Bellway shares hit as full-year earnings outlook disappoints

Housebuilder Bellway has seen its shares come under pressure after cutting its profitability outlook and flagging volatility in the mortgage market due to the Iran war.

The Newcastle-based group said it was on track for full-year earnings of between £320 million and £330 million, up from £303.5 million the previous year but lower than the £334 million expected in the market.

It downgraded its full-year operating margin expectation to be similar to the first half at around 10.5%, having previously forecast 11%.

Shares in the group tumbled 12% in response.

Bellway also cautioned over risks to the market from the Middle East conflict as mortgage rates have already begun to rise, though it said it was not yet seeing any impact on homebuyer sentiment.

Chief executive Jason Honeyman said: “At this stage, the situation in the Middle East has not had a material impact on trading.”

He added: “The ongoing conflict in the Middle East heightens the risk of both inflationary cost pressures and an impact to customer demand, and we have already seen volatility return to the mortgage market.”

The availability of homeowner mortgages has shrunk by around a fifth (21%) since March 6, according to Moneyfactscompare.co.uk.

Its figures show that some average fixed mortgage rates have now topped the 5.5% mark, while the number of residential products to choose from has dipped below 6,000.

Russ Mould, AJ Bell investment director, said Bellway’s margin downgrade was a concern, coming before any hit from the Iran conflict.

He said: “The downgrades come even before any impact from higher bond and mortgage rates that may follow if oil and gas prices stay higher for longer than hoped and leave the shares no higher than 10 years ago.”

But Bellway offered some good news with a rise in forecasts for housing completions over the year to July, at between 9,300 and 9,500, against previous guidance for 9,200.

Average selling prices are also now expected to be up 3% for the year at around £325,000, up from £320,000 previously pencilled in, due to the types of homes sold.

Interim figures showed pre-tax profits edged 0.6% lower to £139.9 million in the six months to January 31 as revenues lifted 6.3% to £1.52 billion.

On an underlying basis, pre-tax profits rose 0.5% to £150.9 million.