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Bellway on course to meet expectations despite some margin pressure

“This has been another successful trading period for the group, during which we have made further disciplined investment in order to grow the number of sales outlets and build upon last year’s strong trading performance," said Jason Honeyman, Bellway's boss

Flats on fire in Barking
It was probably not the best time for Bellway to put out a trading update bragging about its five-star home builder status

Bellway PLC (LON:BWY), the company that built the flats in Barking that caught fire over the weekend, has seen a dip in its order book.

The housebuilder said the value of its forward order book had fallen to £1.64bn from £1.70bn in June of last year, reflecting the company’s planned growth in so-called “social housing” completions this year. Social housing offers a lower margin to the housebuilder.

The forward order book as at 2 June had risen by 2.7% to 6,312 homes (3 June 2018 – 6,144 homes), with 68% of these plots contracted.

The sales position giave the group confidence that Bellway is well placed its expectations with regards to earnings growth in the current financial year.

The period from the beginning of February to the start of June saw a 4.7% year-on-year increase in the reservation rate to 244 per week from 233 per week the year before.

The company said house prices generally remain firm but are not rising as rapidly as previous years, while at the same time cost increases continue to be experienced throughout the broader construction sector.

Bellway said its cost base remains well controlled and this has helped to mitigate some of the pressure on the gross margin.

“Customer confidence is resilient and despite the ongoing political uncertainty, the cancellation rate since 1 August has moderated to 12% (2018 – 11%), a reduction from the 13% reported in March at the interim results,” the company said.

In the wake of the fire in Barking, East London, the second bullet point in the company’s trading update noted that the company had retained its status as a five-star home builder.

The shares were down 0.3% at 2,818p in a rising market.

Quick facts: Bellway PLC

Price: 2304 GBX

Market: LSE
Market Cap: £2.84 billion

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