British housebuilder Bellway has lowered its expectations within its earlier profit guidance, citing weaker customer demand and rising costs that have continued to affect the UK housing market. The company now expects underlying operating profit of around GBP 320 million for the financial year ended in July, compared with its earlier guidance range of GBP 320 million to GBP 330 million. Bellway is scheduled to publish its full-year results in October. 
The company said the near-term market outlook remains uncertain as affordability pressures continue to affect buyers. Customer demand had shown some improvement during the spring selling season but weakened from April as mortgage rates increased. Bellway also faced uncertainty around government tax measures during the previous autumn, adding to the difficult trading environment. 
The wider UK housebuilding sector has been dealing with a combination of affordability concerns, higher borrowing costs and increased construction expenses. Against this backdrop, builders have been more cautious about acquiring new land and have slowed the pace of some construction activity. 
Bellway said it has been focusing on completing homes already under construction to generate cash, while maintaining a highly selective approach to new land purchases. The company had already indicated earlier in the year that it was following a disciplined approach to land acquisition. Its February trading update showed that the forward order book had also been below the previous year's level, reflecting the pressure on demand. 
Despite the difficult market, Bellway completed 9,695 homes during the year, exceeding its earlier guidance of between 9,300 and 9,500 homes. The higher number of completions was supported by strong bulk sales. The company's housing completions had stood at 8,749 homes in the previous financial year, meaning the latest figure represents an increase of nearly 11%. 
Housing revenue also increased by more than 13% to around GBP 3.14 billion, while the average selling price rose to about GBP 324,000 from GBP 316,412 a year earlier. Bellway said the increase in average selling price was mainly linked to changes in geographic and product mix rather than a broad increase in house prices. 
The company's forward order book, however, declined to GBP 1.20 billion, compared with GBP 1.52 billion a year earlier. It represented 4,206 homes, down from 5,307 homes in the comparable period. The decline indicates that demand remains a concern despite the stronger number of completed homes. 
Bellway also reported adjusted operating cash flow of more than GBP 850 million, ahead of its earlier guidance of GBP 750 million to GBP 800 million. The company has announced a further GBP 50 million share buyback after completing its existing GBP 150 million programme. 
Quilter analyst Oli Creasey said the higher-than-expected completions were positive, although he noted that the scale of the improvement may not be enough to generate a strong investor response. Bellway shares fell by more than 1% in early trading following the update. 
Bellway chief executive Jason Honeyman has renewed calls for the UK government to take steps to improve housing affordability. The company is seeking a reduction in stamp duty, the tax charged on property transactions, along with greater support for first-time buyers. 
Honeyman also called for measures to support the delivery of affordable and social housing, saying the government should improve access to housing across different segments of the market. The company sees support for first-time buyers as one way to help address affordability pressures that are keeping some potential buyers out of the market. 
The government has ruled out plans to reduce or remove stamp duty in the forthcoming budget, which is due later in October. This leaves the housebuilding sector facing continued uncertainty over whether any measures will be introduced to improve buyer affordability. 
Bellway's latest performance follows a period in which the company had already been adjusting its strategy to deal with weaker market conditions. Its previous annual results showed that the company was targeting higher housing volumes over the following years, with a longer-term ambition of around 10,000 homes a year by 2028, subject to more stable market conditions. 
The company's current approach is therefore focused on balancing housing completions and cash generation with tighter control over new land investment. With the forward order book lower than a year earlier and mortgage costs continuing to influence buyer decisions, the pace of demand recovery will remain important for Bellway's performance in the coming financial year. 
Source Reuters