Trading Statement
Bovis Homes Group PLC
Bovis Homes Group PLC
Trading update
14 July 2005
Bovis Homes Group PLC is pleased to be able to issue a trading update ahead of
its interim results for the six months ended 30 June 2005 which will be
announced on 12 September 2005. As previously announced, the 2005 interim
results will be the first results reported under International Financial
Reporting Standards ('IFRS').
The UK housing market has remained steady during the second quarter of 2005
after a weak fourth quarter of 2004 and a quiet start to 2005. Consumers are
showing caution, contributing to property transactions in England and Wales in
the first quarter of 2005 being 24% lower than the corresponding period in 2004.
In the Group's Annual General Meeting statement issued on 11 May 2005, the Group
reported that due to the slowing of the second hand housing market, legal
completions for the first half of 2005 would be lower than the comparable period
in 2004. The Group legally completed 1,089 homes in the first half of 2005
compared with 1,302 legal completions in the first half of 2004, of which 246
were social legal completions (22.6% of total legal completions) compared with
138 social legal completions in the first half of 2004 (10.6% of total legal
completions).
The average sales price achieved during the first six months was £179,800
(average size: 1,060 square feet) compared with £201,100 in the corresponding
period in 2004 (average size: 1,167 square feet). Average sales price per square
foot decreased, year on year, by 1.6%. For private development units, the
average sales price per square foot increased, year on year, by 3.3%.
The Group's gross margins for the first half of 2005 were approximately 33%
compared with 2004's half year gross margin of 34.7% (restated for IFRS). The
Group achieved, in the first half of 2005, land sale profits, net of option
write downs, of £8.8 million. Administrative expenses for the six months ended
30 June 2005 are expected to be broadly in line with the same period in 2004.
The Group believes that the full year impact of IFRS on the 2005 results will be
limited. However, due to the timing of a number of transactions requiring
adjustment under IFRS, the impact on the 2005 interim results is more marked,
reducing pre tax profits by in excess of £1 million. The corresponding impact on
the 2004 interim results was less material.
Net borrowings at 30 June 2005 were in line with the Group's internal
expectations and gearing stood at about 10%.
The Group ended the half year to 30 June 2005 with approximately 12,000 plots in
its consented land bank. The Group has remained cautious in respect of
purchasing land with outline planning consent as land prices remain high. The
Group has continued to focus on conversion of strategic land. During the first
half of 2005, the Group secured planning consent on an estimated 1,300 plots at
Brockworth Airfield, near Gloucester, at a significant discount to market value.
Against the backdrop of a challenging housing market, Bovis Homes ended the half
year to 30 June 2005 with a cumulative reservations total of 2,038 homes
(excluding forward sales for 2006), a 3% reduction compared to the corresponding
period in 2004. Social housing has grown as part of the Group's business with
639 social housing reservations achieved in the first half of 2005 compared with
295 social housing reservations in the comparable period of 2004.
Looking forward to the second half of 2005, there remains considerable
uncertainty over the robustness of the UK housing market. There has been no
discernable improvement in transaction activity in the housing market since the
General Election. Whilst the Group still aims to achieve around 3,150 legal
completions for the full year, and is well placed in terms of production
activity to construct the homes required, the current short term trading
conditions are likely to impact the Group's target for over 1,100 further home
reservations, for 2005 legal completion, in the second half of the year. Unless
there is a notable increase in reservation levels during the period August to
October, it is unlikely that the Group will achieve the planned level of volume
expansion this year.
The Group will benefit from a larger availability in the second half of 2005 of
smaller, more affordable properties which are more readily saleable in the
quieter housing market in which the Group expects to operate. Whilst this will
support the Group's aims in terms of volumes, the Group anticipates that the
average sales price for the full year 2005 will be lower than in 2004. This is
largely due to the average size of unit which, dependent on mix, may fall by
circa 10% year on year. Based on the Group's current expectations the overall
gross margin for the full year 2005 is likely to fall by circa 2% compared to
2004.
The Group believes that the medium to long term prospects are good, founded upon
the Group's strategic land bank and ability to deliver needs-driven homes into a
supply constrained housing market. The conversion of a number of large strategic
sites will provide the Group with the opportunity to expand its regional
structure and facilitate the planned expansion. Based on the good progress being
made, the Group has launched two new regions with effect from 1 July 2005. These
new regions, Wessex and South Midlands, currently have only a limited number of
staff and much of the service provision required is delivered from existing
staff, systems and assets in the more established South West and Central
regions.
New housing represents a credible choice for house purchasers with low
maintenance, well specified properties; however, it is a challenge for
housebuilders to sell into a marketplace where purchasers are lacking in
confidence. Bovis Homes, in common with other housebuilders, faces that
challenge and the second half of 2005 is likely to be a difficult trading
period.
The Board remains content with the previously advised statement in respect of
future dividends. It intends, conditional on any necessary approvals required at
future general meetings, to increase the full year dividend over the next four
years by 5.0 pence per annum. This commitment, which is subject to a stable
business environment, will double the full year dividend over the four year
period to 40.0 pence per share from its 2004 base of 20.0 pence.
Enquiries: Malcolm Harris, Chief Executive Emily Bruning
Bovis Homes Group PLC Shared Value Limited
Tel: 01474 876200 Tel: 020 7321 5027
A conference call for analysts and investors, hosted by Malcolm Harris, Chief
Executive, will be held at 8.00am on Thursday 14th July 2005. To participate in
this conference call please dial: +44 (0)20 7365 1844. A replay of the call will
be available for 7 days following the call. To access the replay please dial:
+44 (0)20 7784 1024 and passcode: 1469116#.