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Housebuilder Bellway has said it is expecting to cut build volume by a third and see a near halving of profit in its current financial year, given weak demand for new homes prompted by high interest rates.

The listed builder, reporting results for the full year to July, said it expected completions to drop to around 7,500 in the current year, from 10,945 in the year just gone, and for its profit margin to drop by at least six percentage points.

The gloomy prediction came as the builder admitted it had laid off 5% of its staff 鈥� equivalent to about 150 people 鈥� in a recent restructuring exercise designed to shape the business for the current market.

However, Bellway also reported a 58.8% rise in statutory pre-tax profit for the financial year just gone, to 拢483m, with the comparison to the prior year boosted because of a 拢346m building safety charge impacting profit in 2022. Ignoring the exceptional charge, Bellway said underlying pre-tax profit for 2023 fell by 18.1% to 拢533m from 拢650m, on turnover down 3.7% to 拢3.41bn.

Bellway said the weaker trading seen in the 2023 year had continued into the current financial year, meaning it expected lower volume and profit in the year ahead.

It said private reservations per site per week in the nine weeks from 1 August were down to 0.41, compared to 0.58 the previous year, and that weak sales last year had contributed to a forward order book value of 拢1.23bn, down 41%.

The firm said: 鈥淕iven the reduced order book and prevailing lower reservation rates, there will be a material reduction in volume output in the current financial year.鈥�

It added that it was 鈥渢argeting to deliver completions of around 7,500 homes鈥�, and to end the year with a higher order book 鈥� compared to the 4,411 homes inherited this year 鈥� to 鈥渟erve as a platform for a return to growth beyond the current financial year鈥�.

>> See also Bellway to shut two divisions amid market 鈥榮lowdown鈥�

The firm, which reported a pre-tax margin this year of just over 14%, said it expected its margin to sink by around 600 basis points, and that its average sale price would reduce in the year ahead from the 拢310k reported this year to 拢295k, with the reduction 鈥減rimarily reflecting a higher expected proportion of social housing completions and a continued use of incentives鈥�.

However, it added that 鈥渁 wider than usual range of outcomes are possible, and the final volume outturn will depend on the trajectory of mortgage interest rates and the strength of demand in the autumn and spring selling seasons.鈥�

Bellway already saw its volume and price fall back slightly in the 2023 year, with Bellway in 2022 selling 11,198 homes at an average price of 拢314k.

This year鈥檚 drop also reflected a higher number of sales to social housing, with the number of private homes sold this year falling back by over 10% to 8,166, while overall completions dropped by just 2.3%.

The firm said that its 98,164-plot land bank meant that it was able to stay 鈥渉ighly selective鈥� in the land bank currently without hindering its long-term growth ambitions, which remained to grow to deliver beyond 13,000 homes per annum 鈥� despite the current downturn.

The firm鈥檚 chief executive, Jason Honeyman, said: 鈥淣otwithstanding the near-term market challenges, Bellway remains very well-placed to capitalise on future growth opportunities and to continue creating long-term value for all our stakeholders.鈥�

Analyst Sam Cullen at Peel Hunt said the results were in line with expectations, but the outlook cut expectations for the future. He said: 鈥淏ellway is a good business, but tough market conditions are the dominant factor for now. We expect the next six to 12 months to be difficult but believe Bellway is well positioned for recovery as and when it comes.鈥�