Bellway Profit Rises as Help to Buy Boosts Mortgage Lending

Bellway Plc (BWY) said annual profit rose 37 percent as the U.K. homebuilder benefited from an increase in borrowing sparked by the government’s Help to Buy loan-guarantee program. The shares rose to the highest in about two months.

Net income for the 12 months through July climbed to 108.6 million pounds ($174 million), or 89.3 pence a share, from 79.3 million pounds, or 65.5 pence, a year earlier, the Newcastle, England-based company said today in a statement. Revenue advanced 11 percent to 1.11 billion pounds.

“Help to Buy acted as a catalyst for underlying consumer demand and helped increase our sales values,” Chief Executive Officer Ted Ayres said by phone.

The government last week introduced the second phase of Help to Buy, which offers mortgage guarantees that allow buyers to make down payments as low as 5 percent. The first phase, which began in April, provided interest-free loans for buyers of newly built homes who meet certain income qualifications.

The program has contributed to the most buoyant housing market since the financial crisis, even as two thirds of 31 economists surveyed by Bloomberg described it as “bad” policy. The government’s measure won’t cause a bubble, Ayres said, echoing comments made by the EY Item Club, a London-based group sponsored by Ernst & Young LLP, in a report yesterday.

“Outside of London we’re still seeing pricing relatively flat -- we’re achieving what we anticipated in our valuations.” Ayres said.

Higher Prices

Bellway sold 5,652 homes in fiscal 2013, up from 5,226 a year earlier, according to today’s statement. The average selling price increased to 193,025 pounds from 186,648 pounds.

“The results are up against weak comparisons from previous years and now come with very, very heavy use of stimulus,” Mark Hughes, an analyst at Panmure Gordon & Co. (PMR), said by phone. Other U.K. homebuilders are also expected to report “exceptional” sales figures, he said.

Bellway gained as much as 4.6 percent to 1,449 pence in London trading, the highest since Aug. 19. The shares have climbed 38 percent this year, while the Bloomberg U.K. Homebuilder Index is up 48 percent, led by Telford Homes Plc. (TEF)

Telford’s earnings for fiscal 2014 are expected to be significantly higher than analysts’ estimates because of “substantially improved margins”, the Hertfordshire, England-based company said in a statement today without giving any figures.

The homebuilder climbed as much as 8.4 percent to 335.25 pence, the highest since 2007.

To contact the reporter on this story: Patrick Gower in London at pgower@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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