Housebuilder Bellway sees profits rise but Ukraine war adds to cost pressures

Housebuilder Bellway has notched up higher half-year profits but revealed a further bill for high-rise fire safety works and cautioned over ongoing cost pressures amid the Ukraine conflict.

The Newcastle-based group reported a 9.8% rise in underlying pre-tax profits to £307.6 million for the six months to January 31 thanks to record completions of 5,694 homes.

It set aside another £22.1 million for fire safety works on potentially dangerous cladding on its tall buildings following the Grenfell Tower tragedy, bringing its total cost so far to £186.8 million since 2017.

The group said it will continue to see surging inflation, which it warned could be compounded by the Ukraine war.

It said: “Materials shortages, rising fuel prices and wage costs are expected to result in continued inflationary pressures in the year ahead, with these potentially exacerbated by the worldwide consequences of the crisis in Ukraine.”

But it said so far house price rises had been offsetting rising costs for the group, with average selling prices rising 2.9% to £311,849.

The group shrugged off concerns that the cost of living crisis and rising interest rates are set to dampen the roaring property market.

It said: “Customer interest and trading conditions have remained strong, with early indications suggesting that the underlying market demand will result in an upbeat spring selling season.”

Its order book has grown since the end of January, to 7,491 homes worth £2.2 billion as at March 13, against £1.6 billion a year ago, and weekly reservations rose 10.6% to 291 in the six weeks since February 1.

This puts it on track to sell more than 11,100 homes over 2021-22, up around 10% year-on-year, at an average selling price of over £305,000.

Group chief executive Jason Honeyman said: “The mortgage market is generally supportive and notwithstanding the recent, modest rises in interest rates and ongoing cost-of-living inflationary pressures, our mid-market product remains affordable in a historical context.”

The group’s cladding fire safety costs come amid a ballooning bill for the housebuilding sector following the Grenfell Tower fire, which killed 72 people in 2017.

Bellway said it had been able to recover £2.5 million of the latest increase in costs, with a total of £29.7 million recouped from suppliers, subcontractors and professional advisors “where they have fallen short of the standards required”.