Interim Management Statement

RNS Number : 2669H

Bovis Homes Group PLC

16 May 2014

 



16 May 2014

Bovis Homes Group PLC

Interim Management Statement

Significant increase in activity driving strongly improving returns

Bovis Homes Group PLC is holding its Annual General Meeting at 12.00pm today.  This statement comments on the Group's current trading, financial performance and outlook for the current financial year.  This statement covers the period from 1 January 2014 to date and supplements the update given with the 2013 Final Results on 24 February 2014.

Highlights

·     78% increase in cumulative private reservations achieved to date for 2014 delivery including 253 units from innovative Private Rental Sector deals to 2,096 (2013 comparative: 1,176)

·     Ongoing mix benefits combined with sales prices achieved ahead of expectations producing a strong increase in average sales price.  Sales price increases expected to at least cover build cost increases

·     House build production stepping up to meet increased sales activity with 80% more homes built in the first four months of 2014 compared to the same period in 2013

·     Maintaining a disciplined approach to investing in land, significant progress made with 3,273 consented plots across 17 sites added to the land bank in 2014 to date with a strong pipeline of contracted and agreed terms land deals being progressed for further acquisition in 2014

·     The Group is now confident of achieving a strong increase in return on capital employed to at least 15% in 2014, assuming stable market conditions

David Ritchie, Chief Executive, commented:

"Strong trading since the start of 2014 provides further evidence of the ongoing successful delivery of the Group's growth strategy.  When combined with the positive market backdrop, this has enabled the Group to balance the delivery of strong sales rates with positive pricing improvements.  With revenues increasing significantly and profit margins rising, the Group is confident of delivering a further strong improvement in return on capital employed in 2014, assuming stable market conditions.  The Group continues to enjoy major success in land investment which will enable the business to drive strong shareholder returns in future years."

Current trading

The Group has achieved 1,151 net private reservations in the 18 weeks to 9 May 2014 (2013: 927), a 24% increase year on year.  Net private reservations per site per week have improved by 21% to 0.69 (2013: 0.57).  In addition, 253 homes have been contracted for 2014 legal completion as part of the innovative Private Rental Sector transactions previously announced.  

During the 18 weeks to 9 May 2014, the Group was operating from an average of 93 active sales outlets (2013 comparative: 90).  This is expected to grow further during the year as the number of new sites progressing to launch continues to exceed an increasing number of anticipated sales outlet closures.

Having started 2014 with 692 forward sold private homes, as at 9 May 2014 the Group's total private sales for 2014 delivery (including legal completions in the year to date) were 2,096 units (2013: 1,176), an increase of 78%.  In addition, the Group has circa 700 social housing units which it expects to deliver this year.  This cumulative position reflects the strong sales performance this year which has been driven by the Group's growth strategy alongside positive market conditions.  The Group remains confident of its ability to deliver both its targeted volume growth for 2014 and an enhanced forward sales position for 2015.

Sales prices continue to increase ahead of management expectations with net prices achieved on private reservations to date averaging circa 3% ahead of target unit prices established in late 2013.  List prices have been increased progressively in the year to date and the use of sales incentives has moderated, both having a positive effect on the net sales prices achieved.  With ongoing capacity constraints in the material and labour supply markets, build costs for 2014 legal completions are expected to increase by circa 5%.  Positively, sales price increases are expected to at least cover this level of cost increase.

Compared to the first half of 2013, the Group expects to deliver a materially higher proportion of this year's legal completions in the first half of 2014 with an improved average sales price and increased profit margin, both primarily due to improved mix.

With strong growth in sales activity, the Group is stepping up home production activity from 2013 to meet its volume targets for 2014.   In the first four months of 2014 production was 80% higher than the first four months of 2013, demonstrating the Group's increased capacity to deliver new homes.  The Group is aware of the importance of its positive contribution to the Government's ambition to increase new homes production.

Land acquisitions

The Group has made significant progress in investing in land demonstrating its strong capability to drive value through the land acquisition process and exploit its positive reputation in the land market.

To date in 2014, the Group has added 3,273 consented plots on 17 sites to the land bank and controls under conditional contract a further 808 plots on eight sites which are expected to be added to the land bank during the remainder of 2014.  There exists a strong pipeline of terms agreed land deals which will deliver further acquisitions during 2014.  The Group continues to apply discipline in its approach to land acquisition with consistent hurdle rates and no future house price inflation included in its land appraisals.

Balance sheet

With significant land payments made in 2014 to date, the Group had net debt of £96 million as at 9 May 2014.  This net debt position is expected to be lower at 30 June 2014.

Outlook

Given the current sales position for 2014 combined with improved sales prices and profit margin, the Group is confident of achieving its targets in 2014.  With the aim to deliver between 3,650 and 3,850 legal completions in 2014 and a clear focus on controlling the capital employed of the Group, return on capital employed is now expected to increase strongly to at least 15% in 2014 (2013: 10.4%). 

The outlook for the Group continues to be very positive as a result of the land investment made to date which will enable the delivery of strong shareholder returns in the future.

Board

As of today's date Colin Holmes retires from the Board.  Colin has been a non-executive director since 2006 and has been Chairman of the Remuneration Committee since 2008.  The Board would like to thank Colin for all of his dedication and hard work and wish him every success in the future.

Conference call for analysts and investors

David Ritchie, Chief Executive and Jonathan Hill, Group Finance Director of Bovis Homes will host a conference call at 08:30am today, Friday 16 May 2014 to discuss the Interim Management Statement.

To access the call please dial [phone] and enter pincode 96717709# 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 Friday 6 June 2014.  To access the playback facility, please dial 020 3426 2807 and enter conference reference 648297# 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.

-ENDS-

Enquiries:           David Ritchie, Chief Executive

                                Jonathan Hill, Finance Director

                                Bovis Homes Group PLC

Tel: [phone]

Andrew Jaques / Reg Hoare / James White

MHP Communications

Tel: [phone]

 

END

 

 

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