Bellway ‘taking steps to reduce headcount’ as rate hikes continue mortgage slowdown
British housebuilder Bellway’s underlying operating margin will contract from 18.5 per cent to 16 per cent as mortgage rates continue to slow down demand in the sector.
The home construction company completed the build of 10,945 homes in the year ended 31 July falling from 11,198 in the same period last year.
As the central bank’s decision to hike mortgage rates rattled buyer demand, Bellway said the average selling price of its homes also dipped slightly to £310k compared to £314k last year.
Earlier this week, it was reported by Sky News that the listed-business was mulling job cuts, representing three per cent of its workforce, as it looks to reduce costs amid a volatile period for the sector.
Bellway said today that it is “taking steps to reduce headcount across the group,” and told City A.M it was not disclosing the number of roles lost as the “consultation has only just begun”.
Revenues for the business remained inline with previous guidance, reclining three per cent to £3.4bn.
Bellway also said it has seen a cooling in the cost of build inflation and a reducing demand for construction goods “supported an improvement in product availability across the group”.
“In light of the current uncertain backdrop, we remain focused on maintaining the group’s strong cost control disciplines and balance sheet resilience,”Jason Honeyman, group chief executive, said.
“This will enable Bellway to respond to ongoing changes in the housing market, meet our commitments in relation to legacy building safety and deliver against the priorities in the ‘Better with Bellway’ sustainability strategy.”
Its share price fell over two per cent this morning as markets responded to the news.
“Reservation rates are down sharply, the order book is also down sharply, prices are no longer going up and completions are expected to go down in the coming year, but shares in Bellway are holding firm despite the gloomy outlook statement that accompanies the housebuilder’s latest trading update,” said AJ Bell investment director Russ Mould.
“Analysts are cutting their profit forecasts for the fiscal year to June 2024 and still the shares do not seem to care, so perhaps markets are already pricing in a lot of the bad news.”
He added: “After all, Bellway’s shares have almost halved from their pre-pandemic peaks of early 2020 and the difficulties discussed by chief executive Jason Honeyman have not just developed. Inflation, in the form of wage and raw material costs, began to move higher in spring 2021.
“The Bank of England started to raise interest rates in December 2021. Trussonomics blew up the mortgage, pension and government bond markets in autumn 2022.”