Bellway cut its profitability outlook and flagged volatility in the mortgage market due to the Middle East conflict, according to major media reports. The company downgraded its full-year operating margin expectation to be similar to the first half at around 10.5%, having previously forecast 11%, major media said. Shares in Bellway tumbled 12% in response to the news, major media reported. However, Bellway is 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.
Bellway 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, major media reported. The availability of homeowner mortgages has shrunk by around a fifth (21%) since March 6, according to Moneyfactscompare.co.uk figures cited by major media. 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, Moneyfactscompare.co.uk figures show. Russ Mould, AJ Bell investment director, said Bellway’s margin downgrade was a concern, coming before any hit from the Iran conflict.
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, major media said. Average selling prices are 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, according to major media. 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, major media reported. Bellway's revenues were down 3.7% to £3.4 billion for the year to 31 July, according to research from four sources. Bellway's final dividend was unchanged at 95p per share, with total dividend unchanged at 140p per share, research indicates.
Conflicting reports emerged on Bellway's share price movement, with major media stating shares tumbled 12% in response to the news, while research from four sources indicates shares in Bellway rose around 1% in afternoon UK trading. This discrepancy could reflect different timeframes or market reactions, leaving uncertainty about the immediate impact on the company's stock. The contradiction highlights the volatile nature of market responses to corporate announcements amid broader economic tensions.
Bellway is targeting completions of around 7,500 homes, down from 2023's 10,945 homes, according to research from four sources. Bellway's sales for the nine weeks to early October were 133 per week, down from 191 per week in the same period in 2022, research shows. This decline in sales pace and targeted completions contrasts with the company's raised forecast for completions to between 9,300 and 9,500 for the year to July, indicating potential inconsistencies in reporting periods or metrics. The exact reasons behind these differing forecasts remain unclear, contributing to confusion about Bellway's future output.
Rivals Barratt Developments, Taylor Wimpey, and Redrow are all up by just under a tenth in 2023 so far, according to research from four sources. This performance suggests that while Bellway faces specific challenges, the broader housebuilding sector has seen gains this year, potentially reflecting varying strategies or market positions. The comparison underscores the competitive landscape in which Bellway operates, as it navigates profitability pressures and external risks.
Governor Andrew Bailey signaled there should be scope for some further reduction in Bank rate this year.
The FTSE 100 rose 83 points to close at 10,567, research from four sources indicates. Miners and defensives led the rebound in the FTSE 100, according to research. Mining and commodities stocks drove the FTSE 100 recovery, with Metlen Energy & Metals and Antofagasta among beneficiaries, research shows. Financials including St James's Place, ICG, Standard Life, and Aviva were higher, research indicates. Rolls-Royce was up over 4%, with HSBC and other banks rising over 1%, according to research. Shell and BP were among the big fallers, down 1.5% and 2.5% respectively, research says. Weir and Barratt Redrow were bottom of the list, down 10.9% and 2.5% following news from both companies, research reports.
Oil and gas prices eased, with Brent crude down to just over $81 a barrel and UK nat gas prices at 125p a therm, according to research from four sources. This decline in energy prices may provide some relief to inflationary pressures, though volatility persists due to geopolitical tensions in the Middle East. The easing contrasts with earlier spikes linked to conflict risks, highlighting the unpredictable nature of commodity markets amid global instability.
US stock indices generally opened higher, but the Dow Jones soon dropped into the red, down 39 points at 48,462, research from four sources indicates. The Nasdaq climbed 0.6% and the S&P 500 was up 0.1%, according to research. This mixed performance reflects ongoing uncertainty in global markets, influenced by factors such as interest rate expectations and geopolitical events. The divergence between indices underscores the selective impact of economic data and corporate earnings on investor sentiment.
The Bank of England left interest rates on hold at 3.75%, the Bank of England said. The Bank of England forecast GDP growth of 0.9% this year, according to the Bank. The Bank of England forecast unemployment to rise to 5.3%, the Bank reported. The Bank of England's rate decision was a knife-edge 5-4 vote, with governor Andrew Bailey having the casting vote, research from four sources indicates. The Bank of England forecasts inflation will fall to its 2% target this spring, the Bank said. An increase from 5.1% to 5.3% implies around 72,000 more people unemployed, research shows. The Bank is no longer saying that rates are on a 'gradual downward path', the Bank of England stated.
Bellway's financial performance and outlook present contradictions, with the company on track for higher full-year earnings yet reporting an 18% decline in adjusted pre-tax profit for the past year. Similarly, forecasts for housing completions and average selling prices vary across sources, with one predicting completions between 9,300 and 9,500 and another targeting 7,500 homes, while selling price estimates range from £325,000 to £295,000. These discrepancies suggest different metrics or time periods are being reported, potentially confusing assessments of Bellway's financial health and future trajectory. The lack of clarity on which figures are most current or reliable complicates analysis of the company's position in a challenging market.
The implications for the UK housing market and broader economy are significant, as Bellway's warnings about mortgage volatility and Middle East conflict risks highlight systemic vulnerabilities. Rising mortgage rates and shrinking product availability could dampen homebuyer demand, exacerbating existing pressures from inflation and economic uncertainty. The Bank of England's cautious stance on interest rates, coupled with forecasts for modest GDP growth and rising unemployment, suggests a fragile economic environment that may further strain the housing sector. Bellway's experience could signal broader challenges for housebuilders, particularly if geopolitical tensions persist and fuel inflationary cost pressures.
Unknowns remain regarding the specific measures Bellway is using to assess the impact of the Middle East conflict on mortgage market volatility and homebuyer sentiment. The exact reasons behind the conflicting reports on Bellway's share price movement, such as whether they refer to different trading days or times, are also unclear. Additionally, it is uncertain how Bellway reconciles the differing forecasts for earnings, completions, and selling prices across sources, including which metrics are most reliable. The extent to which rising mortgage rates and inflation are directly linked to the Middle East conflict, as opposed to other economic factors, remains ambiguous. Whether other UK housebuilders are experiencing similar financial pressures or outlook changes due to the Middle East conflict and market conditions is not fully known.