Bellway issues Brexit warning despite record results
The housebuilder’s preliminary results for the year ending 31 July 2018 report the completion of 10,307 new homes, surpassing the 10,000 mark for the first time in its history, following nine consecutive years of growth in volume.
The previous year’s figure had been 9,644. The earnings per share were also at a record level, rising by 14.2% to 423.4p.
Revenue rose 15.6% to £2,957.7 million and profit before taxation was £641.1m - up 14.3% on last year. The group’s order book had a value of £1,469.5m at 30 September (1 October 2017 - £1,361.5m).
A strong performance in Scotland was highlighted with Bellway’s Scotland West division enjoying a “very successful” year, delivering 794 new homes.
Bellway said its new division in the East of Scotland will help drive further growth in the Scottish market.
However, Bellway flagged Brexit as a potential threat for the year ahead, saying the group was “mindful” the UK’s departure from the EU in March could “pose a threat to consumer confidence during the busy spring selling season”. The uncertainty surrounding Brexit and its impact on the UK economy “could significantly impact our ability to deliver our strategic objectives,” the group said.
In the event that market conditions remain unchanged, Bellway said it should be able to increase output in the year ahead.
“Assuming that market conditions remain robust, Bellway has a solid platform from which to further increase output in the year ahead,” the company added.
Meanwhile the firm revealed it has set aside nearly £6m to pay for recladding work to schemes found to fail rain screen fire tests.
Bellway said it has strengthened its processes and training relating to fire safety issues and will continue to develop these in the year ahead “as government guidance no doubt evolves”.
Chief executive Jason Honeyman said: “While we received Building Regulations approval for their use at the time, as a responsible developer, we are fully engaged with the government and our partners to develop solutions that protect our customers and future occupiers.
“Accordingly, the group has set aside a provision, net of recoveries, of £5.9m to deal with any likely remedial costs that may be borne by Bellway.”
Stephen Williams, equity analyst at Brewin Dolphin, said: “Bellway’s preliminary results came in marginally ahead of the expectations set in August’s trading update, with pre-tax profits and earnings both up 14% on a record number of completions. Gross margins were down a little, reflecting reduced receipts from selling freehold reversionary interests, and the company is investing in both IT systems and new divisions.
“One of Bellway’s new plans is the creation of a partnerships business in London to capitalise on the high demand for affordable housing from local authorities. The group also commented on the shortages of both skilled labour and key materials and is developing a more standardised product to alleviate costs. While it is mindful of the potential threat to consumer confidence following Brexit, current trading remains solid.
“Overall, the shares appear inexpensive, but management is bold in continuing to grow the business as the housing cycle approaches a cyclical peak. Nevertheless, Bellway’s balance sheet is strong and it should be better placed than some of its peers, with a relatively affordable, good quality product.”