Bellway Plc Financial Analysis

This assignment requires a comprehensive analysis of Bellway Plc's financial performance, focusing on profitability trends, cash holdings, and corporate finance strategies. Students should use the provided books, journal articles, and online resources to evaluate Bellway's financial health, liquidity management, and potential improvements in its financial structure.

CORPORATE FINANCE

Table of Contents
INTRODUCTION...........................................................................................................................1
1. A very brief statement of opting Bellway plc........................................................................1
2. Back ground and overview of organisation............................................................................3
3. A discounted cash flow analysis.............................................................................................4
4. A multiples valuation, for example using price earnings ratios..............................................5
5. Valuation methods..................................................................................................................6
6. A value based on the balance sheet.........................................................................................8
7. Other methods which occur provides additional insights in to the value of organisation......8
8. A comparison of the different methodologies.......................................................................10
9. A forecast subject to share price will be on 1 Dec 2018.......................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Corporate finance is a vast concept which is considered in organisational context
essential for evaluating the performance and growth in statistical form. Corporate finance
basically deals with the capital structure and format of organisation in terms of managing the
business functions and management in effective manner (Brealey and et. al., 2012). Corporate
finance basically helps to enhance the value of organisation and helps to elaborate essential
aspect which remain associated with financial position, presentation of financial statements of
organisation. This is considered as a tool for managing the resources and the management of
financial resources with in the organisation. There is an organisation opted name as Bellway Plc
and critical analysis done in various dimensions. Moreover, the essential aspects are considered
to make effective finance plan and forecast. This analysis basically helps to consolidate all the
essential information and data in respect of making the financial projections and expectation.
This is one of the essential aspect in terms of corporate finance and analysing financial
information of organisation.
1. A very brief statement of opting Bellway plc
Bellway plc is working in the UK business environment over 70 years for home building
experience and growing from local north east of England. Many families are getting benefits
from services provided by organisation. There are some positive aspects are considered
favourable in respect of building positive image in respect of selling homes and residential
properties. As per past recorded there is a 10.6% increment was recorded in last few years.
Organisation also won the 5 star homebuilding status by the Home Builder Federation (HBF).
As per the last years financial reports it is recorded that organisation sold 9644 homes in
2016/17 and generated the income of £136.6 million in dividends. It has a strength of 2544
employees who are regularly proving their services to lead the organisation towards desired aim
and targets (Huang and Kisgen, 2013).
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(Source: Profitability graph of Bellway Plc, 2018)
As per above graphical representation the revenue graph may be analysed in various
terms. There are five year's growth statistics are presented in graphical form which shows
increased results in terms of analysing the profitability. As per last year results it is seen that the
revenues were recorded as 14.19% form 2.24 Billion to 2.56 Billion and net income raised by
12.70% from 402.90 million to 454.06 million. Gross profit margin is calculated as 25.89% and
net profit margin was calculated as 17.86% and operating margin was calculated as 22.42%.
return on assets were recorded as 15.36% and return on equity was recorded as 22.71%. apart
form it return on investment are recorded as 21.74%.
growth rate is also present the favourable aspect in terms of analysing the financial
performance of organisation. Earning per share without including extraordinary items, growth
was recorded as 12.96% and the 12.52% are considered respectively. Trends presents the
positive results and outcomes in terms of growth and development of organisation. Dividend
payment was made as the construction services industry are considered as a dividend (Hillier and
et. al., 2014). Pay out ratio was measured as 33.28%, dividend growth rate in terms of 5 years
were recorded as 43.5% and dividend yield method was measured as 0.04% for last five years.
It is considered that the organisation is evaluating the organisation generated cash flow at
Bellway Plc fell down by £13 million and it earned approx £153.11 million from the operations
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for a cash flow margin of 5.98%. in addition it is seen that the company used £28.16 million in
investing activities and utilised funds as £137.95 million in financing activities.
2. Back ground and overview of organisation
Overview of organisation
Bellway plc is one of the real state organisation which deals in residential properties and
homes in Newcastle Upon Type. This company is listed on the London stock exchange and it is
also constituent of the FTSE 250 Index. It is a holding company of the Bellway group of
organisations. Selling homes, ranging form one bedroom apartments, residential property and the
providing home facility to poor families and as well as providing satisfactory home solution
services to the client of the UK (Denis, 2011).
Bellway plc was formed by three brothers such as John Thomas Bell and his sons and
Russell as a house builder in Newcastle upon type. It was floated on the London Stock Exchange
in 1961 and John was acquired by North British and all the reserves are taken by them. Mainly
organisation deals in the selling homes, buildings, one bedroom apartments five bedroom family
apartments, social housing to housing associations in the UK. It believes in providing traditional
housing family home and residential property.
Organisation is listed under FTSE 250 Index. Bell family be able to mange and control
the operations related to residential homes and buildings. Soon company stared to collect orders
and demand of housing and residential properties (Ehrhardt and Brigham, 2016).
Current financial performance
Current financial performance of organisation indicates towards following aspects in
terms of liquidity position, profitability and solvency position of organisation. Current ratio is
3.44 and qucik ratio was measured as 0.139. liquidity position shows positive results and
outcomes. It is concluded that the liquidity position of organisation in shows the the current
assets of Bellway plc is able to compensate the the portion of current liabilities. Debt equity
reatio also shows the positive and favourable aspects (Dewally and Shao, 2014). As per analysis
of solvency position of organisation It is seen that the organisation has debt to equity ratio was
computed as 0.0723 and the total debt to capital was calculated as 0.0674 which indicates that
the organisation is capable to repay the long term debts with its internal capacity. As per the
current position of organisation it is seen that the price (GBX) is recorded as 3342.00 and the
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change was seen as 0.03%. shares traded as 16.14K and the 1 year change as 13.52% increased
and Beta was evaluated as 0.5485.
as per financial highlights group revenues were recorded as £2558.6 million an
incremental results are considered as 14.2%. operating profit was counted as £571.6 million with
the incremental change of 16.2%. operating margin was also counted as 22.3% which was raised
by +30bps. Profit before taxation was calculated as £560.7 million which was raised by +12.6%,
earning per ordinary shares were recorded as 370.06 with the incremental change of +12.7%.
proposed total dividend per ordinary share are counted as 122.0 per share with the incremental
change of +13%. net assets value was evaluated during the year was calculated as 1785 with the
incremental change of +17.3%. return on capital employed was recorded as 27.6 with the
decremental change of -60bps.
Industry and competitors
As per competitors analysis it is seen that the organisation is getting a tuff competition
form REDROW, CALA, Taylor Wimpey and muller homes. There is an estimated employees
are computed as 10 whereas employee's strength in REDROW is 1866. in revenue graph
Bellway plc is so far, revenue of Bellway was recorded as $45 million and revenue of REDROW
was recorded as $2.2 billion. CORNERSTONE Development is one of the nearest competitor of
Bellway plc. Revenue of CORNERSTONE Development was recorded as $37.5 million. All the
other aspects are considered essential in terms of managing the operations and management.
3. A discounted cash flow analysis
There is a cash flow statement of Bellway Plc for the year ended 2017 is presented as
follows
Particular Amount
Net Income before Extraordinaries 454.06M
Receivables 7.56M
Other Funds 15.93M
Funds from Operations 472.98M
Depreciation, Depletion & Amortization 2.76M
Depreciation and Depletion 2.76M
Deferred Taxes & Investment Tax Credit 233000
Deferred Taxes 233000
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Changes in Working Capital (319.7M)
Accounts Payable 92.58M
Net Operating Cash Flow 153.28M
Investing Activities
Sale of Fixed Assets & Businesses 3.16M
Purchase/Sale of Investments (29.38M)
Purchase of Investments (29.38M)
Net Assets from Acquisitions -
Capital Expenditures (Other Assets) -
Capital Expenditures (Fixed Assets) (2.11M)
Capital Expenditures (2.11M)
Net Investing Cash Flow (28.33M)
Financing Activities
Sale of Common & Preferred Stock 1.11M
Repurchase of Common & Preferred Stk. -
Proceeds from Stock Options -
Preferred Dividends -
Other Proceeds from Sale of Stock 1.11M
Issuance/Reduction of Debt, Net (2.5M)
Common Dividends (136.56M)
Change in Current Debt (2.5M)
Change in Capital Stock 1.11M
Cash Dividends Paid - Total (136.56M)
Net Financing Cash Flow (137.95M)
Net Change in Cash (13M)
Free Cash Flow 151.17M
As per above analysis of cash flow statement it is seen that the net income for the year
was counted as £454 million. Total cash flow from operations are calculated as £153 million
inflows, there is a cash out flow was recording in respect of from investing activity was recorded
as £28 million. There is a cash outflow was recorded in terms of financing activity which was
calculated as £138 million. Net change in cash was evaluated as 13 million. Opening cash
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balance was calculated as 59 million and cash balance in the end reserved for future use was
recorded as 46 million.
There are some further information also can be determined in effective manner. There is
a cash reserves was counted as £13 million at Bellway Plc, organisation be able to retain the
cash flow per share at 3.98 per share and price per share was calculated as 8.42. book value per
share was calculated 18.93, tangible book value per share was also the same.
4. A multiples valuation, for example using price earnings ratios
Pricing valuation basically helps to analyse the value of organisation (Calomiris and
Herring, 2013). For the year ending 31st July was analysed to trade with performance and the
results are seen in incremental form. Effective trading performance and the results are increased
in earning per share and the value of assets. Net Asset Value of Bellway is calculated as 18.4%
and the earning has been resulted and raised by 1522 per share (2015 – 1286p). furthermore It is
evaluated that the organisation board is mainly recommend a 42.3% increase in the final
dividend to 74.0 per share. Increasing the proposed the total dividend was calculated as 40.3% to
108.0 per share 2015 was cleared reflation was made in respect of determining the main aspects
which remain associated with the potential aspects in analysing performance of organisation.
There are some approved charges total dividend per share are defined in respect of dividend per
share such as 74.0 per share and 52.0 per share. It is analysed that future and assuming the
opportunity for growth and development of unchanged. The performance of organisation is
basically helps to analyse the records of board's with help of outstanding performance.
There are some essential aspects are considered in this context in terms of determining
the price of organisation (Conyon and He, 2011). There are types of valuation methods are
analysed for better growth and development of organisation. Historical price indicates form
various aspects such price of shares at present is 3300+/- at preset time. There are variations also
found in respect of share price of products and services.
5. Valuation methods
Discounted Cash Flow method:
Discounted cash flow method can be considered as an effective concept of finance which
is used to analyse the attractiveness of an investment opportunity. Discounted Cash Flow is
widely applied method in finance sector which is effective in analysing future cash flow
projections, and discounts them through applying a required annual rate to arrive at present value
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estimates (Subramaniam and et. al., 2011). All future cash flows are estimated and discounted
through applying cost of capital to give their present values. This method is mainly applied by
organisations as to attaining good earning visibility.
Dividend Discount Model:
It is also an essential term in finance which is used as a procedure of valuing
organisational stock's price through discounting desired dividends to the present value. the
estimation of a stock is justified regardless of the greater part without bounds money streams
anticipated that would be produced by the firm, marked down by a suitable hazard balanced rate.
As per the DDM, profits are the money streams that are come back to the investor. This method
is effective in attaining higher competitive edge of firm through increasing the value of stock at
market place. An effective financial position of firm leads the company to enhance their dividend
payments at market area.
Relative Valuation:
Relative Valuation is an effective component of finance which is also considered as the
business valuation method. It is widely applied method which helps in comparing the price of
assets to the market value of the similar kind of products. Relative valuation models are a
different option to absolute value models, which attempt to decide an organization's natural
worth in light of its analyse future free money streams marked down to their present esteem.
Such as total esteem models, financial specialists may utilize relative valuation models while
deciding if an organization's stock is a decent purchase. This method is effective in comparing
the assets of firm with the similar assets of their rivals (Wilson, 2016).
Net Asset Based Valuation:
It is also an essential approach of finance which is considered as an effective element of
business valuation. It is mainly focused on the companies net asset value and the sporting
market value of its actual assets minus its total liabilities to analyse what it would to redevelop
the business or its activities. This method is widely applied by firm as it is easy to calculate,
promptly available and render a minimum value of firm. Resource based valuation approach is
helpful for capital escalated nature business while work concentrated business will get
underestimated by utilizing this approach (Kaplan, 2013).
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(Source: Pricing trends, 2018 )
6. A value based on the balance sheet
There is an analysis done in respect of valuation of assets and value of organisation.
There are some strong measurement and aspects are considered in this context which are helps to
determined the long term vision and growth of organisation. As per above analysis it is seen that
the organisation's mission and vision is centralised around making the infrastructure more strong
and appropriate in terms of building stakeholder interest. It is very important for the organisation
that the economy of organisation is resulted as the EU referendum. Long term vision clear the
visibility of organisational aim and objective (Frino, Hill and Chen, 2015). The aim of Bellway
Plc is to grow the development and enhancing strategy to deliver quality services.
Stake holder's interest remain associated with the building the strong relations. As per
analysis of balance sheet of Bellyway there are some favourable aspects come across that the
proposed final dividend per ordinary shares were recorded as 74.4 which was increased by
+42.3% in 2014 it was 36.0, 52.0 for the year 2015 and 74.0 for the year 2016. This indicates the
increased results in terms of building sales and growth in NAV as Net Asset Value. Increasing
dividend shows the positive image of organisation in terms of managing and maintaining the
growth of organisation.
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It is seen that the value of dividends equivalent to 295.28 p per share since July 2007. it is
considered that the peer group reflection basically helps to analyse the essential aspects in terms
of building the relations with the growth and development strategy of organisation. As per above
analysis it is seen that the organisation is basically helps to analyse that the profit after tax is
covered that 101%. revenue structure of organisation be able to achieve increased profitability of
organisation. There are 2.4 times are considered that the reinvestment of earning back subject to
have a compounding effect on growth and this helps to make flexible policy.
7. Other methods which occur provides additional insights in to the value of organisation
There are type of methods are used in corporate finance in respect of determining the
performance of organisation and analysing the Key financial indicators of organisation. There
are key performance indicators are analyse in respect of financial stability and sustainability of
organisation. There are main six principle KPI are estimated in organisational context;
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Number of homes sold: As per above analysis it is seen that the ordinary share of
organisation get increased by 12.7% for the year 2017 which was 51.9 million more than the year
2016. it is concluded that the price of products and shares are analysed in dramatic manner so
that the eligible criteria to be made in effective and perspective manner. As per type earning per
share KPI are considered profitable in respect of Bellway plc such as EPS which is usually
measured that how profitable condition of organisation is in present time.
Operating margin (%): operating margin was evaluated as 22.3 million for the year
2017 and 22.0 million for the year 2016 and 20.4 for the year 2015. these KPI helps to
demonstrate models which enable the support the group of organisation and enhance the graph of
volume. Moreover all these information remain associated with analysing the profitability and
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sustainability of profit. It moreover helps to demonstrate and analyse the efficiency of
organisation.
Return on capital employed: this performance key indicator assist mangers and
directors to analyse the dividend payout ratio to be distributed and retained to practically
combined with NAV per ordinary shares. Return on capital employed is determined as 27.6 for
the year 2017. this is one of the key indicators that how delivering strategies are adopted by
organisations to lead the operations and management. This helps to determine the relevant
aspects related to land acquisition and the subsequent performance for development.
Earning per ordinary share: This majorly remain associated with analysing
performance of organisation and in terms of evaluating profitability over a period. It is seen that
the earning per share was calculated as 231.5 for the year 2015, 328.7 for the year 2016 and
370.6 for the year 2017.
Net asset value per ordinary per share: this is one of the key performance indicator
which helps to analyse the net asset value per ordinary share. With the help of this key
performance indicators managers be able to sort out the plans and strategies for better growth
and development in respect of Net asset value. This helps to analyse the potentiality of share
price in respect of stakeholders of organisation. As per above analysis it is seen that he net assets
per ordinary share was recorded as 1785 and +17.3% for the year 2017 which was more than the
year 2016. value per ordinary share was calculated as 1522 for the year 2016.
Proposed total dividend ordinary share: This performance key indicator basically
provides information related to building the interest and faith among stakeholders of
organisation. As per this indicator it is seen that the dividend per share was calculated as 122.0
million for the year 2017. 108.0 for the year 2016. 2015 there are some profitability is analysed
as 77.0 million for the year 2015.
8. A comparison of the different methodologies
There are types of methodologies used to analyse the profitability and the measure the
financial stability of organisation. As per above given scenario it is analysed that two major
methods can imply and vary parallel to financial stability of organisation.
PE valuation: this is the method which defines the growth and development
opportunities of Bellway plc. As per peer reflection it is seen that revenue is estimated as
profitability of organisation.
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PBV valuation: this is one of the essential aspect which helps to demonstrate the
multiple price and development of market share of organisation (Flannery, 2012). as per analysis
of P/BV relativeness it is analysed that the gross probability of organisation is required to
analyse and consolidate.
9. A forecast subject to share price will be on 1 Dec 2018
As per analysis of financial structure of organisation in terms of determining the
projected scores related to sustainability and profitability of organisation. As per above analysis
it is forecasted that 17 polled investment are covered by Bellway Plc advice that company can
perform well in the market. There are some consequences are analysed in respect of sentiment of
investment analysts improved on Sep 10 2009. as per previous forecast it is advised investors to
hold their position in Bellway Plc.
Share price forecast indicates towards following steps such as target pricing is evaluated
as 4030 with a high estimate of 4383.0 and a low estimate 2760. the median estimate indicates
towards 20.62% increase from the last price of 3341.00 for 12 months.
CONCLUSION
As per above analysis it is concluded that the corporate finance is majorly associated with
management decisions and effective management aspects. There are types of management
activities and plans are defined in respect of analysing the internal financial performance
indicators in this context. There are types of methods are defined in respect of determining the
price and main aspects related to financial key performance indicators. There are types of
valuation methods are evaluated to analyse the decisions and making financial plan.
Comparability and summary of valuation methods are analysed with peer group reflection.
Forecasting of share prices and value of organisation is evaluated in this context.
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