Housebuilder Bellway says recent falls in mortgage rates have helped trading in recent weeks after its reservation rate fell by more than 30%.
The North East-based developer reported results for the six months to the end of January 31, in which it said trading had picked up in the early part of this year following the impact of higher mortgage rates and the end of Help to Buy last autumn, which had caused a 43.8% fall in the number of private reservations. Against a strong comparator period the year before, Bellway built revenues by 1.6% to £1.8bn with underlying operating profits falling 4.4% to £317.7m.
Despite headwinds identified as the end of Help to Buy, affordability worries for buyers and delays in the planning system, and a lower order book of £1.6bn vs £2.2bn, the firm launched a £100m share buyback. Bellway said funds were available partly because it had not yet made use of a 100,000-plot land bank meaning it did not need to spend in the land market.
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The firm reported a heightened 20% cancellation rate across the half year - including an average cancellation rate of 25% in the fourth quarter of 2022 - which it said reflected uncertainty in the market amid worries of economic downturn and the cost-of-living. Cancellation rates have since come down this year.
Speaking to BusinessLive, Bellway's finance director Keith Adey said the firm's focus for the foreseeable future would be on recovery from what he called a very difficult trading period. In October 2021, the company announced an ambition to build between 16,000 to 18,000 annually, "over several years", but Mr Adey said those levels were not "really on the agenda right now" in light of the more challenging market.
Bellway's group chief executive Jason Honeyman said mortgage finance for customers with a deposit was improving but the lack of affordably priced higher loan-to-value products was hampering first-time buyers. Mr Adey said cost-of-living concerns were thought to be affecting buyers at the lower end of the market and while Bellway's average home costs close to £320,000 the impact would be less pronounced for them.
On costs, the firm said high energy costs and some wage rises were still contributing to stubborn inflation with some signs of easing among certain trades.
Mr Honeyman said: "Bellway has delivered another strong performance, notwithstanding the challenging operating and trading conditions in the period. We have been encouraged by the moderate, yet sustained improvement in reservations since the start of January 2023, and the group remains on track to deliver volume output of around 11,000 homes in the full financial year (July 31, 2022 - 11,198 homes).
"Bellway's experienced team has a proven ability to adapt to an evolving economic backdrop. The proactive expansion of our land bank in recent years has provided vital strategic flexibility and our disciplined approach to capital allocation is reflected by the £100m share buyback announced today. The group has a robust balance sheet with strong cash resources and, combined with our strategic land holdings, Bellway has an excellent foundation to deliver long-term returns for shareholders."
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