"This sounds bleak but is in line with the experiences of other large housebuilders. As with the other builders, sales pricing has remained relatively robust (-1%), which has provided support to company revenues"
According to housebuilder Bellway, it is considering closing its South Midlands and London Partnerships regions and reducing capacity in its Durham region. It is proposed that sites within these divisions will be transferred to other operating divisions.
It also said that the number of employees affected was a small percentage of its overall workforce of around 3,000 people. The business has begun consulting with those potentially impacted.
The firm said that in response to current market conditions, which have caused a slowdown in the sales market, proposals are underway to make some structural changes across the business.
Bellway added: “This includes the potential closure of two of our operating divisions, with sites being transferred to other divisions, a reduction in capacity in a third division and a limited number of role reductions across the business.”
The housebuilder said that between February 1 to June 4, its private reservations fell almost 30% on the equivalent period last year. It said it was “mindful” that uncertainty over interest rates and cost of living effects “could impact housing demand”.
Oli Creasey, equity research analyst at Quilter Cheviot, comments: “The financial year just finished (ending 31st July) looks like a relatively good one for Bellway. Housing completions and company revenue both fell marginally (c. -2% to -4%), despite the last 12 months being a challenging environment.
"However, this is partly a timing issue – many of the full year 22/23 sales will have been agreed before mortgage rates rose sharply, and the indications are that full-year 23/24 will be considerably more challenging for the company.
“The company’s private reservation rate has fallen by -36% during the year, and management stated that mortgage rates in June and July 2023 returned to the levels reached during the Liz Truss government, significantly impacting the volume of sales.
"We note that the order book (sales agreed but likely to complete in FY 23/24) has fallen around -40% year-on-year, suggesting volumes next year will be significantly lower. Bellway’s outlook statement acknowledges this, with completions expected to decrease materially.
“This sounds bleak but is in line with the experiences of other large housebuilders. As with the other builders, sales pricing has remained relatively robust (-1%), which has provided support to company revenues.
"The margin has fallen c. 250bps, largely due to inflation of build and other costs, but we do expect these inflationary effects to moderate in the coming year.”