Housebuilder Bellway (BWY) revealed what it described as ‘ambitious’ growth plans and an early re-entry into the land market after earnings more than doubled for the year to July, sending shares up almost 5% to £35.13 in early trading.
Revenues for the last year hit £3.12 billion, an increase of 40% as flagged in the August trading update, with housing completions rising nearly 35% to 10,138 units and average selling prices topping £306,000.
AMBITIOUS GROWTH
The company already has a substantial forward order book of almost £2 billion worth of work as of the start of October and a strong work in progress position which will see completions rise to more than 11,000 new homes this year.
However, over the last 12 months the firm has significantly strengthened its land bank with the acquisition of a record 19,819 plots at a value of £1.07 billion in order underpin its future expansion plans.
The additional plots take the land bank to 86,571 units against 72,361 last year and should allow the firm to deliver 12,000 new homes a year in the 2023 financial year or a 20% increase on the figure for the year just ended.
HIGHER RETURNS
In turn, that should generate cumulative underlying pre-tax earnings of around £1.25 billion over this year and next year with a third of after-tax profits being returned to shareholders in the form of dividends.
That figure compares with pre-tax profits of £479 million and earnings per share of 316.9p for the year to July, a 102% increase on the previous year, and a 135% hike in the dividend to 117.5p from 50p per share last year.
Longer term, the firm expects to increase output to between 16,000 and 18,000 homes per year, generating even greater profits and shareholder returns.
EXPERT VIEW
Analysts at Davy raised their recommendation on the stock from neutral to outperform and hinted at earnings upgrades to come.
‘Bellway expects 12,200 completions in the 2023 financial year, which is around 10% ahead of our current forecast and around 20% ahead of the 2021 outturn’, said analyst Colin Sheridan.
Also, the company’s combined pre-tax profit of £1.25 billion in financial years 2022 and 2023 is around 6.5% ahead of his estimates, suggesting ‘mid-single-digit upgrades to forecasts in the next couple of years’ added Sheridan.
