25 March 2025
If you are covering Bellway’s half year results, please find commentary below from Oli Creasey, property analyst at Quilter Cheviot:
“Bellway’s half-year results to January 2025 show a meaningful improvement compared to the same period last year. Sales volumes have increased by 12% compared to the six months ending January 2024. This growth is partly due to a 2% increase in trading outlets, but it also represents organic growth from the low point in the current cycle.
“Management stated that the company is on track to deliver ‘at least 8,500 homes’ in FY-25. The company is slightly ahead of this target at the halfway point, although management has previously indicated that volumes are likely to be higher in the first half of the year due to seasonal factors (fewer sales in the second half during the Christmas period are typical). Lower mortgage rates and improving consumer confidence have driven the increased volumes.
“House prices have remained largely unchanged during the period, with a slight increase of 0.4%. While build cost inflation has moderated from the highs of 2022-2023, it remains in the low single digit range and is growing faster than house prices. Management’s guidance of an average sale price of £310k for FY-25 suggests a similarly low growth rate year-on-year. The fact that prices are not keeping pace with inflation is preventing margin expansion, with the company’s operating margin remaining at 11%. The margin is flat compared to the first half of 2024 and up slightly compared to the second half of 2024, which could be partly due to seasonal factors.
“The company has had a strong start in the first seven weeks of the second half. Since the start of February, the reservation rate (sales per outlet per week) has grown to 0.76x, close to the long-term average of around 0.85x. However, a significant portion of these sales come from bulk orders to large-scale clients, which typically have lower margins. We estimate the private sales rate to be around 0.66x, flat compared to the same period last year.
“Bellway is clearly making progress in revenue growth, driven by increasing volumes. Achieving this growth through bulk orders is no bad thing, but management will need to focus on expanding margins. Both volumes and profit remain well below 2022 levels. While the company and the housebuilding industry are on the road to recovery, there is still a long way to go.”
