09 February 2024
If you are covering Bellway’s latest results, please see the following comment from Oli Creasey, property research analyst at Quilter Cheviot:
"Bellway have released a 6 month trading statement this morning. The statement represents a challenging trading period, which is reflected in the data: sale volumes down -28% and the average sale price per home -2.5%. However, while challenging, this was very much in line with the rest of the housebuilding industry, and expectations. Management have reiterated guidance that full year volumes will be around 7,500 homes, and that the company expects to return to positive sales growth in the financial year ending July 2025.
"Of some concern for investors will be that during this six month period, Bellway has spent two-thirds of its cash reserves, with the cash on balance sheet reducing from £232m to just £77m. This appears to be a result of increased payments to land creditors (mostly representing contracts signed in the past two years), but the future land obligations have reduced significantly, and net gearing (which includes the impact of future land payments) remains low at c. 5%. While we expect management will want to rebuild this cash buffer over future periods, the reduction isn’t as alarming as the headline reduction suggests.
"Management have pointed to a number of green shoots across the business: build cost inflation is moderating, the mortgage market is improving for borrowers, and interest in Bellway’s homes is increasing. However, that interest is expected to mostly be reflected in the next financial year’s results, meaning FY 2024 (to July-24) is likely to be one to forget."
