Bellway slips despite positive update
Housebuilding group Bellway (BWY) saw its shares slip on Tuesday as it issued a positive update for investors.
Completed sales reached 2,455 during the six months from 1 August 2011 to 31 January 2012 - up 5% on a year ago.
Bellway said the growth has been driven forward by completions of private sales, which have increased by 15%, seeing the proportion of private completions in the sales mix increase significantly. It noted that the average selling price of all completions across the UK was reflecting the overall trend in the market, rising 8.7% to £187,000, from £168,428 in 2011.
There was an increase in reservations up to an average of 89 per week from 205 sites - versus 80 per week from 185 sites last year. The order book stood at £423 million as it entered the second half of the financial year - up £21 million from the start of the financial year. The figures came alongside the group having already reserved or completed 83% of the years target.
The company's board said it was broadly satisfied with results given the economic environment.
With the expected launch of the government's new Mortgage Indemnity Guarantee (MIG) scheme soon and the approach of the traditionally busy spring selling season, the company believes that early indications point to resilience in the housing market.
The MIG scheme is expected to launch in March and will compensate lenders or investors for losses due to the default of mortgage loans, attempting to reinvigorate the lending environment and allow individuals to lend at more favourable rates than they can in the current economic climate.
The group has spent around £105 million on land and land creditors during the six months to the end of January, bringing its net debt to the £12 million mark - although the company has access to a £300 million debt facility which expires in tranches up to November 2016.
Analyst view
"A robust trading update from Bellway and a resilient outlook statement results in a small upgrade to our full-year forecasts," commented Mark Hughes, analyst at Panmure Gordon. "Although we rate Bellway a 'hold' for now, the business is undoubtedly a quality operator in the sector and we would flag share price weakness as an opportunity for investment.
"Today's statement also provides good sector read across, and we reiterate our key pick recommendations on Barratt Developments (BDEV) and Galliford Try (GFRD) ahead of results announcements at the end of the month," he added.
"On both prices and margins, the board flags that improvements will begin to slow but still make progress," a Peel Hunt research note stated. "The statement highlights in reference to the spring selling season that the comparables are set to get tougher as we have suggested. Bellway is always slightly more glass half empty than its peers but there are a number of cautious comments in here. We remain at 'hold' with a target price of 615p."
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