Interim Management Statement

RNS Number : 3381G

Bovis Homes Group PLC

11 May 2011

 



11 May 2011

Bovis Homes Group PLC

Interim Management Statement

Trading progressing well and land investment continuing

Bovis Homes Group PLC is holding its Annual General Meeting at 12.00pm today.  This statement makes comment on the financial performance of the Group for the period from 1 January 2011 to the date of this statement, and provides guidance on the outlook for the current financial year.  This statement constitutes Bovis Homes Group PLC's Interim Management Statement as required by the UK Listing Authority's Disclosure and Transparency Rules.

Current trading

Ten new sales outlets have been launched, resulting in an average of 67 sales outlets for the year to date, compared to 64 in the comparable period of 2010.  The Group has focused on commencing build development on new sites acquired since the downturn.  As a result, the Group anticipates launching for sale on a further 23 new sales outlets during 2011, which will support the anticipated increase in average sales outlets to 76 during 2011 as a whole, 15% greater than the average of 66 sales outlets in 2010.

After an encouraging start to the year as reported at the time of the preliminary results on 14 March 2011, the market has remained stable with visitor numbers for the year to date remaining over 20% ahead of the prior year.

The Group has achieved 566 private net reservations to date in 2011 (2010: 505), a 12% increase, with an average private sales rate of 0.47 net reservations per week per sales outlet (2010 comparable: 0.44).  Having started 2011 with 201 forward sold private reservations, at 6 May 2011 767 private reservations were held for 2011 legal completion, compared to 964 private reservations at the same point in 2010.  The 2010 total included the sale of 215 units into the private rental joint venture in which the Group holds a 50% equity interest.

Including social housing units expected to legally complete in 2011, at 6 May 2011 the Group held a total sales position of 1,026 units which compares to 1,234 units at the same point in 2010.  Given the timing of build completion of the reservations achieved to date and the aforementioned 215 unit private rental joint venture deal which legally completed in H1 2010, it is expected that the volume of legal completions for the first half of 2011 will be slightly lower than that achieved in the first half of 2010.

Sales prices during 2011 have been stable and consistent with prices achieved in the last quarter of 2010, in line with the Group's expectations. Based on these sales prices and with the benefit of build cost savings, gross margins on home sales are also in line with expectations with an average gross margin on net reservations achieved to date for 2011 legal completions of circa 19%.

Land management

In furthering the Group's growth strategy, investment has continued in good quality land on which hurdle rate 25% gross margins can be delivered based on current sales prices and build costs.  To date in 2011, 1,008 new consented plots have been added across six sites, all in the south of England.  These plots are anticipated to deliver revenue based on current sales prices of £234 million with a gross profit margin of 25%.  Terms have been agreed in principle on a further 19 sites which will provide circa 2,600 plots.

The Group has selected a number of sites where land sales are targeted in 2011.  In the year to date, two land sales have been achieved and terms have been agreed on a further three, which, all taken together, will deliver circa £50 million of cash proceeds to support the ongoing investment in new land.

Balance sheet

The Group continues to manage its balance sheet prudently, ensuring control is maintained over housing work in progress and agreeing deferred terms on land acquisitions wherever possible.  On 6 May 2011, the Group held net cash and expects to retain this net cash position at the half year.  The Group continues to benefit from the flexibility offered by its syndicated credit facility of £150 million which matures in September 2013.

Market conditions

The housing market continues to operate well below historical activity levels. Limited supply of homes for sale is being balanced by constrained demand caused by low availability of mortgage finance at high loan to value.  Therefore, sales prices are relatively stable.  Without an improved availability of high loan to value mortgage finance, it is expected that market activity will continue to be constrained. 

The Group welcomes the Government's recent initiative with FirstBuy and anticipates applying for an allocation in the scheme.  However, such initiatives do not overcome the fundamental issue of mortgage finance availability for homebuyers holding modest deposits.  The Group is involved in efforts to identify ways in which lenders can be encouraged to support homebuyers with 95% loan to value mortgage finance, recognising that in achieving this it is likely that some form of mortgage indemnity protection will be provided to the lenders.

Outlook

The Group is progressing well with its growth strategy to increase volumes, driven by a greater number of sales outlets, enhance the Group's bias to traditional housing sites with higher sales prices, and deliver stronger margins from new sites acquired since the downturn. The Group's financial position enables it to continue to invest in attractive land opportunities to support further growth.  The Group is selling homes in line with its targeted weekly sale rate and a continuation of this will allow the Group to achieve its volume expectations for 2011 with increased revenue, profits and improved returns on capital.

Enquiries:        David Ritchie, Chief Executive

                        Jonathan Hill, Finance Director

                        Bovis Homes Group PLC

Tel: [phone]

Andrew Jacques/Reg Hoare/James White

MHP Communications

Tel: [phone]

Conference Call for analysts

David Ritchie, Chief Executive, and Jonathan Hill, Finance Director, of Bovis Homes will host a conference call at 08:30am today, Wednesday 11 May 2011, to discuss this IMS.   To access the call please dial 0800 368 1950 and quote passcode: 192105.  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 Wednesday 18 May 2011, commencing approximately 30 minutes after the live call has finished, on: 0800 368 1890, access code: 377304.

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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.

 

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