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Reservations down at Bellway

Created:
6 December 2007
Written by:
Jonas Crosland

UK housebuilder Bellway has revealed that reservations in the first four months of its fiscal year have fallen by seven per cent, reflecting a steady downturn in the housing market. However, the bad news was tempered by the Bank of England's decision to cut interest rates by 25 percentage points to 5.5 per cent, and the shares actually rose 12p to 912p.

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Bellway's forward order book slipped from £689m this time last year to £677m, and comes against a growing backdrop of gloomy news for the housing sector. UK house prices in Novermber fell for the third consecutive month, the worst performance since the mid-1990s, with demand hit by higher credit costs and a much stricter approval criteria by leading mortgage lenders.

Despite falling 32 per cent in the last six months, the shares have not fallen as far as those of Bellway's peers, and the company has predicted that the first half of the trading year to the end of January should see modest volume growth, albeit at the cost of a slight reduction in margins. After that, much will depend on the all important Spring selling season .

TIP UPDATE:

Buy

Shares in Bellway have retreated from our buy tip at 1,227p (17 August 2007) although it remains one of the best performers in the house building sector. With a strong land bank, the prospect of further rate cuts and a modest forward EPS of 8, the shares are still worth buying.

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