Fog lifting for homes giant Bellway
Oct 14 2009 by Karen Dent, The Journal
HOUSEBUILDER Bellway said it is poised to take advantage of the property market recovery, despite sliding into the red for the first time in its history.
A £66.3m land write-off pushed the Newcastle company into a loss, but it is focused on building again after spending £120m on land – enough to build more than 3,370 homes – in the last two months after clearing its debts.
The improving picture comes as Bellway revealed an annual pre-tax loss of £36.6m after exceptionals. Without the land write-down, it would have reported a £29.8m profit for the year to July 31, sliding from £34.8m in 2008.
Chief executive John Watson said: “We did that [write-off] in January. We’re not expecting to see that again in the foreseeable future. It’s a lot less than some of the other building companies. The market feels more stable than it was. There is still a problem for first-time buyers getting mortgages, but it’s steady as you go.”
The group, which axed about half of its 2,400 staff during the year, has concentrated on cash generation. It reduced debt to £36.8m from £217.7m then raised £43.7m from shareholders.
Mr Watson said: “This has put us into a cash situation – it’s a great place to be. We’re one of the few builders who can wave a chequebook.”
He welcomed signs of stability in the market, despite continued fears about unemployment and problems securing mortgages.
Annual property sales dipped by a third to 4,380 completions, with the average selling price down to £154,005 from £169,729. The lower prices meant turnover from house sales dropped 39% to £674.5m and the overall annual turnover fell by 40% to of £683.8m.
But reservations are currently 58% higher than a year ago and Bellway had secured 61% of its target output for the year by the end of last month.
Bellway used incentives “on virtually every home” and Mr Watson said the company would continue to do so.
Mr Watson said: “It’s stabilising but fragile. It’s not a fog, it’s a mist at the moment and it feels more stable than it was, but its still a problem for people getting mortgages.”
Vinay Bedi, divisional director at Brewin Dolphin, Newcastle, said: “The great thing from a shareholder’s point of view is the company has reduced debt, it is stable and it is well positioned to buy land.
“If you were to back any of the building companies to come out of this, Bellway would certainly be one of the companies on the shortlist.”
Bellway’s fall in profits but more positive outlook echoes recent results published by Barratt and Persimmon.
