Bellway reports record revenues ahead of slowdown in the housing market

Bellway (GB: BWY) reported preliminary results for 2022 with higher revenues – but warned of a weaker outlook due to slowing housing demand as mortgage rates rise.

Total revenue for the group increased by 13.3% to £3,536.8 million, which set a new record for the company. This was supported by 10.5% growth to around 11,198 completed homes, well ahead of the company’s expectations.

Despite the solid top-line performance, the company’s pre-tax profits took a hit and were down by 37% to £304.2 million.

However, this was mainly due to an additional payment of £346.2 million as part of a commitment to building safety after the Grenfell Tower fire tragedy in 2017.

Excluding this, the company’s pre-tax profits grew by 23% to £650.4 million, driven by higher selling prices in the UK housing market. The average selling price grew by 2.6%.

The company, however, warned of a tough year ahead with higher interest rates and mounting fear of recession.

The company said, “Given the backdrop of rising interest rates and wider economic uncertainty, the board currently expects to deliver volume at a similar level to the prior year.”

Aynsley Lammin, an analyst at Investec, commented, “Good results for 2022, but the market has clearly deteriorated markedly since the summer with the autumn selling season starting very badly.”

The shares were trading lower by 2.2% yesterday, having fallen 44% this year so far.

Is Bellway stock a buy?

According to TipRanks’ analyst consensus, Bellway’s stock has a Moderate Buy rating, based on two Buy and Three Hold recommendations.

The BWY target price is 2,819.4p, which has an upside potential of 58% from the current price level.

Conclusion

Bellway is the latest addition to the list of builders warning of a slowdown in housing demand. Various other builders have shown similar trends in their results.

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