9 August 2023
If you are covering Bellway’s trading update, please find comment below from Oli Creasey, equity research analyst at Quilter Cheviot:
“The financial year just finished (ending 31st July) looks like a relatively good one for Bellway. Housing completions and company revenue both fell marginally (c. -2% to -4%), despite the last 12 months being a challenging environment. However, this is partly a timing issue – many of the full year 22/23 sales will have been agreed before mortgage rates rose sharply, and the indications are that full year 23/24 will be considerably more challenging for the company.
“The company’s private reservation rate has fallen by -36% during the year, and management stated that mortgage rates in June and July 2023 returned to the levels reached during the Liz Truss government, significantly impacting the volume of sales. We note that the order book (sales agreed but likely to complete in FY 23/24) has fallen around -40% year-on-year, suggesting volumes next year will be significantly lower. Bellway’s outlook statement acknowledges this, with completions expected to decrease materially.
“This sounds bleak, but is in-line with the experiences of other large housebuilders. As with the other builders, sales pricing has remained relatively robust (-1%), which has provided support to company revenues. The margin has fallen c. 250bps, largely due to inflation of build and other costs, but we do expect these inflationary effects to moderate in the coming year.”
