Bellway eyes return to growth as first-half profits slump
By Benjamin Chiou
Date: Tuesday 26 Mar 2024
(Sharecast News) - Interim profits at UK housebuilder Bellway dropped by more than a half on the back of a slump in housing completions and a deterioration in margins, but the company pointed to an improving economic outlook as mortgage rates continue to fall back.
The company slashed its dividend for its first half to just 16p per share, down from 45p at the half-year stage a year earlier, but in line with its target of underlying dividend cover of 2.5 times for the full financial year.
In the six months to 31 January, housing completions dropped by 28.1% to 4,092, leading to a 29.6% fall in revenues to £1.27bn, with average selling prices dropping 2.4% to £309,278.
Like many other housing developers, Bellway has been hit by the rapid rise in interest rates over the past two years, which has had a big impact on affordability, demand and pricing.
Underlying per-tax profit for the first half dropped by 57% to £134.2m, with operating margins sinking to just 11.0% from 17.6% a year earlier, as lower volumes were met by rising costs and the use of sales incentives, along with extended site durations, Bellway said.
Net cash for the period was £76.6m, down from £292.5m the year before.
"Bellway has delivered another resilient performance in a period of challenging trading conditions," said chief executive Jason Honeyman.
"Although the economic backdrop remains uncertain, the gradual reduction in mortgage interest rates throughout the first half has helped to ease affordability constraints and we have been encouraged by the improvement in reservations since the start of the new calendar year."
The company said it remained on track to deliver 7,500 homes in the fiscal year to 31 July, down from 10,945 previously, with Honeyman stating: "If market conditions remain stable, we are well-placed to build the order book through the second half which will serve as a platform for a return to growth in financial year 2025."
Bellway's shares were down just 0.1% at 2,630p by 0913 GMT.
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