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1. Company Snapshot

1.a. Company Description

Bellway p.l.c., together with its subsidiaries, engages in the home building business in the United Kingdom.The company builds and sells homes ranging from one-bedroom apartments to six-bedroom family homes, as well as provides homes to housing associations for social housing.It offers homes under Bellway and Ashberry brands.


The company was incorporated in 1978 and is headquartered in Newcastle upon Tyne, the United Kingdom.

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1.b. Last Insights on BWY

Bellway p.l.c. has experienced a surge in optimism regarding its earnings prospects, leading to an upgrade to a Zacks Rank #1 (Strong Buy) from Zacks. The housebuilder's decision to increase its dividend to £0.49, surpassing last year's comparable payment, has also contributed to the positive sentiment. Furthermore, the company's CEO, Jason Honeyman, received a substantial pay increase to £3.2m, driven by bonus payments. Additionally, Bellway has called for the Government to address home affordability issues, while reporting an increase in home sales over the past year.

1.c. Company Highlights

2. Bellway's FY '25 Results: Strong Volume Growth and Margin Expansion

Bellway's full-year results for FY '25 demonstrated a robust performance, with a 14.3% increase in volume to 8,749 homes, driven primarily by a 20.3% growth in private output to 6,924 homes. The average selling price (ASP) rose 2.8% to GBP 316,000, contributing to a 40 basis point expansion in gross margin to 16.4%. Operating margin improved to 10.9%, driving a 27.9% increase in underlying profit before tax (PBT) to GBP 289 million. Earnings per share (EPS) came in at 2.02, beating analyst estimates of 1.63. The proposed full-year dividend is 70p per share, reflecting the company's commitment to returning value to shareholders.

Publication Date: Oct -16

📋 Highlights
  • Volume and Profit Growth:: Sales volume rose 14.3% to 8,749 homes, with underlying profit before tax up 27.9% to £289 million.
  • Share Buyback Program:: Announced a £150 million share buyback over 12 months, potentially expanding into a multiyear initiative.
  • Financial Strength:: Maintains low gearing of 8.3%, a £2.5 billion land bank, and a £1.5 billion order book for 5,300 homes.
  • WIP Turn Target:: Aims to improve work-in-progress (WIP) turn to 1.8x by FY '28, boosting cash flow as volume grows to 10,000 homes.
  • Strategic Land Focus:: Targets 20% volume from strategic land (23%+ gross margin) by FY '28, doubling from current levels.

Capital Allocation and Shareholder Returns

Bellway has introduced a new capital allocation framework, prioritizing investments for growth, enhanced returns, and maintaining an efficient capital structure with low gearing. The company has launched a GBP 150 million share buyback program, which will run over the next 12 months, and potentially be a multiyear program. This move underscores the company's focus on delivering better value for shareholders. As Shane Doherty noted, the company will prioritize long-term shareholder returns and return excess capital to shareholders in future years.

Operational Efficiency and Future Guidance

The company is targeting a work-in-progress (WIP) turn of 1.8x by FY '28, which is expected to drive significant net cash inflow as volume grows to 10,000 homes. Bellway expects to deliver growth in volume and profit in FY '26, with a target of 9,200 homes, an ASP of around GBP 320,000, and an operating margin similar to FY '25's level of around 11%. The company's focus on capital efficiency and cash generation is expected to enhance returns, with a target return on capital employed of 20%.

Valuation and Metrics

With a P/E Ratio of 20.73 and an EV/EBITDA of 12.54, the market appears to be pricing in a certain level of growth and profitability. The Dividend Yield stands at 2.3%, indicating a relatively attractive return for income investors. The company's ROE is 4.2%, and ROIC is 4.1%, suggesting room for improvement as the company implements its new capital allocation framework. The Net Debt / EBITDA ratio is a comfortable 0.03, indicating a healthy balance sheet.

3. NewsRoom

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UK property sales edge up in October

Nov -28

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11 new developments offering great deals for buyers

Nov -28

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Bellway's (LON:BWY) Shareholders Will Receive A Bigger Dividend Than Last Year

Nov -25

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10 gorgeous gatehouses that make a lasting first impression

Nov -14

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UK property market cools amid autumn budget fears

Nov -13

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Why buying property before the budget might bag you a bargain

Nov -10

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UK house prices see fastest growth since January as mortgage approvals rise

Nov -07

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9 high-tech homes that make daily life easier

Nov -07

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.65%)

6. Segments

Housing - Private

Expected Growth: 4.65%

Bellway p.l.c.'s 4.65% growth in Housing - Private segment is driven by increasing demand for new homes, strategic land acquisition, and partnerships with housing associations. Additionally, the company's focus on affordable housing and its ability to navigate the UK's complex planning system have contributed to its growth.

Housing - Social

Expected Growth: 4.65%

Bellway p.l.c.'s Housing - Social segment growth of 4.65% is driven by increasing demand for affordable housing, government initiatives to boost social housing supply, and partnerships with local authorities to deliver mixed-tenure developments. Additionally, the company's focus on brownfield site regeneration and provision of high-quality, energy-efficient homes also contributes to its growth.

Non-housing

Expected Growth: 4.83%

Bellway p.l.c.'s non-housing segment growth of 4.83% is driven by increasing demand for commercial and industrial spaces, strategic land acquisitions, and partnerships with local authorities. Additionally, the company's focus on brownfield redevelopment and urban regeneration projects has contributed to the growth, as well as its ability to capitalize on the UK's infrastructure development initiatives.

7. Detailed Products

Homes

Bellway p.l.c. builds and sells a wide range of new homes, from one-bedroom apartments to five-bedroom detached houses, catering to various customer needs and preferences.

Part Exchange

Bellway's Part Exchange scheme allows customers to trade in their existing property as part payment for a new Bellway home, simplifying the moving process.

Assisted Move

Bellway's Assisted Move service helps customers sell their existing property, providing a smooth transition to their new Bellway home.

Incentives and Offers

Bellway offers various incentives and promotions, such as Help to Buy, Stamp Duty paid, and other limited-time offers, to make purchasing a new home more affordable and attractive.

8. Bellway p.l.c.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bellway p.l.c. operates in a highly competitive industry, and there are many substitutes available to customers. However, the company's focus on quality and customer service helps to differentiate it from its competitors.

Bargaining Power Of Customers

Bellway p.l.c. has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's strong brand reputation and quality products reduce the likelihood of customers switching to competitors.

Bargaining Power Of Suppliers

Bellway p.l.c. relies on a network of suppliers for materials and services. While the company has some bargaining power due to its size, suppliers also have some bargaining power due to the specialized nature of their products.

Threat Of New Entrants

The UK housebuilding industry has high barriers to entry, including significant capital requirements and regulatory hurdles. This reduces the threat of new entrants to the market.

Intensity Of Rivalry

The UK housebuilding industry is highly competitive, with many established players competing for market share. Bellway p.l.c. must continually innovate and improve its products and services to remain competitive.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 12.66%
Debt Cost 5.09%
Equity Weight 87.34%
Equity Cost 11.08%
WACC 10.33%
Leverage 14.50%

11. Quality Control: Bellway p.l.c. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Berkeley

A-Score: 6.1/10

Value: 7.8

Growth: 4.1

Quality: 7.5

Yield: 6.9

Momentum: 2.5

Volatility: 8.0

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Persimmon

A-Score: 4.9/10

Value: 7.0

Growth: 1.4

Quality: 5.2

Yield: 8.8

Momentum: 1.5

Volatility: 5.3

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Redrow

A-Score: 4.9/10

Value: 6.7

Growth: 3.8

Quality: 7.4

Yield: 4.4

Momentum: 4.0

Volatility: 3.0

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Taylor Wimpey

A-Score: 4.7/10

Value: 4.4

Growth: 1.6

Quality: 5.1

Yield: 8.8

Momentum: 1.5

Volatility: 7.0

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Bellway

A-Score: 4.5/10

Value: 6.2

Growth: 1.6

Quality: 5.9

Yield: 5.6

Momentum: 2.5

Volatility: 5.3

1-Year Total Return ->

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Barratt Developments

A-Score: 4.5/10

Value: 3.1

Growth: 1.3

Quality: 5.0

Yield: 7.5

Momentum: 3.5

Volatility: 6.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

27.32$

Current Price

27.32$

Potential

-0.00%

Expected Cash-Flows