Bellway s latest update further adds to the positivity around housebuilders

Bellway’s shares went up today (26th March), on the back of the company’s decent first-half numbers.

Housebuilders have certainly been enjoying something of a good run lately, and the latest market update from Bellway will, no doubt, further add to investors’ positive sentiment on the sector.

For its half year ended January, the company took revenue of around £700m, representing a 39.5% increase over the previous year.

That was thanks to the sale of 3,245 homes during the period, up from 2,597 sold the year before.

Adding further to the boost was the 13% increase in average selling price (£212,071 versus the previous year’s figure of £187,426), partly fuelled by higher prices in the south where UK-based Bellway has strong focus.

Pre-tax profit for the period came in at £104m, that’s a remarkable 73% increase over last year’s figure of £60m.

The company’s outlook appears healthy.

Rates of reservations in the six months to January, according to the company, averaged some 137 per week – compared to 97 per week the year before.

Additionally, as at 9th March, the housebuilder’s forward order book had grown in value to around £830m, representing 3,944 homes and a 63.5% increase over last year. That’s helped the company’s confidence in forecasting a 20% sales volume growth for the current fiscal year.

All of this is predominantly thanks to the UK government’s Help to Buy scheme, which has been discussed previously, including its extension to 2020 (it was previously set to end in 2016) – which certainly buoyed investors’ existing upbeat view of the sector.

Bellway and peers are keeping shareholders happy

Bellway is not alone. Certainly, other players in the sector (including Taylor Wimpey, Persimmon, Barratt Developments, Bovis Homes and Crest Nicholson) have benefited from strong momentum in the recovering UK housing market.

All have equally posted decent results, which have been followed by dividend hikes and – in some cases – proposed additional cash hand-outs to shareholders. Meanwhile, all have, unsurprisingly, seen their valuation on the rise over the last two or so years.

That said, it’s the case that some are riding somewhat higher than others.

Bellway’s valuation of around 12x forward earnings, for instance, is just under 2% above Bovis Homes’ but some 14% below Barratt’s.

Potential risks exist, however…

To be sure, certain likely factors (interest rate rise – to name but one) in the medium-long term threaten to put the brakes on the strong run currently enjoyed by these companies. Another possible risk has been highlighted here previously. But, for now, the story looks intact for Bellway.

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