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Housebuilder Bellway launches cost savings plan, profit up 14 percent

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By Reuters

(Reuters) – British housing developer Bellway Plc <BWY.L> launched a cost savings programme on Tuesday to boost margins after reporting a more than 14 percent rise in full-year pre-tax profit and reiterating a warning about future margins.

The homebuilder, among Britain’s top 5 by market value, said it was mindful that Britain’s forthcoming exit from the European Union could hit consumer confidence in the busy spring selling season and also of rising pressures on building costs.

“As housebuilders continue to increase output, there remains upward pressure on build costs throughout the industry,” said Bellway, after reporting annual sales of more than 10,000 homes for the first time.

The company said that a shortage of skilled labour was the greatest constraint to growth, but that there was also a shortage of key materials, such as structural timber, plastics, bricks and blocks.

It said it had launched a new house type that would help save costs by standardising more and was developing a new construction specification which will help it rationalise the number of suppliers it uses.

It also initiated a two-year IT investment programme to help capture some of the benefits of standardisation and save on procurement.

Britain’s housing market overall has slowed since the Brexit vote in June 2016 but Bellway said that the rate of house price increases, though more moderate, was still running ahead of cost increases. The company is mainly focussed on the sub-600,000 pound price bracket covered by the government’s help-to-buy scheme, sheltering it from tightening at the top of the market.

Profit before tax for the year ended July 31 rose to 641.1 million pounds from 560.7 million pounds a year earlier, driven by a slight uptick in average selling prices.

Revenue rose 15.6 percent to 2.96 billion pounds, with average sales price ticking up over 9 percent to 284,937 pounds.

The company said that it expects to further increase output in the year ahead, despite Brexit.

Order book stood at 1,469.5 million pounds as at Sept. 30, slightly above 1,361.5 million pounds at Oct. 1 last year.

(Reporting by Arathy S Nair and Shariq Khan in Bengaluru; editing by Patrick Graham)