Builder Bellway may divide Scottish arm

Bellway: considering Scottish arm split. Picture: PA

Speaking after reporting a 75 per cent jump in annual profits, chief executive Ted Ayres said that if the market remains strong the group could soon be back to pre-recession completion levels north of the Border.

However, expansion is likely to be dependent on the Scottish Government providing more funding for its Help to Buy scheme after the current allocation runs out next year.

“Scotland has been one of our best-selling divisions over the last six to nine months,” Ayres told The Scotsman. “We’ve seen sales go up and profits go up and that’s given us the confidence to buy more land.”

The company has acquired sites at Cumbernauld, Dalkeith and Winchburgh, and expects to sign a deal for land at Kilmarnock soon. Ayres said the firm was still able to buy land within its target margin levels and saw scope for further expansion.

Before the financial crisis, Bellway was building about 800 homes a year in Scotland, through two divisions centred around Edinburgh and Glasgow.

A collapse in demand for flats forced it to rethink, with output falling as low as 300 in 2008-9 and the two teams being merged into one. But the group re-focused its operations, concentrating on “traditional” two-storey houses in Central Belt locations.

After a boost from the introduction of the Scottish Help to Buy scheme, Ayres says the firm should build around 600 homes in the current financial year.

He added: “It looks as though there’s a possibility to take that further.”

The firm opened two further divisions in England last year, and Ayres said that, providing market conditions remain strong, the company will look to add two or three more in the years ahead. Returning Scotland to its former east-to-west split is one of the most likely possibilities, creating dozens of jobs in back-up functions as well as more building site work.

But with Scottish Help to Buy accounting for 30 per cent of sales and just £100 million still to come for the scheme – the first tranche of £140m was snapped up quickly – an extension beyond 2016 will be essential to preserve growth.

Ayres was speaking after Bellway posted record annual profits and said it is well placed for further growth after strong trading in recent weeks.

The Newcastle-based company beat forecasts with profits of £245.9m in the year to 31 July, up from £140.9m 12 months earlier.

Bellway added that in the first nine weeks of its current financial year its forward order book lifted to a record £975.3m, and that it expects to grow volumes by some 10 per cent this year.

There have been signs the housing market is cooling with the annual rate of house price growth slowing in September to 9.4 per cent from 11 per cent the month before, according to mortgage lender Nationwide.

But Bellway said in the nine weeks since 1 August its reservations have averaged 128 per week, against 122 a year ago.

Ayres said the market had now stabilised into a “traditional seasonal selling pattern” but he thought the firm could continue growing by about 5 per cent in subsequent years by taking market share from its three largest rivals.

Analyst Chris Millington at Numis said the results were ahead of expectations and he was “encouraged by the commentary”.