Shares in Bellway took off after it delivered a reassuring assessment on the state of the UK’s housing market recovery.
At £32.66 per share, the Bellway share price was 7% higher in Tuesday trade, making it the FTSE 250’s biggest gainer.
For the 12 months to July, revenues at the firm toppled 30.1% year on year to £2.4 billion as higher mortgage costs sapped demand for its product.
Total completions fell to 7,654 homes from 10,945 a year earlier.
Bellway said that sales dropped “due to the lower starting forward order book and challenging trading conditions, particularly in the first half of the financial year.”
However, it added that “customer confidence gradually improved throughout the year, driven by a moderation of both mortgage interest rates and consumer price inflation, and an increase in wages.”
This pushed the private reservation rate per outlet increased to 0.51 per week last year from 0.46 previously.
Bellway’s underlying operating margin dropped to 10%, down 6% from the prior year. The firm said that this reflected “lower volume output, cost inflation and the use of targeted sales incentives, together with higher site-based overheads due to the slower sales market since the summer of 2022.”
Underlying operating profit slumped by 56.2% year on year, to £238.1 million. Pre-tax profit ducked 62% over the period, to £183.7 million.
Strong Start
Bellway said that improved trading and more outlets pushed its forward order book to 5,144 homes, up from 4,411 at the same point in 2023.
The builder added that “since the start of the new financial year, customer demand has remained robust and has been supported by an overall reduction in mortgage rates over the summer.”
Its private reservation rate per outlet per week was 0.59 in the nine weeks from 1 August. This was up from 0.41 in the corresponding period last year.
Bellway said it plans to deliver “at least” 8,500 new properties this year. Average selling prices, meanwhile, are tipped at £310,000 versus £307,909 in financial 2024.
“Resilient Performance”
Chief executive Jason Honeyman commented that “Bellway has delivered another resilient performance despite the challenging operating conditions during the year.”
He noted that “while a lower order book at the beginning of the financial year drove the reduction in the number of housing completions, customer demand through the second half benefitted from a moderation in mortgage interest rates which has eased affordability pressures and supported an increase in reservations.”
Honeyman added that “the combination of these improving trading conditions and our strong outlet opening programme has generated a healthy increase in the year end order book. As a result, we are well-placed to deliver a material increase in volume output in financial year 2025.”
“Well Positioned”
Adam Vettese, analyst at eToro, said that “the outlook [for Bellway] reads much better… interest rates have started to come down and will come down further, making affordability more accessible across the board.”
He added that “if Labour follow through with planning reforms this will make more sites available for development.” The new UK government has vowed to build 1.5 million new homes between now and 2029 to soothe the country’s chronic housing shortage.
Analyst Andy Murphy of Edison Group commented that “Bellway’s strong land bank and ongoing outlet expansion provide a solid foundation for future growth.”
He noted that “while current results reflect a challenging environment, especially with a lower starting order book, the company appears well-positioned for a recovery in fiscal year 2025 as market conditions stabilise.”
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