15 October 2024
If you are covering Bellway's latest results, please see the following comment from Oli Creasey, property research analyst at Quilter Cheviot:
"The financial year 2023/24, ending July 2024, was a tough one for Bellway and other housebuilders. The company’s volumes were -30%, and the operating margin fell from 16% in 2023 to just 10% this year. While this is in line with peers and expectations, as well as formal guidance from the company, Bellway’s profit before tax figure has fallen almost -60% year-on-year.
"Backward-looking weakness has come as no surprise, and investors are more interested in the outlook for the next 12 months. The direction of travel is positive, but the pace of recovery that Bellway’s outlook statement suggests is a little troubling. The company is forecasting a +11% increase in volumes next year. While that is progress, it is important to note it is an improvement on this year’s low base and is still -22% when compared to the 2022/23 financial year. Likewise, while sales prices have held firm this year, and should remain so next year as well, that allows for very limited margin recovery, with the forecast set at 11% next year.
"Sales data for August and September reflect these expectations. The sales rate has improved year-on-year to 0.59x in terms of sales per outlet per week, but this is in line with the same rate as experienced in the second half of this financial year.
"Bellway’s dividend has been cut -60%. While a sharp decline, this was widely expected given a similar move at half-year, and the company’s stated policy of a 2.5x payout coverage.
"Bellway has been reducing the size of its landbank, we assume to reflect the pace of volume recovery expected. The owned landbank is -9% smaller than last year, although it still reflects nearly 6x the guided volumes for next financial year of at least 8,500 homes."
