available credit and the government Help to Buy scheme.

The company's low net bank debt of only £16.4 million lends it healthy balance sheet capacity for further investment in land. Chairman John Watson said: "The group's operational and balance sheet capacity for volume growth has allowed Bellway to respond positively to strong consumer demand. The resulting growth in earnings, together with a strong focus on increasing return on capital employed, has allowed the group to enhance the total return to shareholders through growth in the net asset value (NAV), together with the payment of a regular and progressive dividend."

NAV per share improved to 1,046p from 1,001p at 31 July 2013 and earnings per share soared 74.9% to 66.3p. Gross margin climbed to 19.8% from 17.9% the previous year.

The FTSE 250-listed firm reiterated its confidence in the market by boosting its interim dividend by 78%.

The shares rose 4.2% by 10.30, to 1675p, against a 52-week low of 1,199p.

Related Categories