Bellway PLC (LON:BWY) has postponed its dividend as the coronavirus lockdown presents a “threat to liquidity” across the economy, but said it was still operating some construction sites.
The housebuilder said the government’s measures to prevent the movement of people to limit the spread of the epidemic created “a significant risk to production capability and customer demand in the weeks and months ahead”, with reservation rates already weakening in the last two weeks.
As well as postponing the decision on when to pay an interim dividend until later in the year, management are pausing new site acquisitions and have undertaken a “re-prioritisation of production expenditure to focus on plots which are in the later stages of construction programmes”.
“These measures are designed to preserve liquidity without impacting upon the long-term health and operational capacity of the business,” the FTSE 250-listed group said in an interim results statement that flew in the face of a two-week moratorium advised by the Financial Conduct Authority.
The balance sheet had net cash of £4.6mln at the end of January and was buffered by committed bank facilities of £545mln, along with an order book of £1.5bn at 8 March, comprising 5,772 homes.
Profit fell 7% to £291.8mln in the six months to 31 January as revenue rose 3.6% to £1.5bn.
“Longer term, the group has the ability to be highly cash generative should we enter a prolonged period in which land and work in progress spend are curtailed,” the company said, but the outlook “will be determined by the UK's ability to recover from the threat posed by COVID-19.”
Bellway shares fell another 2% to 2,023p by mid-morning on Wednesday, more than 53% lower then where they were in late February.
Broker Liberum said Bellway “is in a reasonably strong financial position”, judging the shares to be good value on 4.8 times historic earnings per share and 0.8 times book value, financial strength and track record.
Analysts at UBS agreed the company is "well placed to withstand the downturn", noting that its has the lowest adjusted gearing amongst mid-cap peers of around 14% versus a mid-cap peer average of about 28%.
"We think provides a solid buffer to withstand short-term deep hits to earnings potentially being protracted to the medium term."
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