Member Article

House market hits building firm

Newcastle-based housebuilder Bellway has reported a 38% drop in sales. The company has offered cash discounts, part exchange and rent before you buy schemes in an effort to kick start sales.

Bellway said the fall in sales during the six months to January 31 was in line with its expectations as it revealed its order book had fallen to £296m - standing at almost half of the £580m it was at the same time last year.

The crisis in the housing market also hit selling prices at Britain’s fourth biggest housebuilder with its average property now carrying a £160,000 price tag compared to £174,800 12 months ago. The company said the figure also reflected its move to build more cheaper social housing.

But it warned that its margins were “under extreme pressure” and it predicted they could fall by more than half compared to 18.1% it reported for six months to the end of January 2008.

The company admitted its level of new development had “slowed considerably” and it was working to sell off its 1,000 completed stock plots as quickly as possible to boost its cash flow.

It is now working to slash around £100m off its debt and said it was on course to reduce it to around £120m by the end of July.

Bellway axed 850 of its 2,500 UK staff last year, including 160 in the North East, and reduced the number of its divisions from 18 to 13.

Those jobs losses plus its plummeting profits sparked a rebellion among angry shareholders after the company awarded massive bonuses to three directors including chief executive John Watson.

Shareholders at last month’s Annual General Meeting held in Newcastle voted against the decision. Although one described it as giving the company “a bloody nose”, the directors will not be forced to hand back the cash because it has already been paid.

This was posted in Bdaily's Members' News section by Ruth Mitchell .