Everyone knows housebuilders are having a tough time of it at the moment, and today’s report from Bellway underscores the challenges facing the sector.
Despite reporting higher annual profit and increasing shareholder returns, it was forced to lower its home-completions guidance for next year as a softer market weighs on demand.
“Bellway’s shares were little changed this morning as investors weighed a solid set of full-year numbers against a still-subdued outlook for the year ahead,” said Adam Vettese, Market Analyst at eToro.
The housebuilder said completions rose 11% to 9,695 homes in the year to 31 July, lifting revenue 14% to £3.16bn, while underlying pre-tax profit grew 6% to £305.7m. Cash generation was strong, with operating cash flow up 36%, leaving Bellway with net cash of £157.7m and very low gearing. It raised its dividend 7% to 75p and announced a £150m share buyback for the current year, taking total shareholder returns across the two years to around £450m.
However, the outlook will be the issue for investors. With its forward order book lower and buyer demand constrained by economic uncertainty and high mortgage rates, it expects to complete between 9,000 and 9,400 homes in 2027, down from this year, with more of those coming from lower-margin bulk sales.
Its underlying operating margin, already down to 10.1%, is expected to fall further. Reservations have remained subdued in recent weeks, and it expects build cost inflation of 3% to 4%.
Bellway, which welcomed the new proposed government scheme to help first-time buyers, said its strong balance sheet and land bank left it well placed to grow again when conditions improved. This is a line housebuilding investors have heard for some time.