Housebuilder makes £200m and is set to achieve forward sales target, despite market gloom

Housebuilder Bellway this week took a bullish view of the housing market despite recent negative industry surveys.

It emerged on Tuesday that the firm has already achieved forward sales and reservations for more than 50% of its £587m target for the financial year ended 31 July 2005.

Bellway’s good mood was boosted by its results for the year to 31 July 2004, hitting a pre-tax profit of more than £200m for the first time. Turnover rose to more than £1bn.

Bellway’s outlook for 2005 contrasted with recent industry surveys, including one published by the RICS on Tuesday, which have shown that most housebuilders are suffering from a slowdown that will continue next year.

The RICS said house values were falling at the steepest rate for nine years and the number of unsold properties had risen 8% over the past three months.

John Watson, Bellway’s chief executive, said: “I’ve got the opposite problem to what the RICS is saying. I can’t get enough property to the market because of forward sales.” Bellway has set a target of selling 10,000 a year by 2010.

Although Watson conceded that the market was softening, he said employment levels were such that he did not foresee a housing crash, as long as interest rates did not rise steeply in the next 12 months.

Pre-tax profit rose 21.4% to £205m, boosted by Bellway’s focus on lower to middle-value homes, which have been in more demand than luxury houses.

Watson said the average Bellway sale price of £161,400 was lower than its competitors, and that he did not want any division of the business to exceed an average sale price of £200,000.

Bellway is focusing on social housing, which should act as a further buffer to the slowdown in the private sector. It has started construction on a government housing renewal pathfinder scheme at Sefton in Liverpool, and has been selected as preferred bidder on another scheme in Solihull, West Midlands.

The board recommended a 25% increase in its total dividend of 25p a share. The company’s results were in line with expectations so shares remained little changed on Tuesday at 683p.