29th Mar 2022 11:35
(Alliance News) - Bellway PLC on Tuesday flagged a potentially larger cladding-related provision than expected, among three key issues the housebuilder faces in the coming months.
Bellway shares were 4.8% lower at 2,475.30 pence each in London early Tuesday afternoon.
Historical cladding remedial measures could stretch back to a 30-year period, according to UK government guidance, Bellway warned.
"This is beyond the scope of our existing provision, and if agreed, it would require Bellway to extend the period covered by its assessment by a further 18-to-20 years and would result in a significant, additional provision," the company said.
Property developers in the UK must agree a GBP4 billion plan to fix dangerous cladding on low-rise flats, Housing Secretary Michael Gove said back in January.
Building cladding has been under scrutiny since the Grenfell Tower fire in London back in 2017. The blaze, which was started by a faulty fridge in an apartment, was fed by the tower's flammable cladding panels, killing 72 people.
Cladding is one of three issues Bellway faces, Third Bridge analyst Ross Hindle commented.
The other problems for the housebuilder come in the form of costs and hiring.
"Bellway was able to leverage the favourable pricing environment to offset rising costs, boosting operating margins to 18.7%. However, as inflation fears continue to accumulate and the cost of living soars, there is unease around how long the house price party can last. Our experts expect the market to cool off during the course of 2022 as interest rates and consumer confidence dampens," Hindle commented.
"Rising costs, staffing shortages and cladding issues remain the three of the key challenges facing Bellway."
In the meantime, Bellway posted robust interim results.
Revenue in first half ended January 31 climbed 3.5% to GBP1.78 billion from GBP1.72 billion.
Pretax profit was 9.8% higher at GBP307.6 million from GBP280.2 million a year earlier.
Bellway raised its payout by 29% to 45.0 pence from 35.0p.
Interactive Investor analyst Richard Hunter commented: "Bellway's confidence for its prospects is amply demonstrated by a rise of 29% to the interim dividend, which implies a yield of 4.9%, a clear invitation to income-seekers in the current environment.
"Unfortunately, and with the sector as a whole, the bears have been in the driving seat. Cost inflation, pressure on household incomes, rising interest rates and supply chain constraints have all clouded prospects, and Bellway is no exception."
Over the past 12 months, the stock has fallen 28%, compared to just a 0.3% fall in the wider FTSE 250.
Hunter added: "Even so...the general view of the company's prospects is optimistic, with the market consensus of the shares continuing to come in at a strong 'buy'."
By Eric Cunha; [email protected]
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