Bellway profit to fall despite record sales

Bellway expects its profit to fall this year by around £40m despite seeing “renewed consumer optimism” in the housing market in 2020.

The housebuilder issued a trading update this morning in which it said profit for the year was likely to be “in line with expectations”, which are that pre-tax profit will fall from £663m last year to around £620m this.

Bellway said it was facing “ongoing challenges in relation to higher-priced homes” and “upward pressure on construction costs across the wider sector” at a time when house prices remained flat. The housebuilder also saw its average sale price fall in the six months to December as it expanded its lower-value social housing business.

However, this expected reduction in profit came as the firm reported record house sales of 5,321 in the first half of the year, a rise of 6.3% on the same period in 2018, and a rising reservation rate, with 151 private homes sold per week, up 11%.

Bellway said that customer interest had remained resilient in 2019 despite political uncertainty, and that “this interest has increased since the start of the calendar year, with renewed consumer optimism benefiting the housing market”.

It added: “There remains some cost pressure affecting the wider industry, however trading conditions are encouraging and early indications suggest that there will be a return of the usual, traditionally strong spring selling season.”

This would allow it to grow volumes for the full financial year, to June, it said.

Bellway chairman Paul Hampden Smith said: “Bellway continues to increase the supply of affordably priced, good-value new homes, following another successful trading period in which it has achieved further volume growth.

David O’Brien, equity analyst at Goodbody, described the update as “solid”, and said it followed a pattern of encouraging updates from housebuilders including Barratt, Persimmon and Taylor Wimpey.

“While their enthusiasm is measured, it’s clear that the improved political certainty has triggered a positive market backdrop and boosted the sector,” he said.