Interim Management Statement

RNS Number : 4085W

Bovis Homes Group PLC

07 November 2014

 



7 November 2014

Bovis Homes Group PLC

Interim Management Statement

Significant increase in shareholder return expected in 2014 and land purchases progressing well

Bovis Homes Group PLC is today issuing an Interim Management Statement for the period from 1 July 2014 to date.

Highlights

·     On course to deliver a strong result for 2014 with an increase in volumes expected of circa 30% over 2013

·     Average sales price for 2014 legal completions expected to be approximately 10% greater than in 2013

·     Operating margin for 2014 expected to be circa 17% (2013: 14.9%), delivering a return on capital employed of circa 16% (2013: 10.4%)

·     Circa 6,000 consented plots on 33 sites added to the consented land bank to date with average returns above full hurdle rate

·     Substantial forward order book for 2015 supporting strong growth prospects

Current trading

The Group has experienced a more normal seasonal pattern in trading activity during 2014 with a weaker summer period followed by an improvement in the autumn.  Given the reported lower levels of activity in the wider housing market, the Group's sales rates have been robust albeit lower in the second half of the year compared to the strong equivalent period in 2013 which benefited from the introduction of the Government's Help to Buy scheme.  In the 43 weeks to 31 October 2014, the Group achieved 2,886 net private reservations (2013 comparable: 2,334), an increase of 24%, including the Group's PRS transactions.  Net private reservations per site per week for the year to date, excluding the PRS transactions, have averaged 0.58 (2013 comparable: 0.60).

The Group is well placed to deliver its targeted volume for 2014 and is building a substantial forward order book for 2015, continuing the strong growth of the business.  At the end of October, the Group held 1,282 forward reservations for 2015 legal completion compared to 726 reservations at the same point in 2013.  This significant increase is in part driven by the balancing 220 PRS units for 2015 delivery, compared with no PRS units in the comparable figure, and increased social housing reservations.

Sales prices have continued to be robust in the second half of 2014.  The Group has achieved sales price gains on private reservations during 2014 to date of circa 5% over target sales prices set in late 2013.  Whilst the Group has seen build cost pressures, particularly in labour costs, the sales price gains are expected to fully mitigate the impact of higher build costs during 2014.

Land acquisitions

Land investment continues to be the main value differentiator and is a key element of the Group's strategic growth plan.  The Group remains focused on investing in prime traditional housing sites mainly in the south of England (excluding London where the Group has no exposure).  Encouragingly, the consented land market has remained disciplined through 2014 to date with land values reacting in a rational manner to house price and build cost movements.  This has allowed the Group to acquire land at strong margins and returns.  The Group has added circa 6,000 consented plots on 33 sites to the consented land bank to date during 2014 with average returns above full hurdle rate, based on appraisal point sales prices and build costs.  The average return on capital employed of the land acquired based on investment appraisal at the time of acquisition is between 25% and 30%, well above the Group's hurdle rate of 20%.  The contribution from the Group's strategic land bank continues to be strong with circa 2,700 of these consented plots added arising from strategic conversion.  The pipeline of contracted sites and those with terms agreed remains strong, with additional sites expected to be added to the consented land bank by the year end. 

Borrowings

As at 31 October 2014, the Group had net debt of £145 million.  Given the phasing of housing receipts and land payments, the Group expects to end 2014 with a modest net debt position.

Outlook

The Group remains on course to deliver a strong result for 2014 and is targeting volumes of circa 3,650 homes, an increase of approximately 30% compared to 2013.  The average sales price of legal completions is expected to be around 10% greater than that achieved in 2013.  Based on the mix of homes now anticipated to legally complete, the operating margin is expected to be circa 17% (2013: 14.9%), delivering a return on capital employed of circa 16% (2013: 10.4%).

With a stronger forward order book at the start of 2015 and an increasing number of active sales outlets during 2015, the Group expects to continue its strong growth in volumes, profits and return on capital employed, based on current market conditions continuing.

David Ritchie, the Chief Executive of Bovis Homes Group PLC said:

"We are anticipating a strong increase in profit for 2014 and at the same time expecting to deliver a stronger forward order book for the start of 2015.  The Group's updated strategic plan as laid out at the time of our Interim Results to deliver optimal scale and enhanced returns is supported by our ongoing land buying and strategic land conversion.  We are confident of our future prospects and ability to deliver improved shareholder returns through higher return on capital employed and increasing dividends."

-      ENDS    -

Enquiries:          David Ritchie, Chief Executive

                               Jonathan Hill, Group Finance Director

                               Bovis Homes Group PLC

Tel: [phone]

Reg Hoare/James White/Giles Robinson

MHP Communications

Tel: [phone]

Conference Call for analysts

David Ritchie, Chief Executive, and Jonathan Hill, Group Finance Director, of Bovis Homes will host a conference call at 09:00 today, Friday 7 November 2014, to discuss the Interim Management Statement.

To access the call please dial [phone] and quote passcode: 69051318#.  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 6 December 2014 on 020 3426 2807, accessible with the passcode 651526#.

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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.

 

END

 

 

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