Bellway profit falls 18% to £532m; reservations down

Newcastle-based house building giant Bellway said its revenue slipped 3.7% to £3.4 billion and underlying profit before taxation fell 18.1% to £532.6 million in the year to July 31, 2023.

Bellway’s proposed total dividend per share has been held at £1.40 per share.

The company said its programme of accelerating the construction of social homes partially offset weaker private demand, which was impacted by higher mortgage interest rates, cost-of-living pressures and the end of Help-to-Buy.

The firm’s overall reservation rate fell 28.4% during the year to 156 per week and the private reservation rate decreased by 35.9% to 109 per week.

On recent trading and outlook, Bellway said: “Since the start of the new financial year, customer demand continues to be affected by mortgage affordability constraints, with reservations below the comparative rates in the prior year. 

“In the nine weeks since 1 August, overall weekly reservations were 133 per week (1 August to 2 October 2022 – 191) and the private reservation rate was 99 per week (1 August to 2 October 2022 – 136). 

“The private reservation rate includes a bulk sale to a private rental sector investor, on compelling financial terms, comprising 71 homes (1 August to 2 October 2022 – nil). 

“The private reservation rate per site per week in the period was 0.41 (1 August to 2 October 2022 – 0.58), including a contribution of 0.03 (1 August to 2 October 2022 – nil) from the bulk sale.

“The group has a lower, yet still sizeable forward sales position with a value of £1,232.3 million as at 1 October (2 October 2022 – £2,093.8 million). 

“The order book comprised 4,636 homes (2 October 2022 – 7,257 homes), of which 71% were exchanged (2 October 2022 – 71%).

“Given the reduced order book and prevailing lower reservation rates, there will be a material reduction in volume output in the current financial year. 

“Based on the average private reservation rate per site per week of 0.46 achieved in financial year 2023, the group is targeting to deliver completions of around 7,500 homes (2023 – 10,945 homes), and to end the year with a higher order book (2023 – 4,411 homes) to serve as a platform for a return to growth beyond the current financial year.

“The board notes however, that a wider than usual range of outcomes are possible, and the final volume outturn will depend on the trajectory of mortgage interest rates and the strength of demand in the autumn and spring selling seasons.

“Overall, headline pricing has remained firm across our regions, although targeted incentives continue to be used to attract customers and secure reservations. 

“In financial year 2024 we currently expect the overall average selling price to be around £295,000 (2023 – £310,306), with the moderation from 2023 primarily reflecting a higher expected proportion of social housing completions and a continued use of incentives. 

“In the near term, we anticipate headwinds from lower volume output, ongoing pressures of cost inflation and the use of sales incentives to persist. 

“Overall, we expect these factors, together with the effect of extended site durations, to lead to a reduction in the underlying operating margin of at least 600 basis points in the current financial year …”