(Image: Bellway)
Bellway has increased revenue, profits and cash generation despite ongoing challenges in the UK housing market, but has simultaneously warned investors to expect lower housing output and further pressure on margins in the year ahead.
Just three months ago the housebuilder declined to provide guidance beyond the current financial year. It has now offered its first detailed outlook for the 12 months to the end of July 2027, forecasting housing completions of between 9,000 and 9,400 homes, down from the 9,695 this past year, while warning that operating margins are expected to fall further.
The figures for the year just ended were otherwise sold, with revenue up 13.6% to £3.16 billion, helped by a 10.8% rise in housing completions. Underlying pre-tax profit increased 5.7% to £305.7 million, while reported pre-tax profit rose 21.8% to £270.2m.
One of the strongest performances was in cash generation, with adjusted operating cashflow jumping 36% to £868.6m. Bellway ended the year with net cash of £157.7m, compared with £41.8m a year earlier.
Chief executive Jason Honeyman said the group had "delivered a robust performance, growing both volume output and profits despite ongoing challenges across the housing market".
"Our continued focus on operational improvement and capital efficiency has enhanced resilience, driven a significant 36% increase in adjusted operating cashflow and supported higher shareholder returns," he added.
The stronger financial position has enabled Bellway to announce a further £150m share buyback programme. Combined with dividends and previous buybacks, the company expects to return around £450m to shareholders.
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The proposed annual dividend has been increased by 7.1% to 75p per share.
Adam Vettese, market analyst at eToro, said the key takeaway from the results was not the increase in housing output but the company's financial strength.
"A sharp rise in operating cash flow left the group with a stronger net cash position, which in turn underpinned both a higher dividend and a £150m buyback programme for the year ahead," he said.
He added that Bellway's ability to return cash to shareholders while maintaining low gearing distinguished it from some rivals that remain focused on strengthening their balance sheets. However, he also cited softer reservation rates, a weaker order book and management's expectation of lower completions and margins next year as evidence that housing-market headwinds have not disappeared.
During the year the company contracted to purchase 8,578 plots across 35 sites, including a major development comprising around 1,900 plots within the Dunfermline Strategic Development Area. Bellway said the site would act as an "anchor site" supporting future growth across its two Scottish divisions.
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However, the outlook for next year suggests conditions remain difficult across the sector.
Bellway expects lower completions in the coming 12 months, continued pressure on customer affordability and build-cost inflation of between 3% and 4%. The company also expects underlying operating margin to decline further from the 10.1% reported for this past year, down from 10.9% the previously.
Recent trading has remained subdued. Private reservation rates have softened and the value of the forward order book has fallen to £1.44bn from £1.53bn a year earlier.
Victoria Scholar, head of investment at interactive investor, said Bellway had delivered revenue ahead of market expectations and generated significantly more cash than analysts had anticipated.
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She said the improvement in cash generation had given the company scope to step up shareholder returns through the buyback programme, but also noted that underlying profit came in below forecasts.
"Meanwhile the Middle East conflict and this year’s energy shock have pushed up mortgage rates, creating consumer confidence and affordability pressures in the housing market," she said. "And with the Bank of England leaning towards a hawkish bias, those pressures show no sign of abating."
While Bellway welcomed the UK government's proposed Your First Home scheme and continues to point to a long-term shortage of housing across the UK, its latest guidance suggests that the recovery it hopes for remains some way off.