ii view: housebuilder Bellway optimistic after spring bounce

Second-half update for four months to 1 June

• Private reservations per week and including bulks sales up 8.1% to 0.67 (2024: 0.62)
• Forward orders up 14% to £1.65 billion from early June 2024

Guidance:

• Now expects full-year build completions of up to 8,700, up from at least 8,500 previously
• Continues to expect full-year adjusted operating profit margin to approach 11%, up from 10% at last year end on 31 July

Chief executive Jason Honeyman said:

"Bellway has delivered a solid trading performance, and we are on track to deliver strong growth in volume output and profits in the full financial year. We have a healthy forward order book and outlet opening programme, which will serve as a platform for further growth in FY26.”

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ii round-up:

Headquartered in Newcastle, housebuilder Bellway (LSE:BWY) operates via 20 regional divisions across the UK. 

Group brands are Bellway, Bellway London and Ashberry. 

The company employs around 3,000 people directly and focuses on providing traditional family housing outside of London and apartments within London.

For a round-up of this latest trading update announced on 10 June, please click here.

ii view:

Started in 1946, the FTSE 250 mid-sized housebuilder today competes against rivals including Taylor Wimpey (LSE:TW.), Persimmon (LSE:PSN), and Berkeley Group Holdings (The) (LSE:BKG). The Ashberry brand is used on just over a tenth of active outlets, and typically on larger sites alongside the core Bellway brand, offering a choice of layouts and elevational treatments from the standard house type.   

For investors, higher costs resulting from US trade tariffs could have ramifications for global inflation, keeping interest rates higher for longer. A forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap. Net debt of £73 million as of early June is up from £57 million in 2024, while a forecast dividend yield of around 2.3% compares with over 4.5% at peers Taylor Wimpey and Persimmon. 

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More favourably, an improvement in customer demand continues to be seen, with the builder now fully sold for the current financial year to 31 July. An easing in planning regulations is being pushed by the government. The previous acquisition of Redrow by Barratt Developments could yet see further sector consolidation occur, while house prices remain broadly stable with Bellway’s average selling price for this financial year expected to be around £315,000. 

For now, and while risks remain, a consensus analyst fair value estimate close to £32 per share is likely to see investors remain supportive of this FTSE 250 housebuilder. 

Positives: 

• Hoped-for interest rate cuts
• Easing planning regulations 

Negatives

• Uncertain economic outlook
• Forecast dividend yield below some rivals

The average rating of stock market analysts:

Buy