Housebuilder Bellway (BWY) found itself in demand, up 2.8% to £31.15, as it unveiled a robust trading update.

The company raised its annual guidance on output and margins as ‘strong’ underlying demand boosted homebuilding activity to record levels in the first half of the year.

Housing completions for the full year to 31 July 2021 were now expected to increase to around 9,800 homes, up from 7,522 last year, and the underlying operating margin for the full year was expected to improve by at least 200 basis points, up from 14.5%.

For the six months through 31 January 2021, the company reported record first half volume output, with completions rising 6.3% to 5,656 year-on-year.

The private reservation rate increased 3.3% to 156 per week and the order book jumped to 5,889 homes from 4,598 homes, representing a value of £1.63 billion, up from £1.16 billion.

Looking ahead, the company said the completion profile ‘will be weighted towards the first half because of the strong work-in-progress position at the start of the year’.

ANALYST VIEW

As AJ Bell investment director Russ Mould observes ‘the builder seems to be feeling pretty bullish, judging by the way in which is it buying new land’ securing 8,848 plots in the first half of its financial year.

Canaccord Genuity analyst Aynsley Lammin commented: ‘The group has issued a reassuringly solid trading update ahead of its interim results. The group is set to deliver a very strong first half with a record level of completions.

‘It has also stepped up its land buying significantly as it gets on the front foot to support future growth. Clearly there remain macro and pandemic risks, but the group has seen a good start to the year helped by the release of the new Help to Buy scheme with reservations up and pricing firm.

‘The net cash position is very strong despite the increase in land spend, as it benefited from the good level of completions and working capital movements.’

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Issue Date: 09 Feb 2021