Bellway's better-than-expected trading should spark earnings upgrades

(Alliance News) - Bellway PLC's trading update pleased analysts on Friday with sales and margin implying profit ahead of market expectations.

The Newcastle-based housebuilder said total house completions dived 30% to 7,654 in the financial year ended July 31, from 10,945 a year prior.

The average selling price dipped 0.7% to GBP308,000 from GBP310,306.

However, Bellway said both figures were slightly ahead of previous guidance.

Housing revenue fell 31% to GBP2.35 billion from GBP3.40 billion.

"While a lower starting forward order book drove a reduction in volume output, customer demand during the year has benefitted from a moderation in mortgage interest rates which has helped to ease affordability constraints and supported an increase in reservations," said Chief Executive Jason Honeyman.

Bellway said its forward order book stood at 5,144 homes on July 31, up 17% from 4,411 a year before.

Looking ahead, CEO Honeyman said: "We are encouraged by the new government’s plans to increase the supply of new homes across the country and welcome its plans to reform the planning system. Overall, the long-term housing market fundamentals are positive, and we remain confident that our robust balance sheet and operational strength, combined with the depth and quality of our land bank, will enable Bellway to successfully capitalise on future growth opportunities."

Bellway said: "Customer confidence has improved, driven by a moderation of both mortgage interest rates and consumer price inflation, and an increase in wages. Trading patterns were less volatile than the prior financial year when sharp changes in borrowing rates led to significant variations in customer demand. We have been encouraged by the improvement in affordability during the year and the relative stability in mortgage interest rates since January 2024."

Analysts at Stifel said financial 2024, which closed on July 31, ended better than expected.

The broker said housing revenue was 3% better than forecast while margin guidance of around 10% suggests earnings before interest and taxes might be about 6% better than its estimate.

Sales rates improved in the second half and Bellway has grown its sites, so starts 2025 with an order book 17% stronger than at the start of the year, underpinning confidence, Stifel said.

Peel Hunt thinks housing revenue and the underlying margin implies profit of around GBP235 million, 9% ahead of the current consensus.

Bellway is currently attempting to buy fellow housebuilder, Crest Nicholson Holdings PLC.

On Thursday, Bellway and Crest Nicholson announced that the put up or shut up deadline for the proposed merger would be extended until August 20.

Peel Hunt continues to believe that the acquisition makes "strategic sense for both parties".

Stifel agrees and sees the the industrial logic of acquiring Crest Nicholson as "appealing".

Bellway shares rose 2.9% to 2,734.00 pence each on Friday morning in London.

Crest Nicholson shares were 2.6% higher at 257.40p.

By Jeremy Cutler, Alliance News reporter

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