Bellway PLC (LON:BWY) shares were downgraded by broker Peel Hunt a day after the housebuilder’s trading update.
The FTSE 250 group built 7,522 homes in the year to July 31, a 31% decline on the prior year, and of which 6,013 were delivered prior to the lockdown period.
Average selling prices were just above flat at £293,000.
This level of volumes and prices was slightly ahead of Peel Hunt analyst Sam Cullen’s expectations.
However, profitability is likely to be sharply lower than he had forecast.
Higher costs related to extended site durations and non-productive sites during lockdown are now expected to push the second half of the past year into a loss, while margins for the next year are “likely to be limited to the mid-teens”.
Running these changes through his forecasting model reduces earnings for the next financial year by 13% and lowers Peel Hunt’s target price to 2,720p from 2,840p.
This resulted in a downgrade to ‘hold’ from ‘add’.