Bovis Homes Group PLC press release
Trading update July 2012
Significant improvement in profit from ongoing successful execution of strategy
The Group is today issuing a trading update for the six month period ended 30 June 2012 ahead of reporting its half year results due to be announced on Monday, 20 August 2012.
David Ritchie, the Chief Executive of Bovis Homes Group PLC said:
"The Group has performed strongly, in line with expectations, in the first half of 2012 with a significant improvement in profit delivered from the ongoing successful execution of the Group's growth strategy. The continued success in the land market during the first half of 2012, with around 2,500 new plots contracted, is positioning the Group for further growth in the future."
For the six months ended 30 June 2012, the Group legally completed 944 homes, compared to 801 homes in the same period in 2011, an increase of 18%. The Group's average sales price increased by 1% year on year to £164,400. The increasing benefit of stronger sales prices on new sites was offset in the first half year by an increased proportion of legal completions from midlands / northern sites, trading out lower priced product. Market prices are considered to have remained unchanged during the year to date.
The Group expects to report a housing gross margin for the half year of circa 21% (H1 2011: 20.1%). Including a strong profit of £3.9 million from land sales, the Group expects to deliver an operating margin for the half year over two percentage points ahead of the prior year at circa 10% (H1 2011: 7.5%).
The Group has achieved 993 net private reservations in the first six months (2011: 802), a 24% increase. The net private sales rate per site per week was 0.47 (H1 2011: 0.45) from an average of 82 active sales outlets, compared to 68 in the same period in 2011. Sales prices achieved to date are ahead of the Group's expectations.
Cumulative reservations expected to legally complete in 2012, including social housing units, stood at 1,646 homes at 30 June 2012 (30 June 2011: 1,333 homes). Reservations on sites acquired since the housing market downturn are having a positive effect on the forward order book. The average sales price on private reservations expected to legally complete in the second half of 2012 is in excess of £200,000, compared to £175,000 achieved on private legal completions in the first half of 2012. Additionally, the housing gross margin on this forward order book is stronger than that achieved in H1 2012.
NewBuy continues to grow in activity and the Group is currently using NewBuy for over 10% of private reservations.
The Group continues to take advantage of opportunities to acquire high quality consented land. In the six months ended 30 June 2012:
- the Group has acquired 1,835 consented plots on 11 sites, of which 1,037 are included in the land bank at 30 June 2012 with the balancing 798 expected to be added to the land bank in early H2 2012 after the satisfaction of some vendor obligations
- the Group has in place contracts to acquire another 649 plots on six sites, the majority of which are expected to be added to the consented land bank in H2 2012; and,
- terms have been agreed in principle on a further 20 sites, representing in excess of 3,000 plots.
The Group has retained a prudent balance sheet with work in progress tightly managed and net cash of £23 million as at 30 June 2012. The Group's balance sheet management, cash resources and flexible banking arrangements continue to support the Group's accelerated investment in consented land to grow the business.
The Group's growth strategy is expected to generate strongly improved returns going forward, assuming UK housing market conditions remain stable. Profits are expected to grow significantly from the compound positive effect of:
- Increased legal completion volume from a greater number of active sales outlets and stronger sales rates;
- Higher average sales price from an increased proportion of sales of traditional homes on more southerly based sites; and,
- Improved profit margins from an increased contribution from sites acquired since the housing market downturn.
The Group is also maintaining rigorous control of capital employed, which should lead to a strongly improving return on capital employed.
The Group has experienced robust trading during the first half of 2012 with significantly higher visitor numbers compared to prior years, particularly on its new post downturn sales outlets. Reflecting the challenging economic background, home buyers are taking longer to make their purchase decision and continue to face a challenging mortgage process. In keeping with summer seasonality, reservation rates have slowed, with a notable effect on sales rates around the time of the Queen's Diamond Jubilee.
The Group remains confident of its prospects to enhance shareholder value and improve returns. The compound positive effect of greater volume, increasing average sales price and improving housing profit margin provides good visibility that, based on current market conditions continuing, return on capital employed can be improved in 2012 to a rate approaching 7.5% (2011: 5%).
Enquiries: David Ritchie, Chief Executive
Jonathan Hill, Finance Director
Bovis Homes Group PLC
Tel: +44 (0)7855 432 699
Andrew Jaques/Reg Hoare/James White/Giles Robinson
Tel: +44 (0)203 3128 8100
Conference Call for analysts
David Ritchie, Chief Executive, and Jonathan Hill, Finance Director, of Bovis Homes will host a conference call at 09:00am today, Monday 9 July 2012, to discuss this trading statement. To access the call please dial 0800 368 1950 and quote passcode: 978887#. Please dial in 5 minutes prior to the start of the conference call to allow time for registration. A recording of the conference call will be available until midnight on Monday 16 July 2012, commencing approximately 30 minutes after the live call has finished, on: Tel: +44 (0)800 368 1890, access code: 385867#.
Certain statements may be forward looking statements. Forward looking statements involve evaluating a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends, results or activities should not be taken as a representation that such trends, results or activities will continue in the future. Undue reliance should not be placed on forward looking statements.