Bellway grew home completions faster than expected in its latest financial year and unveiled a fresh share buyback, though the housebuilder flagged softening demand and called on the government to do more to help first-time buyers.
This softening in demand was reflected in the Bellway share price reaction on Tuesday, which was down 0.5% at the time of writing, albeit well off the session lows.
The builder said completions rose 10.8% to 9,695 homes in the year to 31 July, ahead of its guided range of 9,300 to 9,500, helped by strong conversion of bulk sales.
Housing revenue climbed more than 13% to £3.14bn, and it expects adjusted operating profit of around £320m, up from £303.5m. The average selling price edged up to about £324,000, though Bellway said this reflected geographic and product mix rather than any underlying house-price inflation.
Margins slipped a little, with the adjusted operating margin expected at around 10%, down from 10.9%, reflecting the greater weight of lower-margin bulk sales. The forward order book also shrank, to 4,206 homes from 5,307, after the strong output and softer reservation rates during the year.
Bellway said the £150m buyback it launched last October should complete this month, after which it will begin a further £50m programme as the first tranche of shareholder returns for the new financial year.
Mark Crouch, market analyst for etoro, said: “Bellway has ended the year with plenty of bricks laid and plenty of cash in the bank, but the foundations for the year ahead look a little less certain. Completions beat expectations, revenue climbed more than 13% and a surge in cash generation has left the housebuilder sitting on £158 million of net cash. That financial strength is also allowing another £50 million to be returned to shareholders through buybacks.”
“The question is whether Bellway can keep building on that momentum. Higher mortgage rates have taken some heat out of the market since April, reservation rates are slipping and the forward order book has fallen sharply. Greater use of lower-margin bulk sales has also helped volumes at the expense of profitability.”