Bellway PLC has released a trading update for the year ended 31 July 2023. The company reported housing revenue of around £3.4 billion, in line with previous guidance. Total housing completions were 10,945 homes, with an average selling price of £310,000. The underlying operating margin is expected to be around 16%, reflecting the effect of build cost and overhead inflation, extended site durations, and increased use of targeted sales incentives. The overall reservation rate reduced by 28.4% to 156 per week, and the private reservation rate decreased by 35.9% to 109 per week. The year-end order book had a value of £1,193.5 million, comprising 4,411 homes. The company's balance sheet remains strong, with net cash of £232 million and low adjusted gearing of 3%. The £100 million share buyback launched in March 2023 is progressing well. Bellway has retained its status as a five-star homebuilder for the seventh consecutive year.
Bellway's performance was resilient, with volume output and housing revenue in line with expectations. The company faced challenges due to macroeconomic uncertainty and cost of living pressures, which affected consumer demand. Affordability remained constrained by higher mortgage interest rates. The company expects underlying trading conditions to remain challenging in the near term. However, Bellway's strong balance sheet and experienced teams position it well to navigate changing market conditions and continue delivering high-quality homes to customers and returns for shareholders.
Customer demand was affected by volatility in mortgage interest rates. Sales rates were impacted by sharp increases in borrowing costs in the fourth quarter of 2022. Mortgage rates began to moderate in early 2023, but reservations in June and July were impacted by rising borrowing costs. The overall reservation rate was 28.4% lower than the prior year, and the average private weekly reservation rate reduced by 35.9%. The cancellation rate increased to 18%, driven by softer private customer demand. Availability of mortgage products remained good, but lenders' re-pricing activity affected the availability of mortgage finance at certain points during the year. The impact of rising interest rates was particularly acute for customers requiring a higher loan-to-value mortgage, exacerbated by the expiry of Help-to-Buy in England in March 2023.
Despite lower reservation rates, Bellway's volume output remained strong, with completions reducing by only 2.3% compared to the previous year. The overall average selling price decreased by over 1%, primarily due to a lower proportion of private completions. The year-end order book had a value of £1,193.5 million, comprising 4,411 homes.