Confidence builds at Bellway as customers start to return

An improvement in the housing market over the summer has made Bellway confident that it will build more homes and make more money than most had expected over the next year.
The housebuilder, one of the biggest in Britain, said that cheaper mortgage deals had prompted more people to put down deposits for its homes in recent months, which would enable it to achieve a “material” increase in build volumes this year.
“Customer confidence has been improving since the start of the calendar year really,” Jason Honeyman, chief executive, said. “We’re ready to capitalise on a better market, we’re ready for growth. We’re confident that we want to invest in land again, we’re confident we want to invest in people again.”
Reflecting the housing market’s downturn after Liz Truss’s mini-budget in September 2022, Bellway built 7,654 flats and houses between August 2023 and July this year, a third fewer than its previous financial year. Revenues declined 30 per cent to £2.38 billion from £3.41 billion.
The combination of lower sales and a largely fixed cost base meant pre-tax profits more than halved from £483 million to £183.7 million. Profitability was further reduced by costs of £5.4 million relating to Bellway’s aborted acquisition of Crest Nicholson, a smaller rival.
The final dividend, to be paid on January 8, reflects last year’s struggles and has been cut by 60 per cent to 38p per share.
However, during its current financial year, which runs until the end of July, the group expects to build “at least” 8,500 homes, an improvement of 10 per cent. With profit margins expected to come in at about 11 per cent, that would generate an annual operating profit of around £290 million, slightly more than most analysts had been forecasting.
In response to its bullish outlook, Bellway shares had climbed 232p, or 7.6 per cent, to £32.84 by Tuesday lunchtime. Not since the start of 2022, when the housing market was still in its post-lockdown pomp, have the shares been higher.
Bellway was founded in 1946 by John Thomas Bell as a small family-owned housebuilder based in Newcastle. It is now listed on the FTSE 250 with a stock market value of close to £4 billion.
Like all builders, it has struggled to sell its homes for much of the past two years as spiralling mortgage rates and wider economic uncertainty stifled the housing market.
Bellway has seen demand return of late, however. Since the start of August, the developer has been selling 0.59 homes a week at each of its 245 sites across the country, almost 50 per cent more than over the same period last year.
That has boosted the order book, which stands at 5,109 homes worth £1.43 billion, up from 4,636 homes and £1.23 billion this time last year.
Honeyman suggested the increase might have been greater had it not been for the looming budget, which he said some customers are “nervous” about.
Bellway’s pricing has “remained firm”, with modest rises in the north of England and Scotland. It expects its average selling price to rise to about £310,000 this year, slightly more than most analysts had predicted and up from £307,900 in 2023.