March 24 (Reuters) - British homebuilder Bellway trimmed its operating margin outlook for fiscal 2026 on Tuesday, as the sector grapples with the risk of further interest rate hikes dampening housing
UK homebuilder Bellway cuts margin outlook, echoes sector warnings on Iran war risks
Bellway's Financial Performance and Market Outlook
By Raechel Thankam Job
March 24 (Reuters) - Bellway trimmed its profit margin outlook on Tuesday as the British homebuilder stuck to incentives to lure potential buyers, and echoed warnings on risks to the market from the Middle East conflict, sending shares down nearly 12%.
Builders are bracing for a year of margin pressure, with the expected recovery in the housing market now under threat from renewed risks of interest rate hikes squeezing demand for new homes and rising building costs stemming from the fallout from the Iran war.
Chief Executive Jason Honeyman said volatility had already returned to the mortgage market, though it had not yet materially affected trading.
Incentives and Margin Impact
Incentives Weigh on Margins
The company's underlying operating profit rose 1.5% to 159 million pounds ($213.47 million) in the six months to January 31, but an increase in sales incentives to about 5% of selling prices from around 4% a year earlier pressured margins.
Bellway, which builds everything from social housing to luxury penthouses, said incentives, like help with deposits, played a key role in supporting reservation rates early in the crucial spring selling season.
Strategy Adjustments
"It was our intention at the start of the year to tighten up incentives to support margin growth into 2027, but today that looks a little too optimistic," Honeyman told analysts.
"Serious buyers are still there, but passing traffic is starting to moderate" he said, adding that sales rates may soften in April.
Cost Pressures and Future Plans
Cost Pressures Loom
Bellway now aims for an operating margin for the year through July of around 10.5%, down from a previous forecast of 11%, joining rivals Taylor Wimpey and Vistry in flagging pressures from cost inflation and reduced affordability.
Bellway is also phasing out its Ashbury brand, opting for a single Bellway label to cut costs and protect margins.
Home Completions and Profit Guidance
The company raised its fiscal 2026 home completions target to between 9,300 and 9,500 and maintained its underlying operating profit guidance.
($1 = 0.7448 pounds)
(Reporting by Raechel Thankam Job and Simone Lobo in Bengaluru; Editing by Rashmi Aich and Tomasz Janowski)
