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Bellway Plc is a holding company with subsidiaries; its main subsidiary company is Bellway Homes.[1] Bellway's principal activity is the construction of houses, bungalows and flats primarily in the private market

Extracts from this document...

Introduction

LUBS 3870 Financial Analysis Bellway Plc 1. Induction Bellway Plc is a holding company with subsidiaries; its main subsidiary company is Bellway Homes.1 Bellway's principal activity is the construction of houses, bungalows and flats primarily in the private market mainly on recycled and reclaimed land but also provides properties to housing associations and inner city urban renewal projects.2 Bellway is involved in three further activities; estates which deals with planning issues and long term strategic land acquisitions, financial Services which offer customers mortgage and insurance products and group administration.3 History Bellway was founded by John T Bell and his two sons in 1946. It now has a market capitalisation of �1,174m4 and operates in seventeen different geographical areas of the UK5 and is headquartered in Newcastle-upon-Tyne. Bellway's build low-cost homes on disused sites or sites that have been left to abandon, it aims is to not to let any plot of land go to waste.6 Construction & Building Material Industry The construction and building material industry comprise of 357 UK companies and is an 'industry basket' of the FTSE Actuaries 3508 index. The industry consists of number of different type of companies. Year 2001 2002 2003 2004 2005 % of Growth 5% 14% 15% 18% 4% The construction industry is identified as being cyclical and is inclined to follow overall GDP tread. Over the last five years the industry has experience a significant rise,9(See Graph & table) it has doubled in value. During 2005 economic conditions and rising raw material cost has led to a slow down in the industry. Bellway's Position in the industry Bellway's is in 173rd position in the FTSE 250 index10 and is in 5th position by maintaining a strong organic growth in the UK private housebuilder sector. With George Wimpey being the largest housebuilder by unit sales until November 2005 when Persimmon the second largest builder took over Westbury and became the UK housebuilder leader. ...read more.

Middle

Therefore only one percentage stamp duty will be charged on any residential property between �120,000 and �250,000,40 making first time house purchase more affordable. * More Brownfield development Deputy Prime Minister John Prescott is asking local authorities to offer more brownfield sites for the construction of new housing to meet the demand.41 * Taxing plan premised land The government may introduce a new tax, Planning Gain Supplement; taxing any gains on land consequently of receiving planning permission. As the value of the land, increases once granted planning permission. 42 * Change in self-invested personal pensions From April 2006 residential property will be allowed to be held in self-invested personal pensions. 43 * Help first time buyers Gordon Brown has initiated a new finance scheme to help first time house buyer. He has struck a deal with three leading mortgage lenders that will provide 75% of the property's value mortgages to first time buyers. The lender and the government will then equally split the remaining 25 %.44 * Change in financial reporting The introduction of new international financial reporting standard will change the current practices of accounting and will significant affects on illustration of profit. * Restrictive Planning Permission The government are establishing new legislation to protect green belt areas against sprawl.45 * Speeding up reviewing planning permission application The Office of the Deputy Prime Minister introduced incentive funding to speed planning permission application for house builders. However the pressure for a quick decision is resulting in more applications being rejected.46 * European Competition Policy The European Community has designed rules to promote competition and restrict monopolized of the markets. Therefore the EC Merger Regulation will prohibit mergers and acquisitions that will cause a reduction in competition and result in an monopolised market.47 * Creation of affordable houses John Prescott produced plans to create new �60,000 houses on ex-NHS sites, buyers will only have to pay for the construction cost.48 * The debate on joining the Euro The debate still exists on joining the Euro. ...read more.

Conclusion

X 100 =24.85% (239.2/998.6) X 100 =23.95% (190.3/769.6) X 100 =24.73% (151.4/688.6) X 100 =21.99% (127.7/553.1) X 100 =23.10% Return on Equity (Profit after Tax/Shareholders Funds) X 100 Bellway (143,830 / 675,051) * 100 =21.31% (118,564 / 557,108) * 100 =21.28% (87,900 / 460,377) * 100 =19.09% (70,671 / 390,951) * 100 =18.08% (61,963 / 335,930) *100 =18.45% 9.97 42.88 118.59 Wilson Bowden (176.6/917.8) x 100 =19.24% (155.2/775.6) X 100 =20% (126.1/649.9) X 100 =19.4% (97.4/548.8) x 100 =17.75% (85.5/471.9) x 100 =18.19% Net Profit Margin (Profit before interest & tax/sales) X 100 Bellway (213,277 /1,092,571) *100 =19.52% (172,762 / 954,197) *100 =18.11% (133,098 / 772,964 ) *100 =17.22% (107,331/ 695,720) *100 =15.43% (95,609 /634,301) *100 =15.07% 0.00 5.41 16.74 Wilson Bowden (279.1/1282.3) X 100 =21.77% (239.2/1165.8) X 100 =20.52% (190.3/983.9) X 100 =19.34% (151.4/789.5) X 100 =19.18% (127.7/726.8) X 100 =17.57% Investment Ratios RATIO DEFINITION COMPANY 2004 �000 2003 �000 2002 �000 2001 �000 2000 �000 INDUSTRY AVERAGE Lower Medium Upper Earnings per Share (EPS)66 Net Profit after tax-preference dividend/ No. of Shares Bellway 127.5p 106.0p 78.6p 63.2p 55.4p Wilson Bowden 187.7p 165.5p 134.6 104.0 91.3 Earnings per Share (EPS) Diluted7 Net Profit after tax-preference dividend/ No. of Shares including rights in share options Bellway 126.1p 104.9p 77.8p 62.7p 55.3p Wilson Bowden 186.9p 163.8p 133.6p 103.4p 91.3p Price Earnings Ratio (PER) Share Price/Earnings per share Bellway 722/ 127.5 =5.66 652 / 106 = 6.15 436 / 78.6 = 5.55 354.5/63.2 =5.61 251.5 / 55.4 = 4.54 Wilson Bowden Dividend per ordinary share67 Bellway 25.0p 20.0p 15.75p 14.2p 12.4p Wilson Bowden 38.0p 33.0p 26.8p 22.3p 19.8p Dividend Cover68 (Net Profit after tax-preference dividends)/Dividends on ordinary shares Bellway (143,835-1,900) / (29,864 -1,900) =5.08 ( 118,564 -1,900) (24,166-1,900) =5.24 ( 87,901-1,900) / (19,272-1,900) =4.95 ( 70,673 -1,900) / (17,518-1,900) =4.40 ( 61,954 - 1,900) / (15,446-1,900) =4.43 Wilson Bowden (176.6-0)/35.8 =4.93 (155.2-0)/31 =5.01 (126.1-0)/ 25.1 =5.02 (97.4-0)/20.9 =4.66 (85.5-0)/18.5 =4.62 Dividend Yield Dividend on ordinary shares/share price of ordinary shares Bellway (25/722) * 100 =3.46% (20/652) * 100 =3.07% (15.75/436) * 100 =3.61% (14.2/354.5) *100 =4.01% (12.4/251.5) * 100 =4. ...read more.

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