Bellway boosts profit but warns of continuing margin squeeze

Bellway has reported higher completions, turnover and profit but is facing a continuing squeeze on margins.

The housebuilding giant, in its preliminary results for the year to 31 July, reported overall turnover of £3.2bn, up from £2.8bn the previous year. Its completions rose 10.8% from 8,749 to 9,695 units.

The group’s pre-tax profit rose 22% from £221.9m to £270.2m, while its underlying operating profit was £320.6m in line with previous guidance.

However the group’s order book as of 2 October was lower year-on-year at 4,981 homes, compared to 5,285 homes last year, while its completions are expected to fall to between 9,000 and 9,400 in the current year.

The group’s underlying operating margin fell from 10.9% to 10.1% and Bellway expects this to decrease further this year. It said this is due to lower completions, ongoing build cost inflation, elevated sales incentives to get people to buy and a higher proportion of bulk sale completions.

It said however it “remains confident in its long-term growth prospects.”

Jason Honeyman, chief executive of Bellway, said: “The UK continues to face a substantial shortage of new homes, while affordability remains a major barrier for many prospective buyers. We therefore welcome the government’s proposed Your First Home scheme, which has the potential to provide significant support for first-time buyers.

“We look forward to further detail on the scheme and to engaging with government on its design and implementation. Bellway has the financial strength, operational capability and landbank to respond as market conditions improve and increase the delivery of much-needed new homes over the medium term.”

Bellway’s operating cashflow, adjusted to exclude one-off items, rose 36% to £868.6m. Bellway announced a £150 million share buyback programme for the current year.