- Completions and pricing exceed expectation for fiscal year that ended in June
- Forward order book starts to rise again helped by improved reservation rates
- Housebuilder expects completions to increase in year to June 2025
- Markets await PUSU deadline for Crest Nicholson bid, extended to 20 August
“The stock market is not (and cannot) always be right, but its views must always be respected and right now the share price chart for Bellway suggests that investors believe a gradual recovery in the UK housing market is underway,” says AJ Bell investment director Russ Mould. “The profits and dividends of the glory, glory, Help-to-Buy-fuelled days of the late 2010s may not be repeated in a hurry but Bellway’s trading statement flags improved reservation rates, a higher order book and expectations that completions will start to grow in the fiscal year to June 2025.
Source: Company accounts. Fiscal year to June.
“Chief executive Jason Honeyman understandably flags interest rate cuts and the new government’s aspiration to boost housebuilding volumes as potential positives but the increase in sales per outlet per week to 0.51 in the year to June 2024 from 0.46 in the preceding period offers some tangible sign of a turn, as does the increase in forward sales.
Source: Company accounts. Fiscal year to June.
“In some ways, Bellway needs to deliver higher completions and profits to maintain its share price momentum, as analysts are already looking for improvement in the year to June 2025.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts. Fiscal year to June.
“The sales and earnings expected for 2025 are way below the prior peaks of 2019 and 2022 and that is why the share price is nowhere near its 2020 high, either. A recovery may be expected, but profits are not expected to reach the levels earned when Help to Buy helped to fuel demand at a time when supply was constrained, with the result that prices and margins (and shareholder returns) flew higher.
“The prospect of a solid, if as yet unspectacular recovery, is reflected in Bellway’s valuation. The stock may not look too attractive on the basis of earnings or yield, but both profits and the dividend are relatively depressed thanks to the downturn, so appearances may be deceptive. On the basis of net asset, or book, value per share, however, Bellway is one of just two quoted housebuilders whose shares trade at a discount – accident-prone Crest Nicholson is the other, which may be why Bellway is trying to buy it, to boost its land bank and position itself for the next housing upswing as swiftly as possible.
Source: Company accounts
“Based on its current share price of £27.08p, and its offer of 0.099 shares and a 4p dividend for every Crest Nicholson share, Bellway is offering 0.9 times net asset value per share for its target.
“Barratt is also working towards concluding its bid for Redrow, although it must yet overcome Competition and Market Authority concerns to do so. Based on its current share price of 520p, and its offer of 1.44 shares for every Redrow share, Barratt is offering 1.27 times NAV for its target.
Source: Company accounts, Marketscreener, analysts’ consensus forecasts, LSEG Refinitiv data
“Bellway’s desire to pay in stock rather than cash is also understandable. Builders went into the 2007-09 downturn with a lot of debt on their balance sheets and that proved to be a frightening experience, so management teams who remember that period are now keen to maintain a greater financial buffer. However, aggressive land buying, generous dividends and a £100 million share buyback have worn down Bellway’s cash pile to the point where it expects to end the year to June 2024 with a tiny net debt position of £10 million. With the Great Financial Crisis and Covid still fresh in the memory, the board is understandably reluctant to take on debt and gear up the balance sheet again.”
Source: Company accounts, Marketscreener, consensus analysts' forecasts. Fiscal year to June.
