Bellway sales revival brings cautious cheer

The group, which has a number of developments in Leeds as well as sites in Barnsley, York and Doncaster, said it is hopeful about trading in the coming months.

Bellway’s finance director Alistair Leitch said: “The early signs that we’ve had in January are encouraging.

“Can we keep that momentum going through to Easter? As long as we don’t have anything untoward happening to the UK economy or to the world political situation, then we should be okay,” he said.

He said this would give the group a good foundation to grow volumes back to the levels seen before the crash.

The group has seen a North/South divide and is selling more houses in the southern part of the country.

Mr Leitch added that the Yorkshire market has been tough. A regeneration site in Leeds which is dependent on first-time buyers has proved challenging.

But yesterday’s positive statement will come as a relief to the sector after a weak autumn trading period knocked sector confidence, which was further exacerbated by the wintry weather in December.

Analysts at Panmure Gordon said in a note: “Bellway notes that visitor levels and reservations since the start of January have been encouraging. The sector may see some relief on the back of this.”

Shares in Bellway closed up nearly three per cent last night, a rise of 18p to 657.5p.

According to recent data, construction activity and house prices also bounced back in January, which helped to lift confidence in the wider economy and allay fears that there could be a double-dip recession.

But the outlook for the year is muted as economists predict the housing market will continue to soften this year, with economic uncertainty and a struggle to access credit deterring buyers from entering the market.

Bellway, the UK’s fifth biggest homebuilder by market value, said it completed the sale of 2,332 homes in the six months to the end of January, an increase of 85 on the 2,247 completed the previous year.

The average selling price rose eight per cent to £168,000 as the company shifts its product mix away from flats towards to traditional two-storey home sales, although it was also helped by greater market stability than last year.

“Housebuilding is as much about location, location, location,” said Mr Leitch. “Even in the depths of recession, if you bring a location that is deemed to be desirable, people will buy.”

Bellway said: “Whilst site visitors and reservations were obviously hampered by the cold weather in December, the number of visitors and subsequent reservations since the beginning of January has been encouraging however, four weeks is too short a time to consider revising our forecast for the full year.”

The company said in December that half-year profits to January 31 were expected to rise 20 per cent after better-than-expected reservations following the Government spending review.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said Bellway was seen as a “likely winner” despite general market nerves over the impact of austerity cuts on the sector.

He said: “The group’s more prudent management coming in to this downturn has shielded it from the worst of the crisis, with the company now reaping the benefits over rivals, acquiring land at discounted levels and potentially cementing future profitability.”

Bellway said profit margins were benefiting as sales from cheaper recent land deals kicked in.

The group, which reports interim results on March 30, added its forward order book stood at 2,343 homes – worth £402m, up from £390m a year earlier.

Arbuthnot Securities repeated its “buy” rating on the stock.

“Bellway is well placed to deliver in the current market uncertainty, with balance sheet strength, land bank depth, good exposure to London and the South East and a conservative highly regarded management team,” said analysts at Arbuthnot in a note.

“Despite a decent recent share price rebound, we believe that the current price does not reflect the ability of Bellway to continue to progress the margin, even in the absence of an improvement in the market.”

stay-at-home sellers shift balance

There have been fears for the housing market in 2011 once public spending cuts bite, with some economists predicting falls of up to 10 per cent.

Halifax offered some relief last week when it said prices rose 0.8 per cent in January, but this was seen largely as a bounce-back after a 1.3 per cent drop in December’s snow.

Halifax said the average cost of a home in Britain rose to £164,173 last month.

The mortgage lender said 2011 house prices would be constrained by consumer caution, with spending cuts and tax rises hitting confidence.

But it noted that fewer sellers coming on to the market would help to support prices by shifting the demand and supply balance.