The share price of FTSE 250 housebuilder Bellway jumped over four per cent in early trading after it released bumper annual results.
Revenues were up by 27 per cent at £2.2bn with gross profit increasing 34 per cent £574m. Bellway managed to squeeze an extra 1.5 per cent out of its gross margin percentage – the amount of gross profit in generates as a percentage of revenue.
Operating profit was up from £360m to £492m with profit before tax increasing by over 40 per cent from £354m to £498m. This led to Bellway hiking its dividend by 40 per cent to 108p per share.
Cash from operations was a healthy £163m (last year £29m) and Bellway was able to dip into the coffers to pay more back to shareholders as well as paying down £48m of debt.
Why its interesting
Not only were gross margin percentages up but so were operating margins. In short this means Bellway's selling prices have been increasing at a faster rate than any increases in costs.
This has meant, according to chairman John Watson, that the Newcastle-based group can use its "excellent operating performance...[to] facilitate further investment into the business".
The fact that there hasn't been an enormous leap in the share price indicates that the market saw these results coming. Bellway has jumped some 37 per cent since its post-Brexit low on 6 July.
Not only do the results cap-off a record year but analyst Charlie Campbell at Liberum added that the future looks bright too:
Bellway started the year with an order book of 4,644 homes, up 2 per cent from the prior year, reflecting slower conditions in June and July around the referendum. This grew to 6 per cent ahead, year-on-year, by 4 October. The order book of 4,701 units represents around 50 per cent of the volumes expected in the year to July 2017.
What Bellway said
Chairman John Watson said:
Bellway has delivered another record year, further increasing the number of new homes sold, which has resulted in a substantial growth in earnings.
The long term outlook continues to be positive, supported by strong customer demand, a substantial forward order book and favourable trading conditions across all areas of the country where Bellway operates. Whilst there is some uncertainty following the result of the EU referendum, trading since that date has remained resilient.
Bellway has invested significantly in high quality land opportunities and infrastructure over recent years. As a result, with its strong balance sheet and structure of nineteen operating divisions, the group is well placed to deliver additional value for shareholders through further disciplined volume growth in the current financial year.