Bellway’s shares increased by 5.92% to 527p in early trading after it said it was set to meet targets despite sales plummeting by more than a half in an “extremely testing” market.
In an interim management statement to the stock market this morning, the housebuilder said that cancellations in the last four months were at “historically high levels” of a quarter of all deals, and visitor traffic is down by 50%.
However, Bellway said that while sales were low compared to last year, they were in line with their sales targets for this year, and said it remained on track with its plans to cut borrowings.
The group said it is on target to reduce its borrowings from 31 July 2008 to 31 July 2009 by £100m, and said it “remains completely focused on conserving cash and positioning the business to benefit from any positive upturn in the market as and when it occurs.”
Between 1 August and 30 November, the group reduced its selling outlets, and is only selling 50-60 homes per week, half last year’s levels.
Bellway said it is in talks with the newly formed Homes & Communities Agency over buying unsold units for use as affordable housing, and estimated that the proportion of sales to housing associations was likely to increase beyond the 20% last year.
It warned that it would have to review the value of its land bank again in January if prices continued to be driven lower.
The housebuilder has frozen all new land buying for “the foreseeable future”, and said in the statement that land spending in the period had been restricted to legal commitment only.
Bellway’s order book at the end of November was £340m, compared with £677m in 2007.
In the statement the company said: “Since the group reported its annual results on 14 October, the trading environment has continued to be extremely testing as the market suffers from negative consumer confidence and restricted mortgage finance, despite the Government’s efforts to resolve the financial crisis.”
Bellway said that sales incentives are being used on “virtually every private sale” including cash incentives and part exchange.
Stockbroker KBC Peel Hunt said: “Bellway is doing the right thing – focusing on paying down its debt – in our view. It reaffirms that debt is on target to be reduced by £100m (to around £120m) by July, primarily through the reduction of completed stock and reduction in part exchange investment.
“Bellway is very much on the right side of the financial divide within the sector with very little financial pressure.”
