Traditional two-storeys boost developer

DURING the debt-fuelled property boom, developers built endless blocks of flats. Many of these were located in so-called “regeneration” areas, downtrodden urban wastelands on the edge of Britain’s former industrial cities like Manchester and Sheffield; many now stand empty, a testament to the industry’s collective stupidity.

Part of the problem was central government-imposed housing density targets, which encouraged developers to build one-and-two bedroom flats rather than family homes.

These targets have since been scrapped by the coalition government, and Bellway yesterday thanked a shift away from apartments to traditional two-storey houses for “encouraging” trading in January.

All in all, it was a solid first-half performance, with completions up 3.8 per cent year-on-year. The average selling price was up from £156,000 to £168,000, and operating margins are up 100 basis points year on year. RBS estimates that profit was around 27 per cent higher, against guidance in the December statement for growth in the region of 20 per cent.

The outlook also appears to be improving. Bellway is the first in the sector for some time to report a higher order book, with orders up three per cent year-on-year to £402m.

Taken together with better first half sales, this suggests the group is being slightly too conservative when it says it expects volumes to be flat this year, although profit growth will largely come from recovering prices and higher margins. With the shares trading on around 0.72 times 2011 net asset value – bang in line with the sector – we would suggest cautious buying going forward.