Bellway battles supply chain problems to post 9.8% increase in profit

Bellway has reported an 9.8% increase in profit in the first half of its reporting year in the face of inflation and supply chain issues.

The housebuilding giant, in its half-year results for the six months to 31 January, reported pre-tax profit of £308m, up from £280m in the same period the previous year. Its revenue increased 3.5% to £1.78bn over the same period.

The housebuilder said that cost inflation overall had been offset by house price gains, and through initiatives such as investing in IT, appointing internal ‘cost control champions’, reviewing plot drainage designs, and using data analysis to drive down costs.

It said, however, that material shortages continue to be challenging.

It said: “Overall, these initiatives have helped to mitigate some of the cost and supply issues affecting the wider sector, although shortages of bricks, blocks and roof tiles continue to pose a manageable challenge.

“Materials shortages, rising fuel prices and wage costs are expected to result in continued inflationary pressures in the year ahead, with these potentially exacerbated by the worldwide consequences of the crisis in Ukraine, although we generally expect these to be offset by further revenue gains.”

Bellway’s completions stayed broadly the same, with 5,694 homes built compared to 5,656 in the first half of the previous year, which Bellway said was boosted by pent up demand. Its average selling price rose by 2.9% to £311,849, which it said was higher than initially expected due to the proportion of private completions rising from 78.4% to 82.6% year-on-year.

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The firm said it is now expecting to complete more than 11,100 homes in the full year, which would be a 9.5% increase on the 10,138 built the previous year. Its order book comprises 7,491 homes. The group is targeting 12,200 completions in 2023.

Bellway also announced it has set aside an additional £22.1m for building safety improvements, bringing its total to £187m since 2017. The increase was due to cost inflation and an expanded scope of works needed following further investigations on blocks.

Bellway said it is ‘proactively’ engaging with the government on plans to remediate unsafe blocks above 11 metres in height, following Michael Gove’s announcement in January of plans to force housebuilders to pay into a £4bn fund.

“We are assessing the additional cost that could arise because of this potential extended review period, but this is a highly judgemental area, not least because the final details of any pledge have not been agreed, and particularly given the ongoing uncertainties with respect to the required standard of remediation and the related position of lenders and surveyors”, Bellway said.

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