Bellway upbeat as housing market ‘returns to normal’

BUILDER Bellway said the housing market was returning to “normal” across the UK, as it announced a further recovery in sales and profits yesterday.

The company recommended a 31 per cent hike in its final dividend after selling more than 4,900 homes in the year to 31 July, compared with nearly 4,600 the 12 months before, and said it expected to grow sales further in the current year.

It said reservations in the first nine weeks of the new financial year were almost 11 per cent ahead of the same period a year earlier, and at 30 September the group had an order book of £418.8 million, up from £396.7m in 2010. Chairman Howard Dawe said: “Against a backdrop of ongoing economic uncertainty, the housing market has stabilised.

“The group’s average weekly reservation rate rose during the early part of 2011 and did not fall until the summer months, thereby returning to a typical pattern for a normal housing market.”

He said that although London remained the “most resilient”, its divisions across Britain had seen volume increases, helping pre-tax profits grow 51 per cent to £67.2m.

In 2007, Bellway built more than 7,000 homes and soaring house prices helped it make profits of £240m.

Finance director Alistair Leitch said the company was pleased with the results and was “on the road to recovery”. He said the firm was working on rebuilding its margins, which it hoped would return to double digits in the current year.

Bellway believes it can build 6,000 homes without having to increase its corporate overheads, which should help it return to margins of around 12 per cent – the long-term average for the industry. But it is unlikely to see a quick return to profit levels of the boom years, when house price inflation added about 5 per cent to those margins.

Like many housebuilders, Bellway has shifted its emphasis from apartments to family homes, which pushed up its average selling price and helped turnover grow from £768.3m to £886.1m.

Scots-born Leitch said that despite a year of gloomy headlines on the economy and household finances, many families still needed to move home for work or other reasons, although speculative buyers were long gone.

“People are buying homes, not houses,” he said. “They are buying for all the right reasons.”

Turnover in Scotland topped £50m, up from £40m the year before and £30m in 2008-9. But Bellway’s sales volumes north of the Border are still only about half of what they were before the financial crisis.

Leitch said: “Scotland has started to pick up a bit. Since the summer, things have started to move ahead, we are quite encouraged.”

Bellway, which prides itself on having paid out to shareholders every year since 1979, is recommending an increase in its final dividend from 6.7p to 8.8p, producing a total dividend for the year of 12.5p, up from 10p last year.

The results were broadly in line with expectations, but Bellway’s shares still climbed 3 per cent on the news.

Analyst Jon Bell, at Shore Capital, said: “Bellway remains our preferred company in the sector, operating with a relatively short land bank, a strong balance sheet and continued focus on increasing volumes and margins.”