London February 8 2022: Bellway, a UK based construction company, stated in its half yearly trading session update that the average selling price for rose by 2.8% to £311,800 (2021 - £303,206) and is now expected to be over £300,000 for the full financial year (31 July 2021 - £306,479), an improvement compared to previous guidance, driven by mix and pricing benefits.
Customer demand for Bellway high quality, family homes is strong across the country, with site visitor numbers and website traffic both ahead of last year.
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The overall reservation rate rose by 5.8% to 202 per week (2021 - 191) and the average weekly private reservation rate was 162 (2021 - 156), an increase of 3.8% against the prior half year. This has been achieved from an average of 247 outlets (2021 - 278), with the strong sales rate resulting in some sites trading-out earlier than expected. Outlet growth is expected in financial year 2023 as planning permissions are obtained on sites acquired over the past 18 months. The cancellation rate remained low, at 13% (2021 - 14%), and the use of Help-to-Buy fell to just 18% of total reservations (2021 - 41%), a marked reduction compared to previous years.
The pricing environment has been positive, with annualised, mid-single digit house price inflation benefitting sites across the country, particularly those developments on the edge of settlements, which offer more spacious, family housing, attractive to those customers with home-working requirements. Notwithstanding the recent, modest rises in interest rates and cost-of-living inflationary pressures, our mid-market product remains affordable in a historical context.
"We have continued our disciplined investment in land and enter the second half of the financial year with a strong order book and a backdrop of ongoing, positive trading conditions. Going forward, Bellway is on track to deliver its target volume growth of around 10% this financial year and further growth to around 12,200 homes in financial year 2023. Thereafter, our strong balance sheet and capacity to invest positions the Group well to continue its long-term and disciplined growth strategy." Says Jason Honeyman, Chief Executive
Bellway has delivered a good first half trading performance, with housing revenue expected to grow by more than 3% to around £1,775 million (2021 - £1,714.9 million). The number of completions rose slightly to 5,694 (2021 - 5,656), a new record for the Group, and slightly ahead of the prior half year, which benefitted from pent-up demand and elevated construction progress.
The order book is substantial, comprising 6,628 homes (2021 - 5,889 homes), with a value of £1,940.9 million5 (2021 - £1,625.3 million). This strong forward sales position means that Bellway is well-placed to deliver its full year target of growing volume by around 10%, to over 11,100 new homes (31 July 2021 - 10,138 homes). Completions will be weighted slightly towards the first half of the financial year and as was the case in financial year 2021, this reflects onsite construction progress.
The average selling price rose by 2.8% to £311,800 (2021 - £303,206), slightly higher than previously expected, with a greater proportion of private completions and positive pricing momentum both contributing to the rise. As a result of this upward momentum, the average selling price for the full year is also expected to rise above previous expectations, to over £300,000 (31 July 2021 - £306,479). As previously guided, the average selling price is likely to moderate slightly in subsequent financial years because of previously announced product mix changes intended to mitigate the end of Help-to-Buy.
The Group uses a range of commercially focussed initiatives, designed to improve, and preserve quality, while ensuring strong control of costs. Although supply chain inflationary pressures are being experienced throughout the wider sector, our strong commercial disciplines have helped to mitigate some of these increases. Together with positive sales price momentum in the wider housing market, this means that the underlying operating margin for the full financial is now expected to improve to above 18%6. The underlying operating margin will be greater in the first half of the financial year, which is in part a mix effect, due to a greater proportion of homes completing on higher margin sites. In addition, there will be a more efficient absorption of overheads because of the higher number of completions and the corresponding weighting of housing revenue towards the first half of the financial year.