Interactive Investor

Bellway shouts value as business booms

8th August 2014 11:22

Lee Wild from interactive investor

Britain's housebuilders have run out of steam since the spring, and many are marking time. Some sort of pause was always likely, but the outlook remains broadly positive - Bellway's full-year numbers certainly suggests that is the case - and the shares look cheap.

Completions jumped by over a fifth to 6,851 during the 12 months to July, the average selling price hit £213,000 - up from £193,000 - and Bellway has increased its forward order book by 36% to a record £924 million. And despite spending £460 million on land - another record - it ended the period with net cash of £5 million.

"This record forward sales position, together with continuing consumer demand for new homes, allows the group to continue its strategy of sustainable volume growth at attractive rates of return, thereby resulting in further enhancements to shareholder value," said the firm.

Bellway said it had done well around the country, although the London boroughs had proved especially lucrative. It sold 1,236 homes there during the period, up almost 50% on the year before, and many at prices way above what management had expected when they bought the land.

Of course, trading has slowed down over the summer - as usual - but is expected to pick up again from next month.

Panmure Gordon expects Bellway to confirm adjusted pre-tax profit of almost £234 million and adjusted earnings per share of 148p when it publishes full-year results on 14 October. That rises to £277 million and 176p in 2015.

At 1,479p, Bellway shares trade on a forward price/earnings ratio of just 10, dropping to little more than eight next year, and on a modest 1.4 times forecast net asset value. Even Panmure admits its forecasts may be conservative.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Related Categories