House builder remains in strong position

Vertem Wealth Management’s investment associate, Fiona Ratcliffe, comments on Bellway results

Bellway have once again demonstrated strong growth in 2018, breaching the 10,000 homes barrier for the first time with the group completing 10,307 new homes in the financial year, while an all-time high sales rate of 200 reservations per week has been recorded.

Revenues in the year rose more than 15% although the continued shortage of skilled labour and core materials impacted margins, although measures are in place to protect margins going forward. The Government’s Help-to-Buy incentive remains a strong contributor to sales; 39% of completions were completed using the incentive.

The ongoing Brexit uncertainty leaves both house buyers and builders in a state of limbo currently, but should market conditions remain robust, Bellway highlight the opportunities to further increase output over the coming year. Land continues to be invested in; an further 27 sites have been agreed upon in the year, resulting in a further 8,500 plots added to the group’s holdings.

A new style of house type range looks to help achieve cost savings for customers, while at the same time protecting Bellway’s margins through greater standardisation. A strong financial position and a healthy cash position on the balance sheet results in shareholders receiving a 17% higher dividend than last year (143p).

Bellway’s 21% fall in share price in 2018 is more reflective of the sector, rather than Bellway’s operational progress itself is making. The new financial year (9 weeks reported) is reflecting a slight fall in sales per site and while political/Brexit uncertainty hampers the sector’s growth prospects, Bellway have demonstrated they remain in a strong position to further enhance growth.