Based on the graphs, it is quite clear that Barrat Development and Taylor wimpy homes both performed better than Bellway PLC. However, it is also healthy to argue that the two companies performed better than Bellway incorporation because Bellway faced various internal or company specific problems that were probably internal problems.
The overall demand in the real estate sectors increased due to the improving economic condition in the country in the second half of the 2012, and first half of 2013. Despite the improving economic conditions, and improved mortgage conditions, the companies profit before taxation increased by just 34%, this could have been better if the company exploited the consumer confidence that it developed in 2012. The company would have performed better than or in the same level with the competitors.
According Bellway (2013), the company’s basic earnings per share increased by over 36.3percentage to 89.3p thereby increasing the net asset value per share to over 1,001p. This was supposed to attract investors to increase their investment, which did not materialize.
Change in management
The company has just had two new independent non-executive directors and this has an effect on the overall investor’s interest, as they are not sure working with the new independent directors. For example, in June 2013, Paul Hampden Smith and Denise Jagger were appointed as non-executive directors to the company.
Economic slump/ recession
The main external factors that contributed to the company’s improved performance which was still lowers that its competitors is that the company was facing the aftershocks of the 2008/2010 economic slump that affected the sectors. The economic recession affected the spending capacity of most of the company’s potential and loyal customers thereby affecting the company’s profitability as compared to its competitors
Fall in visitor numbers and reservations
When the visitor’s number and reservation fall, the investors’ confidence falls because they are not sure about the profitability of the company or the earning capacity of their investments. In such case, the ROI is much lower and the risk is high. if the investors are foreseeing a negative market condition, they are much likely to sell some of their share in anticipation of the worst or better still, they may hold on to their investment and not buy more shares in fear of the market performance (Bellway, 2013)
Increasing dividend/ management control
The company’s dividend affected its capital base. When the management increased the dividend payout to the investors, they reduced the capital that could have been used to give out right issue. On the other hand, the management has cost control policy lead to reduced capacity to spend on advertising and attracting investors. This consequently led to low awareness amongst the potential investors.
The management implemented a strong capital disciplines that involved prudence in capital use especially on acquisition. Controlled acquisition, buoyed by the uncertain economic condition lead to caution on the part of the investors and management leading to slight reduction in the capital outlay. The group’s return on capital employed (ROCE) was used to pay out dividend and acquire more assets instead of buying more shares.
The overall consumer confidence in the real estate sectors improved that this was reflected in the small increase in the overall price of the company’s stock. For example, there were government schemes such as HelpBuy, and NewBuy schemes that were introduced in April 2013 leading to increased performance of the company’s shares in the stock market. The customers were able to acquire new houses with a low deposit of only 5% leading to improved sales and improved consumer confidence at the end of the first half of 2013 (Mayeda, 2013)
Mayeda,, A. (2013, December 9). Consumer confidence nears year high as Canadians put faith in rising house prices. Financial Post Business Consumer Confidence Nears Year High as Canadians Put Faith in Rising Houseprices Comments. Retrieved January 5, 2014, from http://business.financialpost.com/2013/12/09/consumer-confidence-nears-year-high-as- canadians-put-faith-in-rising-house-prices/
Bellway. (2013, July 20). Regulatory News Announcements. Bellway PLC –. Retrieved January 5, 2014, from http://www.bellwaycorporate.com/regulatory-news