Bellway hikes dividend after profit increase

Bellway (LON:BWY) announce that proposed dividends will rise due to the house construction company’s pre-tax profits increase this year.

In Bellway’s preliminary results announcement their pre-tax profits had risen by 12.6% to £560.7 million helping the company to hike their dividend by 13% to 122.0p.

Revenue for Bellway has soared 14.2% to £2,558.6 million, as well as increasing the amount of plots acquired compared to the previous year, suggesting further growth could be on the horizon.

John Watson, Bellway’s executive chairman, said in his announcement that the strong growth is due in part to “an imbalance between the supply and demand for high quality new homes”.

This has been attributed to the interest rate cut to 0.25% by the Bank of England at the beginning of the year, as well as increased use of the Help to Buy scheme, with its use in completions by the company rising from 30 to 35%.

Bellway’s good performance is in contrast to the UK construction sector as a whole. The construction sector’s PMI – the sector’s indicator for economic health – fell for the first time in 13 months in September.

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said this was due to uncertainty caused by Brexit, shortages of materials in the construction sector and a rise in commodity prices caused by the weakening pound.

Further problems in the sector, according to Watson, is a skill shortage. This may well “place upward pressure on sub-contractor costs” in the future.

Bellway may however continue to go diverge from the trend of it construction sector peers. In the first nine weeks of the new financial year saw their reservations per week to continue to rise. Their order book has also risen compared to last year by 17.4%, as well as the rise in plots acquired mentioned previously.