Bellway cuts jobs amid housing gloom

Published 14th Aug 2008

Bellway, the Newcastle-based housebuilder, added more gloom to the housing market this morning as it announced that reservations had fallen by around 45 per cent for the second half of the financial year when compared to the same period in 2007.

Setting the scene for a string of bleak half yearly results from the housebuilders, Bellway reported that completed sales had fallen by 14.2 per cent from the previous year as lenders restricted finance to home buyers. Meanwhile the average selling price of Bellway houses reduced from £173,300 to approximately £169,000, as a higher proportion of cheaper housing association properties were built.

However, Bellway said it was confident that it would escape the widespread land write-downs that have hit other housebuilders as its operating margins are only expected to be 3 per cent lower than the 18.7 per cent achieved last year.

John Watson, chief executive, said: "At this point we are still showing a 15 per cent margin, so why do we need a write-down? There may be some sites we bought last year that will show a lower margin than that but we do not need to write-down across the board."

Mr Watson said he could see no immediate end to the mortgage crisis that had triggered the sharp fall in new home sales. "Most of next year is going to be very difficult. We will batten down the hatches and try to keep going on the current overhead but if things get worse we will have to cut more jobs," he said.

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."

The Newcastle-based housebuilder, which focuses on the cheaper end of the market, has increased the percentage of social housing it builds for housing associations to 20 per cent of its volumes, to cushion it against the market.

In stark contrast to some of its rivals, its gearing is also just 23 per cent. "At that level we have no worries about covenants," Mr Watson said. However, Bellway has stopped buying land and has imposed tight controls on its cash to protect it from a further deterioration in sales.

Bellway said it had knocked around 6 per cent off the average prices in the final two months of its financial year to secure sales. It has also offered other incentives, such as including curtains and carpets within the asking price.

Potential buyers were left with hefty shortfalls after lenders revalued properties down as house price falls gathered pace in June and July, according to Bellway. It said cancellation rates soared to “unprecedented levels” in the summer months.

In June, Bellway announced that it had cut 250 jobs – around 8 per cent of its workforce. Many of its peers have already announced huge job cuts with more than 5,000 job losses in June.

Alistair Leitch, finance director of Bellway, told Times Online: "There's still much less activity and lower consumer confidence. We think there will be a three to six month lag before people come back to the market. Talk about stamp duty being put on hold doesn't help as it's delaying people."

He said he is confident that Bellway would still meet analysts' predictions for its profits this year and continued to pay planned dividends to shareholders.

Source: ' Times '

View All Latest News