7th Jun 2024 10:24
(Alliance News) - Bellway's PLC encouraging trading statement was expected to prompt small increases to earnings forecasts, analysts on Friday said.
In a trading update for the four months to June 2, the Newcastle Upon Tyne, England-based housebuilder reported stronger trading through the spring selling season, with improved reservation rates compared to the first half of the financial year.
The company said it was now fully sold for the current financial year, with volume and margin guidance in line with previous forecasts.
Bellway said the private reservation rate per outlet per week of 0.62 increased by 6.9% compared to a year prior from 0.58.
The forward order book is at 5,346, down 13% from 6,172 a year prior but up 21% from 4,411 at the start of the financial year, Bellway added.
Bellway said it is on track to deliver around 7,500 homes this year, down 31% from 10,945 the year prior, and continues to expect a reduction in the underlying operating margin of at least 600 basis points from 16% a year ago.
The average selling price is now anticipated to be around GBP305,000, up 3.4% from previous guidance of GBP295,000 mainly due to changes in product mix.
"The group is now fully sold for the current financial year and given our strong outlet opening programme and healthy forward order book, Bellway is well-positioned to return to growth in financial year 2025," the company stated.
Bellway noted good levels of building material and subcontractor availability across the group, with limited overall cost inflation on new tenders.
But it explained that "while underlying cost pressures are currently far less pronounced than the prior year, the higher levels of inflation experienced on costs incurred in earlier periods, and carried in our work-in-progress, will be realised through the income statement for legal completions in the months ahead."
Liberum said it was "encouraged by the improvement in trading but would like to see this translating into an improving return on equity before rating the shares a buy."
The broker has a 'hold' rating on Bellway for now.
Peel Hunt noted volume guidance remains at around 7,500 but the average selling price guidance has increased from GBP295,000 to GBP305,000, mainly due to product mix.
With margins still expected to be at least 600 basis points lower than last year’s 16%, the broker sees operating profit to be GBP210 to GBP230 million.
With consensus of around GBP215 million, "this appears to be a minor upgrade," Peel Hunt said.
Peel Hunt has a 'hold' rating on Bellway.
Analysts at Davy Research agreed, predicting "modest" consensus upgrades.
Davy rates Bellway at 'outperform.'
Shares in Bellway rose 0.4% to 2,792.00 pence in London on Friday morning.
By Jeremy Cutler, Alliance News reporter
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