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Builders Margins Going Up

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I've always thought that the builders' shares were a good mirror of the housing market in general. Despite low volumes they seem to have changed their product mix to favour expensive homes throughout the 'downturn'. So even with little volume their margins are rising. Already we've had Barratt, Taylor Wimpey, and now Bellway reporting increased profits. It just doesn't look good for us.

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Bellway p.l.c.

Trading Update

Monday 7 February 2011

Bellway is today updating the market as to its trading performance for the six

months ended 31 January.

The Group completed the sale of 2,332 homes, an increase of 85 units, compared

to the six months ended 31 January 2010. The average sales price of these homes

has risen from £155,871 in the same period last year to £168,000, an

improvement of circa 8%. This increase, whilst aided by greater price stability

during 2010, is primarily a result of the change in product mix as Bellway

continues to change its focus away from apartments towards more traditional two

storey homes.

The operating margin is expected to exceed that achieved in the comparable

period last year of 6.1% by almost 100 basis points. This improvement in margin

should continue in the second six months as more recently acquired sites start

to contribute to completions.

Around £130 million (2010 - £76 million) has been spent on land in the period

and whilst Bellway is no longer in a net cash position, having £7 million of

net debt at 31 January, it remains soundly financed, having recently renewed a

bilateral facility of £150 million with Barclays, one of its banking partners.

This new facility expires in a variety of tranches up until December 2015 and

currently provides the Group with total facilities of £380 million.

In October, our main concern was the effect the Spending Review would have on

consumer confidence and, as already indicated in our last Interim Management

Statement, reservations to the end of November exceeded the Board's

expectations. Whilst site visitors and reservations were obviously hampered by

the cold weather in December, the number of visitors and subsequent

reservations since the beginning of January has been encouraging however, four

weeks is too short a time to consider revising our forecast for the full year.

Currently the Group has an order book of £402 million (2010 - £390 million),

representing 2,343 homes, of which 1,847 should legally complete by 31 July


The strength of this year's spring selling season should be more apparent, when

the results for the six months to 31 January 2011 are announced on Wednesday 30


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I know allot off people in construction trades and they all have the same story to tell ,and that is one of wages/price`s paid by the major builders are going through the floor ,spoke to a chippy the other day who is working on price and is struggling to make £300 a week and there is a que of people willing to do the job

this would suggest to me there margins are rising on the cutting of cost`s rather than increase in volume

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...This increase ... is primarily a result of the change in product mix as Bellway

continues to change its focus away from apartments towards more traditional two

storey homes.

This. They are therefore comparing apples with oranges.

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