Housebuilder sets aside 拢45.6m to fix structural defect at project
Bellway鈥檚 profit has been dented by costs relating to structural defects at a high-rise residential scheme in south-east London.
Preliminary results for the year to July detailed the costs of a defective reinforced concrete frame at a historic scheme in Greenwich, which was first identified in the previous financial year.
The housebuilder has set the current provision for the cost of remediation work at 拢45.6m and expects the cash outflow to be over the next three years.
For the most recent financial year, Bellway set aside an exceptional pre-tax expense of 拢15.3m relating to the defect, of which 拢14.1m was recognised in cost of sales.
Bellway said the 鈥渟cope and extent of the required works鈥� had increased during the year as the remediation design and strategy evolved.
It said it had reviewed other buildings where the same third parties responsible for the design of the frame in the Greenwich development had been involved and found 鈥渘o other similar design issues with reinforced concrete frames鈥�.
鈥淲e are actively seeking recoveries in relation to the structural defect identified, but as these are not virtually certain at the balance sheet date, no reimbursement assets have been recognised,鈥� it added.
The expense contributed to a total 拢37m in legacy building safety costs, which hit the housebuilder鈥檚 pre-tax profit for the year.
Profit before tax stood at 拢183.7m, down 62% from 拢483m.
It said site profitability decreased in line with expectations, 鈥漚rising from cost inflation and the use of sales incentives, together with higher site-based overheads due to the generally slower sales market since the summer of 2022.鈥�
The profit figure was also impacted by 拢5.4m in aborted transaction costs related to its move to buy rival builder Crest Nicholson.
An offer proposed on 3 July would have seen Crest Nicholson鈥檚 shareholders receive 0.099 shares in Bellway for each share they own in Crest Nicholson.
Despite saying its plan to take over its smaller rival would deliver operational benefits, the larger business announced in the middle of August that it was backing away from the plan.
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Even without these exceptional costs, pre-tax profit would have been down 57.5% according to the firm.
Revenue was also down, by 30% from 拢3.41bn to 拢2.38bn, and home completions dropped by the same percentage, from 10,945 to 7,654.
The business attributed this 鈥渢o the lower starting forward order book and challenging trading conditions, particularly in the first half of the financial year鈥�.
Jason Honeyman, group chief executive, said the performance was 鈥渞esilient鈥� in light of the 鈥渃hallenging operating conditions鈥�.
He added customer demand through the second half had 鈥渂enefitted from a moderation in mortgage interest rates which has eased affordability pressures and supported an increase in reservations鈥�.
Private reservations rose 13.8% rose to an average of 124 per week.
鈥淭he combination of these improving trading conditions and our strong outlet opening programme has generated a healthy increase in the year end order book,鈥� he said.
鈥淎s a result, we are well-placed to deliver a material increase in volume output in financial year 2025.鈥�
Commenting on the new Labour government, Honeyman welcomed proposals to reform the planning system.
鈥淎gainst this improving backdrop and if market conditions remain stable, our operational strength and robust balance sheet, combined with the depth and quality of our land bank, provide an excellent platform for Bellway to deliver strong multi-year growth and to continue creating long-term value for all 鈥渙ur stakeholders.鈥�
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