17 October 2023
If you are covering Bellway’s latest results, please see the following comment from Oli Creasey, equity research analyst at Quilter Cheviot:
“By virtue of an unusual year end, Bellway are the last of the UK housebuilders to report full year results. As with peers, the past 12 months have been relatively resilient, with volumes down just -2% and sale prices almost flat. However, this is now in the past, and current trading conditions look materially more challenging – in the outlook statement, management state that they expect sales to fall -30% year-on-year, with average prices down a further -5%. As a result, the operating margin is expected to be below 10% next year (2022/23: 16%). Management also note that there is a wider range of outcomes than normal, suggesting that things could be better or worse, depending largely on where mortgage rates go to.
“While these are clearly difficult trading conditions, the outlook is not materially different to those already provided by peers. Bellway and other housebuilders are expected to be able to weather the storm, although it may depend on how far into 2024 or beyond the market stress goes, given good cash balances and effectively zero debt. However, investors will have one eye on next year’s dividend; Bellway has a policy of maintaining 2.5x payout cover, and with profits expected to be materially lower than last year, it is likely that the dividend will have to be reduced, or this policy suspended. The company has had some success with a £100m share buyback policy this year, which is now mostly complete, and while management haven’t ruled out a second round, it is highly dependent on cash generation and requirements.”
