Bellway to drive down costs

The housebuilder conceded that leaving the EU next spring could influence sales, but any detrimental effects have yet to show themselves, as the forward order book moved up to £1.47bn as at 30 September. And trading in the new financial year has started on a firm note, with 176 reservations made per week, a 2.9 per cent increase over the comparable rate in 2017.

A new Scotland East division started trading on 1 August, and two further new divisions – Eastern Counties and London partnerships – have been approved. This should allow total capacity to rise to 13,000 homes a year, up from the record 10,307 completions last year.

House price inflation moderated but was still enough to cover cost input inflation. However, increased output will generate more upward pressure due to the shortage of skilled labour, as well as a shortage of key materials. So, to protect margins, Bellway launched its Artisan Collection, a rationalised range of 24 designs, which can be adapted to individual character requirements in certain areas. It is also developing a new construction specification that will allow it to rationalise the number of suppliers it uses, while investment in new technology will help to target cost control measures.

On the output side, the London Partnerships business will focus on building relationships with housing associations and institutional investors to boost the supply of affordable homes. Bellway acquired 12,962 plots across 100 sites, all of which met or exceeded its financial hurdle rates in terms of gross margins (24 per cent) and return on capital employed. The owned and controlled land bank now stands at over 41,000 plots or four years of supply.

Broker Peel Hunt is forecasting adjusted pre-tax profit for the year to July 2019 of £677m and EPS of 443.6p (from £645m and 423p in FY2017).