ii view: Bellway builds on demand momentum

First-half results to 31 January

• Revenue up 12.3% to £1.43 billion 
• Pre-tax profit up 19.9% to £140.8 million
• Interim dividend up 31.3% to 21p per share
• Net debt of £8 million, down from net cash of £77 million

Guidance:

• Continues to expect full-year build completions of at least 8,500, up from 2024’s 7,654 builds
• Forward order book of £1.58 billion (16 March 2025) up from £1.34 billion (17 March 2024)
• Continues to expect average selling price of £310,000, up from 2024’s £307,909

Chief executive Jason Honeyman said:“Bellway has delivered a strong first-half performance with good growth in volume output and profits. Underlying demand for our homes is healthy and we have been encouraged by the improvement in customer enquiries and reservations since the start of the new calendar year. 

“I am confident that, given our operational strengths and land bank depth, we remain very well-positioned to capitalise on the positive long-term fundamentals of the UK housebuilding industry, and Bellway will continue delivering the high-quality new homes the country needs.”

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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 more than 2,000 people and focuses on providing traditional family housing outside London and apartments in London.

For a round-up of these latest results announced on 25 March, please click here.

ii view:

Started in 1946, today the FTSE 250 mid-sized housebuilder competes against rivals including Vistry Group (LSE:VTY),  Barratt Redrow (LSE:BTRW) and Taylor Wimpey (LSE:TW.). The Ashberry brand is used on around 14% 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, a possible global trade war could raise unemployment and dampen consumer demand. Unlike rival Persimmon (LSE:PSN), Bellway does not make its own raw materials such as bricks and tiles, potentially keeping costs lower. Although relatively small, net debt of £8 million sits against a previous net cash position. A forecast price earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap, while an estimated dividend yield of around 3% sits below forecasts of over 5% at peers Berkeley Group Holdings (The) (LSE:BKG) and Wimpey. 

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On the upside, some recent improvement in customer demand has been seen. An easing in planning regulations is being pushed by the government. A supportive land bank is held, while the previous acquisition of Redrow by Barratt Developments could yet see further sector consolidation.

In all, and despite continued risks, a consensus analyst estimate of fair value sat at over £31 per share will likely keep existing fans of this housebuilder sitting tight. 

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