Pre-tax profits rose almost 10 per cent at housebuilder Bellway as a shortage of housing in the UK and the government’s Help to Buy subsidy scheme supported demand.
Reporting results for the six months to January 31, the FTSE 250 group said revenues rose 6 per cent to £1.2bn, thanks to a 7 per cent increase in houses completed. Bellway predicted the number of homes sold for the full year would be up 5 per cent on a year earlier. Pre-tax profits rose 9.3 per cent to £248m.
Ted Ayres, chief executive, said demand was “reinforced” by the national shortage of housing, adding that: “With such strong demand, the wider economic uncertainty following the EU referendum has not had any meaningful effect on purchasers’ willingness to acquire a Bellway property.”
High employment, low interest rates, and mortgage availability also supported demand, he said, as well as Help to Buy, in which the government offers first time buyers equity loans, savings accounts and mortgage guarantees.
However Mr Ayres warned that house price inflation had slowed compared with a year earlier, especially for more expensive London homes. The average selling price for private Bellway homes rose 4 per cent during the period to £291,000.
In London, Bellway said it was focusing on relatively affordable homes and that demand for these was “robust”. This stands in contrast to the market for more expensive homes, where estate agents are predicting falling prices. The average selling price of a Bellway home in the capital during the period was a “relatively low” £425,524.
The Office for National Statistics said on Tuesday that UK house prices rose less than previously thought — a 6.2 per cent rise for the year to January against predictions of 6.4 per cent.
The rise in house prices in the year to December was revised significantly downwards, from an initial estimate of a 7.2 per cent gain to just 5.7 per cent.
Mr Ayres said the impact of the start of the Brexit process, which is expected to be triggered next Wednesday, was unknown. But he said the most important factor affecting growth would be availability of skilled labour, which “continues to be a significant challenge to the wider construction industry”. Immigrants make up a significant proportion of the workforce of housebuilders but the government wants to cut immigration.
Bellway is raising its interim dividend by 10.3 per cent to 37.5p a share.
The company said it was targeting a dividend cover ratio of three times earnings and warned that it would “retain the ability to amend dividend cover should there be a substantial change in market conditions”.
Analysts at Davy said: “Bellway has seen very strong sales recently and is in a position to improve guidance on the back of this. The company should continue to post solid growth in at least the near term.”
Peel Hunt said the results were “solid” and in line with expectations, following a trading update last month.
Analysts at Liberum said that “labour availability and the ability to hit construction schedules are the key constraints this year, rather than demand”.
Bellway shares rose 2.5 per cent in morning trading to £28.98, their highest level in more than a decade.