Bellway fears COVID-19 will weigh on costs for years to come

Housebuilder Bellway has warned the impact of the coronavirus pandemic on production and costs, could mean years of lower profits.

In its latest trading update, the Tyneside-based firm revealed that it had sold 7,522 homes in the year to July 31, almost a third less than a year ago, as a result of site closures imposed during lockdown.

However, Bellway added that customers’ interest was increasing, with private reservations rising to 140 per week last month, compared with 162 per week a year earlier.

The firm also has a ‘strong order book’ comprising of 6,588 homes, compared with the 4,878 homes on order in 2019, with a value of £1,760.2 million3 (2019 – £1,223.9 million). 

Nevertheless, the housebuilder has warned that additional costs from longer times at work on sites because of reduced productivity and enhanced health and safety requirements would result in lower gross margin this year and for years to come.

Bellway said that it had incurred costs on several potential land deals that have been suspended because of the coronavirus pandemic. It said that it would continue to assess whether the sites remained financially viable as the economic impact became clearer. Meanwhile, it has agreed to purchase 14 additional sites.

The firm said: “Typically, these are expected to deliver a higher gross margin than usual, or Bellway has the right to withdraw from the land contract, should there be a deterioration in market conditions.”

Bellway sold a record 10,892 homes for an average selling price of £291,968 in the past financial year and reported profit before tax of £662.6 million, The Times reports. 

Its sales have been supported by the government’s Help to Buy scheme, which was accessed by 57% of its customers in the period since March 23.

Belway has asked its subcontractors to cut their rates by 5% in an effort to ease some of the cost pressures caused by COVID-19. The firm has also scrapped its interim dividend but said that it was keen to resume payments once there was more certainty over the economic outlook, assuming that the sales market stays active and that there is no resurgence of the virus.

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