Bellway launches £100m share buyback as H1 profits fall
Bellway on Tuesday reported a fall in half-year profits against a tough economic backdrop and announced a £100m share buyback as customer demand improved in the current calendar year, helped by a seasonal uplift and a fall in mortgage rates.
Recent reservation rates are higher than those in the final quarter of 2022, although below a strong comparator in the prior year when people looked for larger houses during the Covid pandemic lockdowns.
In the six weeks since the February 1, the overall weekly reservation rate was 192, compared with 291 a year ago and the private reservation rate was 135 per week, down from 239 in 2022.
The company moved to build more social housing due to “elevated mortgage rates” immediately after the disastrous mini-budget of former prime minister Liz Truss which saw lenders pull thousands of mortgages from the market.
Underlying pre-tax profit for the six months to January 31 fell 4.6% to £312m. Revenue rose 1.6% to £1.8m and the company was still able to maintain its dividend at 45p a share.
"Housebuilders have had a difficult time over the last year with build cost inflation, the mortgage mayhem around the mini-budget last year, the cost-of-living crisis, rising interest rates and falling house prices," said Interactive Investor analyst Victoria Scholar.
"Shares in Bellway are down over 20% year-on-year, outperforming Persimmon which is down over 40% but underperforming Barratt Developments which is down around 12%."
"Nonetheless the housebuilders have had a strong start to the year, rebounding from last year’s losses as investors look towards the potential imminent peak of the rate hiking cycle and as buyers look to return to the market later this year as house prices and mortgage rates become more affordable again.”
Reporting by Frank Prenesti for Sharecast.com