Bellway: Housebuilder in recovery as share price ‘at odds’ with performance
Housebuilder Bellway reported strong growth in home completions over the last six months, which analysts have said could be a sign the wider homebuilding sector is set for a recovery.
The company reported an 11.9 per cent uptick in housing completions in the six months ended 31 January, with more than 4,500 properties completed with an average selling price of £310,600.
Bellway also said its forward order book was healthy with 4,726 homes, well up on the 3,970 properties from 2024, with a value of £1.3bn, compared to just a shade over £1bn previously.
It said in line with prior guidance, it’s on track to deliver full-year volume output of a minimum of 8,500 homes, as it reported a “strong and well-capitalised balance sheet”. Bellway said it had a “modest” net debt of £8m
While keeping its guidance and being “encouraged by a seasonal pick-up in customer enquiries and reservation rates”, the firm also said “we remain mindful of the sensitivity of customer demand to mortgage affordability and the evolving economic backdrop.”
The long-term fundamentals of the UK housebuilding industry remain positive, and we welcome the Government’s reforms to the planning system to drive a marked increase in the supply of new homes across the country.
Its results come as the government seeks to kickstart UK planning, including transforming so-called ‘grey-belt’ land. Reform has, however, been branded “rushed and incoherent.
Earlier this month, Rachel Reeves and Keir Starmer announced a raft of planning changes intended to get Britain building again.
However, the government’s planning ambitions have been held back by its faltering economic policies.
Low growth and rising inflation have made Brits more cautious about making big decisions like taking out a mortgage, and while the Bank of England cut interest rates last week, it also slashed growth forecasts in half.
If inflation rises, the Bank of England could also consider raising rates, which would impact borrowing for prospective homeowners.
Jason Honeyman, chief executive, said: “Bellway has delivered a strong first half performance in challenging market conditions. While mortgage interest rates have increased modestly since the autumn, customer demand has remained robust, and the Group has a healthy order book to support our targeted growth in volume output for the full year.
The Group has a strong balance sheet and land bank, and we remain very well-positioned to capitalise on future growth opportunities while continuing to play an important role in meeting the growing need for new homes across the country.”
“In the early stages of recovery”
Following its results, its share price dropped after the open by more than five per cent.
Anthony Codling of RBC Capital Markets said: “At the half-way mark Bellway is on track to deliver on its full-year guidance. The robust performance of the Group is at odds with its subdued share price performance.
“The underlying housing market appears to us to be stronger than investors think it is. Mortgage rates have ticked up since Bellway announced its two-year growth plans, but customer demand has remained firm, and Bellway remains confident about delivering on its growth expectations for the full year.”
Oli Creasey, property analyst at Quilter Cheviot: “Much like the rest of the housing sector, Bellway appears to be in the early stages of recovery after what has been a challenging period.”
This morning’s trading statement for the six months ending January 2025 shows its sales volumes have increased by 12 per cent compared to the same period last year, and the company is on track to hit full year volume guidance, which would mean 11 per cent growth year-on-year.”
“Management anticipates a modest seasonal change in volumes in the second half of the financial year but is still seeing improving conditions, with the company’s forward order book also substantially bigger than this time last year, up 30 per cent in value.
Creasy added: “Likewise, while Bellway’s volumes are improving, they are still down by around 25 per cent compared to the 2022 peak.
“Management noted that customer enquiries and reservation rates have been encouraging in the current selling season. However, the mortgage market and wider economic conditions continue to have an impact on customer demand and are likely to be a headwind for Bellway for some time yet.”
AJ Bell investment director Russ Mould said: “Bellway remains a long way from building back margins and volumes towards their recent peak in 2022. Yet the company seems to be keen to seize on any positive signs and notes encouraging levels of customer enquiries and reservations.
“The UK property market currently has the feel of a toddler which has been given too many sweet treats as the looming hike in stamp duty thresholds encourages buyers to conclude transactions before the end of April. Parents know what typically follows a sugar rush and investors are similarly wary of a potential sluggishness post-April, judging by the reaction to Bellway’s update.
“The mortgage market is still unhelpful for Bellway, given rates have gone up with gilt yields despite interest rates coming down, and the business and the wider industry are seeing building cost inflation tick higher again.
“Investors were more impressed by the resilient performance at MJ Gleeson which has average selling prices of less than £200,000. This relatively low price point could prove attractive to a larger cohort of buyers if mortgage costs remain elevated, although the company did see profitability take a hit as it offered buyer incentives in the second half of 2024.”