- Developer posts record profit but flags slowdown
- Volumes, prices and margins seen falling this year
- Sector lags the broader stock market on widespread share selling
Shares in leading housebuilders bucked the firmer stock market trend after developer Bellway (BWY) revealed demand for new homes had ‘moderated’ since August and cut its sales target for this year.
Bellway shares slipped 1% to £18.07 while Redrow (RDW) dropped 1.5% to 410p and Vistry (VTY) fell 3.6% to 545p.
HAVE EARNINGS PEAKED?
As far as the year to July is concerned, Bellway put in a strong performance with record revenues of £3.5 billion and record housing completions totaling 11,198 homes.
Operating margins hit 18.5% against 17% in 2021 and just 14.5% in 2020, driven by better site efficiency, tight cost management and completions from recently acquired land.
Underlying pre-tax profits jumped 22.5% to £650 million, which together with year-end net cash of £245 million allowed the board to hike the dividend for the year 19% to 140p per share.
However, echoing last week’s comments by rival Barratt Developments (BDEV), the company reported a 12% slowdown in weekly reservations in the period from 1 August to 3 October compared with the same period in 2021 due to ‘the backdrop of rising interest rates and wider economic uncertainty’.
A LESS ROSY OUTLOOK
As a result of the slowdown in reservations, Bellway has lowered its forecast for volume sales this year from 12,000 in its August trading update to ‘a similar level to the prior year’ or around 11,200 homes.
It also sees selling prices slipping back from last year’s average of £315,000 to around £300,000 although it puts the fall down to a higher proportion of social housing completions.
Due to the current economic uncertainty, the firm says the range of forecasts for underlying operating margins is ‘wider than the prior year’ but its best guess is over 18% compared with 18.5% last year.
The next updates from the housebuilders come at the end of the month when Vistry and Countryside Partnerships (CSP), which are in the process of merging, release trading statements.
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