Bellway cuts hundreds more jobs in savings bid
Aug 15 2008 by Iain Laing, The Journal
HOUSEBUILDER Bellway has cut more than a third of its North East workforce this year in an effort to save £100m as the property market continues to decline.
The Newcastle company admitted yesterday that it had axed 450 of its 2,500 UK staff and another 350 jobs at contractors this year already and was considering further cuts.
The job losses, which include 162 from its 450-strong staff in the North East, are almost double the 250 planned cuts it revealed when it issued a profit warning in June.
Bellway yesterday said its profit margins were being squeezed as it planned to cut the prices of its properties by up to 10%, or at least £15,000 on its average £169,000 home. But it said that the average cuts so far had been limited to 2.4% due to the strength of the housing association market. Finance director Alistair Leitch said margins would continue to fall towards 10% at worst before recovering in the next couple of years as the housing market revived.
He outlined the job cuts made so far this year and said more were possible as the company looked at wide-ranging savings as the house market staggers. The Royal Institute of Chartered Surveyors this week said sales per surveyor were the weakest since records began in 1978, while the Halifax said house prices had fallen by more than 10% in the last year and mortgage approvals were at record lows.
In addition, the Bank of England’s inflation data released on Wednesday hinted that interest rates would not be cut any time soon, leading to sharp falls in housebuilder shares.
Bellway chief executive John Watson said trading had not improved since its year-end in July. “The market’s not showing any sign of improving or picking up at all. It’s holiday season, so it’s difficult to say if what we’re seeing now is going to trend forward – we are just keeping our fingers crossed,” he said. Mr Leitch said that he expected it would be at least next spring before the market started reviving. He believes the North East market has not performed as well as hoped but that it is “neutral” and still stronger than Yorkshire and the Midlands.
The company is hoping its forward order book will help it weather the storm, although future sales stood at £370m as at July 31, down from £594m the year before and future home reservations had dropped 45%.
Bellway also moved to assure it was not in breach of its banking covenants, which are thought to be an issue with others in the housebuilding sector.
Indeed the 62-year-old company is still performing better than many of its rivals, with further pain expected when York-based Persimmon and rival Taylor Wimpey report their interim figures later this month.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “Given Bellway’s more measured approach to growth over recent years, the company now appears to be reaping some benefit, as low gearing (borrowing) in particular, and an increased emphasis on social housing, look to be providing a more advantageous position over rivals.”
Click on the links below to chart the progress of the company:
June 2008: Bellway jobs go in homes slump
March 2008: Bellway forecasts tough times
Share
