Wednesday 25 March 2020 11:44 am

Coronavirus: Bellway scraps dividend and warns of 'substantial disruption'

Bellway has warned of a period of “substantial disruption” during the coronavirus outbreak, as it cancels its interim dividend to preserve its balance sheet.

Bellway said the coronavirus outbreak had threatened liquidity across the economy and as such, the board is taking immediate action to preserve the balance sheet. The housebuilder’s interim dividend will be postponed until there is more certainty.

New site acquisitions will also be paused and production expenditure will be shifted to focus on plots in the later stages of construction programmes.

In its trading update for the half year ended 31 January 2020, revenue increased 3.6 per cent to £1.54bn while pre-tax profit fell 7.1 per cent from £319.8m in 2019 to £297.2m. Housing completions rose 6.3 per cent to a record 5,321 homes.

In the six weeks since 1 February 2020, reservations increased 7.3 per cent to 278 per week. Reservations have fallen in the past two weeks as the introduction of measures to delay the spread of Covid-19 inevitably affect demand.

Shares are down 2.22 per cent.

David O’Brien, equity analyst at Goodbody, is confident in Bellway’s ability to bounce back from the significant disruption.

“From a liquidity perspective, Bellway are in a net cash position of just under £5m, with access to committed bank facilities of £545m,” he said.

“Although we don’t know the exact quantum of the land creditors due in the next 12 months, we do know that its land creditors totals £270m and that the group state that from a balance sheet perspective that it is in a strong position to withstand the likely disruption.”

Other housebuilders have taken similar measures to conserve cash amid the outbreak. Rival Hammerson has cancelled pay increases for its board, while Persimmon joined Taylor Wimpey in cancelling its dividend and closing the majority of their construction sites.

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