Bellway cuts staff and merges Scots offices as sales tumble

Published on Thursday 14 August 2008 21:50

BELLWAY has merged its two Scottish divisions as part of 150 job cuts across the UK to fight off falling margins and sales.

The FTSE 250 housebuilder warned yesterday that in the past six months it had increased incentives to lure buyers, cut its selling prices by thousands of pounds and scaled back land purchases. Newcastle-based Bellway said completed sales in the 12 months to 31 July had fallen 14.2 per cent to 6,556, with average prices falling 4,300 to 169,000.

"Bearing in mind market conditions, and the fact that the cancellation rate increased to unprecedented levels towards the end of the financial year, we consider this to be a satisfactory performance," the company said.

But the overall picture was flattered by a stronger first half, with reservations in the second half down 45 per cent on the second half of 2007. An increase in incentives, such as cash towards deposits and free carpets, meant margins were likely to fall by as much as 3 percentage points, more than the 1-1.5 points it had earlier warned about.

A rise in the cost of finance and falling prices have been blamed for a major slowdown in housing sales, hitting UK builders across the board.

But Bellway finance director Alastair Leitch warned that such was the malaise in the sector that even if lending conditions quickly improved it was unlikely there would be "much activity at all" during the rest of 2008.

"We're in 'feel bad' mode. If there was such a thing as a feel-good index from nought to ten, we're at minus five at the moment," he said.

"So you could have a freeing-up of the credit situation in the next few months but it would take another four or five months before people believe it."

Leitch added that an already gloomy sector was "not helped" by the recent leak from Downing Street that the government was considering waiving stamp duty on house sales. "All that does is make uncertain buyers dither … They're saying 'Why should I commit now when there's going to be change?'" he said

Sales in Scotland in the year to 31 July were much more resilient than elsewhere in the UK, with legal completions falling just 3 per cent to 800. But despite the relative strength north of the Border, Bellway said it had merged its two Scottish offices as part of a trimming of regional divisions, which resulted in 150 redundancies.

Three years ago, the company, which then had an office in Hamilton, split Scotland into east and west divisions, opening a second office in Livingston.

The Livingston office has now been closed, but Leitch said the company had retained ownership with a view to a potential reopening in 2009 or 2010.

Hargreaves Lansdown analyst Keith Bowman said Bellway had set the scene for what was likely to be a "highly bleak" reporting season for housebuilders, but added the company may be in better shape than its rivals.

He added: "Given Bellway's more measured approach to growth over recent years, the company now appears to be reaping some benefit, as low gearing in particular, and an increased emphasis on social housing, look to be providing a more advantageous position over rivals."

Bellway shares fell 3 per cent.