Firm suffers hit from pandemic and “legacy” fire-safety issues, but reports strong sales rebound
Pre-tax profit at Bellway has slumped by two-thirds in the wake of the coronavirus pandemic, which followed a huge one-off bill for bringing old schemes up to new fire-safety standards.
Announcing financial results for the year to July 31, Bellway said pre-tax profit fell 64% to £237m, on revenue of £2.23bn. This was down 31% on 2019, in a year “significantly affected” by the pandemic.
However, the firm said the results were also affected by a £47m charge to pay for owners of “legacy apartment schemes” – tower blocks completed by Bellway in previous years – to undertake fire-safety improvements.
The firm said its “robust” balance sheet and current strong trading meant that it was able to reinstate dividend payments, albeit at half the level anticipated prior to the crisis.
The firm said the number of sales it had made since the start of the new financial year in August was up 31% on the same period in 2019, though it did not say how many sites that was from. Construction productivity now sits at between 85 and 90% of its normal pre-pandemic level.
Bellway said it now expected the business to complete sales of around 9,000 homes this year, which would represent a 20% rise on the number completed in the covid-hit 2020 figures. However, this would still be around a fifth below the number of homes completed in 2019, before the pandemic struck.
Jason Honeyman, group chief executive, said the firm’s “exceptionally strong” forward order book meant it was resilient in the face of deepening trading risks, given reduced mortgage lending at high loan-to-value ratios making buyers more reliant on government assistance.
He said: “Output for the full year will depend upon the continuation of sales demand, which could be affected by sector-wide risks such as rising unemployment and the forthcoming changes in both the stamp duty and Help-to-Buy rules.
“The board also recognises the risk posed by the uncertain outcome of future trade deals with both the European Union and the rest of the world.”
Bellway said the provision for fire-safety improvements to existing tower blocks followed the publication of new government advice for building owners in 2020. This had prompted site-by-site assessments of its portfolio of “legacy” apartment schemes.
It said it was still in the process of ascertaining legal liability for the costs and that, with that ongoing, the charge was “part of its commitment to help building owners where fire remedial works are required”.
Honeyman said: “There is a structural shortage of new homes in the UK. Beyond the period of recovery, Bellway, with its long-term approach, operational strength and focus on quality, is well set to continue its long track record of delivering growth.”
David O’Brien, equity analyst at Goodbody, said: “Bellway has issued a solid update as demand continues to be robust in the UK housing market.
“Reservations are up by over 30% in the first nine weeks of the financial year as build rates have returned back to 85-90% of normal levels. Further, it is a positive step that management is confident enough to re-instate some sort of capital returns.”