An upbeat set of interim results from Bellway (BWY) sees the housebuilder advance 3.1% to £20.67 as investors take stock of a strong performance characterised by robust volume growth, a growing land bank and consistently improving margins.

In the six months to the end of January, revenue is up 18.7% at £831.2 million while profit before tax is 53.1% higher at £158.9 million. Operating margin has moved 430 basis points higher to 19.9%. Bellway was also keen to highlight to investors that earnings per share grew by 56.1% to 103.5p while return on capital employed increased by 580 basis points to 22.8%.


It is this strategy of volume growth with a focus on return on capital employed which is appealing to the markets and Rachael Applegate at Panmure Gordon maintains her 'Buy' rating on the stock which she maintains is still trading at a small discount to the sector.

Operationally, the Newcastle-headquartered £2.4 billion cap continues to impress; completions in the period are up 15.7% to 3,754 and achieved an average of 139 reservations per week during the first half of the financial year, a slight improvement on the 137 per week achieved in the same period last year.

Bellway also continues to grow its land bank and its spend in the half year was up 47.9% at £355 million; spent on land opportunities at what the group characterises as 'attractive margins'. London remains a key plank of Bellway's growth plans and housing revenue in this region grew 16.4% to £203.2 million.

Expansion at the group continues apace and Bellway recently opened its sixteenth operating division in the South West of the country, the Group's third new division in eighteen months and this will deliver new homes primarily in and around the Bristol area. The new division already has land and a small, but experienced, management team in place to enable it to contribute to housing completions in the next financial year.

The group's positive start to the second half is illustrated by the fact that reservations are up 105 since 1 February. Bellway's order book also stands some 35% higher year-on-year at £1.2 billion of revenue and the group is on course to meet its full-year objectives. Panmure sets a £21.26 price target.

Issue Date: 25 Mar 2015