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Bellway chair buys amid building boom

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The UK’s volume housebuilders can come under fire from a range of different stakeholders, be it local authority groups accusing them of hoarding huge swaths of land, to the Competition and Markets Authority telling some of their members to end “unfair” terms in leasehold contracts that doubled ground rents every 10-15 years.

However, there’s no doubting their ability to make money in a market where demand for new homes continues to outstrip supply. Demand in September was 57 per cent above the five-year average for 2015-19, estate agent Knight Frank said in a recent report. It warned that potential disruptions to supply could exacerbate this.

As with other parts of the construction industry, it is the biggest players who are likely to thrive in such an environment, as they can leverage resources to secure the necessary land, materials and labour to grow market share.

Bellway last month reported it had agreed deals for a record 19,819 new plots in the year to July 31, during which it doubled pre-tax profits to £479m on the back of a 40 per cent revenue increase to £3.1bn. This strengthened its land bank to 86,571 plots and the company said it planned to deliver 12,200 homes per year over the next two years — 20 per cent more than last year.

It also set a longer-term target of building 16,000-18,000 homes per year. With the company also targeting operating margins of 18-19 per cent, above the 17 per cent achieved in the year to July and 14.5 per cent in the year before that, it is little wonder that chair Paul Hampden Smith is confident of its prospects. He bought £99,498 worth of shares last week. Bellway’s shares currently trade about 25 per cent lower than their pre-pandemic peak but are up about 36 per cent over the past 12 months. At a price of 8.5 times next year’s forecast earnings, it is also undervalued compared when compared with its peers.

Wise founder looks to spread wealth

One of the most overused words in modern corporate culture is that of the company as a “disrupter”, which now seems to be applied to any company that makes minuscule changes to the smallest of industry niches.

Wise, the business formerly known as Transfer Wise, is a good example of its true meaning — a company that applies technology in a way that disrupts the practices of an entire market. Matching buyers and sellers of currency at (or very near) mid-market rates was an idea that the company’s chair Taavet Hinrikus and chief executive Kristo Käärmann had a decade ago to avoid some of the hefty charges imposed by high street lenders. It’s done very well, with the company processing £54bn of transfers in the year to March 31, which generated £421m of revenue and £41m of pre-tax profit.

A direct listing of its shares on the London Stock Exchange in July led to the company attracting a valuation of about £8.8bn at the end of the first day of trading. It’s now worth marginally less — around £8.1bn at the end of last week — but this is still an eye-watering 262 times earnings.

Hinrikus, who had a 10.85 per cent stake at the time of the direct listing, has now cashed in 10m shares netting £81.5m and pledged a further 39.6m shares (worth over £320m at last week’s prices) as security for a loan agreed with Goldman Sachs. Both transactions were carried out through an entity closely associated with him known as OÜ Notorious, according to a company filing.

In a separate notice, Wise said it had been informed that the proceeds from both transactions would be “invested in the next generation of global technology companies coming from Europe”. Hinrikus has already invested in more than 100 other European tech start-ups, it said.

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