Shares in Bellway PLC (LON:BWY) suffered subsidence on Thursday after the FTSE 250 housebuilder warned margins for its last full year would be lower compared to the year before.
In a trading update for the year ended 31 July, the firm said that while the pricing environment had remained “firm” over the year, the margin enhancing benefit of house price inflation had continued to diminish and as a result the company’s operating margin was expected to be lower than the 21.5% reported at the end of January.
However, profits were still expected to be in line with market expectations.
READ: Bellway on course to meet expectations despite some margin pressure
This did little to perk up investors, with the shares sinking 2.8% to 2,801p in early trading.
For the year itself, Bellway reported that it had completed a record number of 10,892 new homes, while revenues were expected to rise over 8% to nearly £3.2bn.
Looking ahead, the firm said it had maintained a “sizeable” forward order book of 4,878 homes as of 31 July, which carried a value of around £1.22bn and would allow it to deliver “more moderate growth” in the year ahead.
However, this was lower than the £1.3bn in new homes that the company recorded at the end of 2018.
Jason Honeyman, Bellway’s chief executive, said trading conditions remained “stable” for the firm with resilient customer confidence, which combined with the order book meant the firm was “well placed” to continue its long term growth strategy.
The company will release its results for the year on 15 October.
“No rush to buy”, says broker
In a note, analysts at Shore Capital retained their ‘hold’ rating and 2877p target price on Bellway’s stock, saying that while they expected a “surge” in the housebuilding sector on the back of fresh government intervention, most likely in September, the rally would risk starting from “lower share price levels” than what is currently being traded.
“There is a trade here but no rush to buy yet”, the broker said, adding that they saw better value in Bellway than among its large-cap competitors and believed that those still keen on having a weighting in the sector would have “good grounds for a switch” into the stock.