Housebuilder Bellway PLC (LON:BWY) has posted a robust rise in first-half profits and a solid dividend hike as it said “ongoing customer demand is strong” allaying any fears over the impact of the Brexit vote on its business.
The FTSE 250-listed firm reported a 9.3% rise in pretax profit to £247.6mln for the half-year to January 31 2017, up from £226.6mln a year earlier, as revenues rose to by 5.9% to £1.1485bn.
Bellway said it completed 4,462 homes over the half-year, up 6.5% from the 4,188 completed at the same stage a year earlier.
It added that its reservation rate had increased by 6.4% to 166 sales per week, up from 156 sales per week in the previous year.
The group said it expected the number of homes sold for the full financial year to rise by at least 5%, with the average selling price predicted to rise to around £260,000, up from £252,793 as at July 31 2016.
The group said investment in work in progress increased to £941mln, up from £792mln, providing a platform “to achieve further volume growth, this year and beyond.”
Bellway added that its forward order book as at March 12 was 18% ahead of last year at £1.415bn.
Brexit not meaningful …
The housebuilder’s chief executive Tom Ayres said: “The underlying pricing environment remains positive and values achieved on reservations were in line with, or modestly ahead of expectations.
“The rate of house price inflation has however moderated compared to this time last year and is less pronounced for higher value homes, particularly in London.”
He added: “With such strong demand, the wider economic uncertainty following the EU referendum has not had any meaningful effect on purchasers' willingness to acquire a Bellway property in those parts of the country where the Group operates.”
However, the firm said that the cost of employing workers was rising in the sector but that it was well-placed to deal with the trend, which some builders fear could be exacerbated by any immigration curbs imposed as part of Brexit.
Divi hike …
The group will pay an interim dividend of 37.5p, a 10.3% increase on the 34.0p paid a year earlier.
Bellway’s chairman John Watson said: "For the foreseeable future, the Board expects to maintain a full year dividend cover of around three times earnings as sufficient land opportunities remain available that meet or exceed the Group's required returns, resulting in further value creation for shareholders.
But, he added: “Bellway does, however, retain the ability to amend dividend cover should there be a substantial change in market conditions."
Estimates seen rising ...
In a note to clients, analysts at Liberum Capital pointed out: “Bellway’s H1 PBT grew by 10%, consistent with the statement given in February.”
They added: “Management has marginally increased its guidance for volume growth this year, but made clear that labour availability and the ability to hit construction schedules are the key constraints this year, rather than demand."
The analysts said they expect consensus estimates for 2017 to rise by around 2-3%.
Reiterating a ‘buy’ rating and 2,780p price target on Bellway, they concluded: “The shares are on an undemanding valuation if the status quo is maintained.”
In early trading, Bellway shares were up 2.5%, or 70.0p at 2,898p.
-- Adds broker comment, share price ...