Cheap land is the key to rising profit for builder Bovis Homes

By GARETH MACKIE
Published on 20/08/2012 19:38

BOVIS Homes said on Monday that it was confident of continuing to reap the benefits of buying up cheap land since the housing market downturn as it reported a doubling in its first-half profits.

Along with rivals, the company has seen an increasing proportion of sales from sites acquired following the financial crisis, which should help it deliver continued growth.

Chief executive David Ritchie said: “The investments already made in high-quality, consented residential land, combined with the strong pipeline of future land opportunities, will support further sales outlet growth into 2013 and beyond.”

His upbeat assessment came as Bovis posted pre-tax profits of £16.2 million for the six months to 30 June, up from £8.1m a year earlier. The interim dividend was doubled to 3p a share.

The housebuilder increased its number of sales outlets by a fifth to 82 during the first half of 2012, focusing on the south of England.

Rival Persimmon is today expected to report a 30 per cent rise in pre-tax profits to £75.3m.

Bovis completed 944 house sales in the first half of the year, 18 per cent more than a year earlier. The average sale price rose to £164,400, up from £163,400 a year ago. It said prices in the south of England, where it has 70 per cent of its land bank, were more robust than in locations further north.

The average house size fell 2 per cent to 996sq ft, partly because of increased sales through the UK government’s FirstBuy scheme, designed to help first-time buyers.

Investec analyst Mike Bessell, who rates the group’s shares as a “buy”, described the results as “solid” and said the current outlook suggested that Bovis can maintain its strong trading.

He added: “Land acquisitions in the year to date have been strong, with 1,456 plots added, slightly ahead of replacement levels. In addition, there is a strong pipeline of further deals in place, over 4,000 under contact or with terms agreed.

“Since the end of June, sales per site per week have continued at the same rate as the first half, so the company has seen little summer slowdown.”

However, Jon Bell, an analyst at Shore Capital, noted that recent surveys have shown that house prices outside the prime London market are falling. He said Bovis should reduce its land bank and return surplus cash to shareholders.

Bovis said it had sold two parcels of consented residential land during the first half, at a profit of £3.9m, and would continue to look at selective sales.