Bovis Homes Group PLC press release
Interim Management Statement May 2013
Bovis Homes Group PLC
Interim Management Statement
Strong current trading and significant land investment achieved
Bovis Homes Group PLC is holding its Annual General Meeting at 12.00pm today. This statement comments on the Group's current trading and financial performance and provides guidance on the outlook for the current financial year. In line with the requirements of the UK Listing Authority's Disclosure and Transparency Rules, this Interim Management Statement covers the period from 1 January 2013 to the date of this statement.
David Ritchie, Chief Executive, commented:
"The ongoing success of the Group's growth strategy has driven strong trading in early 2013. Homebuyer sentiment has been improving and, with the recently announced Government initiatives, sales rates have increased ahead of management's expectations. The increased number of active sales outlets in excellent locations, delivered from the Group's assertive land buying over the last few years, provides a great opportunity to take advantage of the improving market backdrop and further strengthen shareholder returns."
Trading in the 19 weeks to 10 May 2013 has been strong with the Group achieving 989 private net reservations (2012: 783), a 26% increase year on year. This has been driven by an 11% increase in the average number of active sales outlets to 91 (2012: 82), and a 14% improvement in the average private sales rate to 0.57 net reservations per site per week (2012: 0.50). The number of visitors to the Group's sites has increased by 29% in the year to date compared to the same period last year.
Having started 2013 with 249 forward sold private homes, as at 10 May 2013 the Group held 1,238 private sales for 2013 legal completion (2012: 1,013). Including social housing units expected to legally complete in 2013, at 10 May 2013 the Group's total sales position to date was 1,852 units (2012: 1,437).
Sales prices achieved on reservations to date have been modestly above management's expectations. The Group expects the average sales price in the half year results to be materially ahead of the prior year comparable period due to improved mix. The housing profit margin is also expected to increase compared to the first half of 2012.
The strong rate of reservations achieved, with a significant contribution from new sales outlets, will deliver a material increase in legal completions in the second half of the year. Legal completion volumes in the first half of 2013 are expected to be at a similar level to the first half of 2012.
Subject to current market conditions continuing, sales rates are expected to support both the delivery of the Group's volume growth targets for 2013 and allow the Group to enhance its year end forward order book, supporting further growth in 2014.
The Group welcomes the Government's announcement of initiatives to support the housebuilding sector, especially the recently launched Help to Buy shared equity product, which enables customers to purchase a home with a 5% deposit and a 20% shared equity loan from the Government. Experience with Help to Buy in its early weeks has been encouraging with strong interest from home buyers and an increase in visitor numbers to the Group's sales outlets.
Whilst it remains difficult to assess its full potential positive effect on legal completion volumes, the Group is confident that this Government backed shared equity product will drive transaction volumes in the new build sector. This will in turn provide impetus to the number of new homes built. Given the Group's strategy of strong sales outlet growth since the housing market downturn, it is very well positioned to exploit the growth opportunities provided by the Help to Buy product.
The mortgage market continues to show signs of modest improvement. However, mortgage approval and residential transaction data reflect the ongoing challenging conditions facing the UK housing market. The Group's growth strategy has been based on the assumption that these challenging market conditions will continue such that any market improvement will provide additional growth opportunities.
The Group has taken advantage of increasing opportunities to acquire consented land anticipated to deliver hurdle rate margins and has been highly successful in adding 2,238 consented plots on 14 sites to the land bank in the year to date. Additionally, a number of sites have been acquired on a conditional basis, which are expected to be added to the land bank during the remainder of 2013. This early success in land investment strongly supports the Group's aim of increasing the number of sales outlets in 2014.
The Group is well ahead of its plan in respect of consented land acquisitions this year and will manage investment during the remainder of 2013 to ensure that land investment is balanced suitably against improving capital turn. Given the quality of the land pipeline combined with the existing consented and strategic land banks, the Group can adopt a selective approach to future land investment to replenish its land bank at strong rates of return.
With significant land payments made in early 2013, the Group had net debt of £110 million as at 10 May 2013. This position is expected to reduce to a materially lower level of net debt at 30 June 2013 and to move towards a cash neutral position at the year end.
The Group views its prospects for 2013 with increased confidence. Based on current market conditions continuing, it is anticipated that increased legal completions at a higher average sales price and at an improved gross profit margin, combined with enhanced overhead efficiency, will continue to improve the return on capital to a level approaching 10% for 2013 (2012: 7.7%).
Conference call for analysts and investors
David Ritchie, Chief Executive and JonathanHill, Group Finance Director of Bovis Homes will host a conference call at 08:30am today, Thursday 16 May 2013 to discuss the Interim Management Statement.
To access the call please dial +44 (0)20 3139 4830 and enter pincode 43146550# when prompted. Please dial in five 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 Thursday 6 June 2013. To access the playback facility, please dial 020 3426 2807 and enter conference reference 639301# when prompted.
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.
Enquiries: David Ritchie, Chief Executive
Jonathan Hill, Finance Director
Bovis Homes Group PLC
Tel: 07855 432 699
Andrew Jaques / RegHoare / JamesWhite
Tel: 0203 3128 8100