Bellway hits £3bn, but price slowdown hits shares

Newcastle-based house building giant Bellway said its revenue rose about 16% to a record of almost £3 billion in the year ended July 31, 2018, and it sold 10,000 homes for the first time.

However, Bellway’s shares slipped as it warned home price growth could slow in the year ahead.

Bellway shares fell about 3.2% to 2,880p to give the firm a current stock market value of around £3.5 billion, according to Bloomberg data.

In a trading update, Bellway said it completed the sale of 10,307 new residential dwellings, an increase of 6.9%.

It reported revenue of almost £3 billion, up from £2.5 billion, which “together with an anticipated operating margin of around 22% (2017 – 22.3%), should lead to another year of significant earnings growth.”

But Bellway cautioned: “The pricing environment is stable, with many sites still able to achieve low, single digit increases, predominantly for affordably priced homes, located in areas of strong demand.

“As the year has progressed, the rate of house price inflation has moderated.

“In addition, higher value homes across the country have, at times, experienced slower sales rates and occasionally required a greater use of incentives, albeit the group has intentionally limited its exposure at this upper end of the market.

“Notwithstanding the more moderate rate of house price growth, cost increases across the group are still being offset by house price gains.

“Nevertheless, the net inflationary enhancement to the margin, which has augmented results over recent years, is beginning to abate.”

Bellway CEO Jason Honeyman said: “Bellway has responded positively to the favourable market conditions, completing the sale of over 10,000 new homes for the first time in its history, whilst retaining a clear focus on quality and customer care.

“In doing so, the group has set a new earnings record and yet, having invested significantly in land, has ended the year with a strong net cash position.

“Trading has been robust and notwithstanding wider political and economic uncertainty in the UK, Bellway has both the financial and operational strength to respond opportunistically to future changes in market conditions.”

In its outlook, Bellway said: “In addition to the strong growth in the number of completions, the group has maintained a sizeable forward order book at 31 July, comprising 4,841 homes (2017 – 4,749 homes), with a value of £1,301.1 million (2017 – £1,296.3 million).

“This solid position should enable the group to deliver further, more moderate growth in the year ahead.

“Bellway retains an ability to be agile and respond positively to opportunities as they arise.

“Provided market conditions continue to remain attractive, the group has the operational and financial strength to further expand the divisional network, thereby supporting additional growth in the years ahead.”