Trading Statement

RNS Number : 4582Z

Bovis Homes Group PLC

14 January 2011

 



14 January 2011

Bovis Homes Group PLC

("The Group")

Trading update: 2010 profits ahead of consensus

Overview

Bovis Homes Group PLC is today issuing the following trading update ahead of reporting its preliminary results for the year ended 31 December 2010 on Monday 14 March 2011.

The Group has achieved a significant improvement in profits in 2010 and has made strong progress in implementing its land investment strategy.

Sales and profits growth

In line with management expectations, the Group legally completed 1,901 homes in 2010 (2009: 1,803 homes), an increase of 5%, of which 1,592 were private homes (2009: 1,527 homes) and 309 were social homes (2009: 276 social homes).  The Group's average sales price in 2010 was £160,700, 4% higher than the equivalent of £154,600 in 2009.  This increase was driven by growth in the Group's average private sales price in 2010 to £172,400 from £165,500 in 2009.

Improved sales prices during the year combined with the benefit of build cost savings primarily on second half legal completions have increased the gross margin.  With overheads in line with expectations, the Group expects the operating profit margin for 2010 to be at least 7%.  Given the Group's strong performance, it is anticipated that the profit for 2010 will be ahead of consensus¹ expectations as at the date of this trading update.

At 1 January 2011, the Group held a forward sales order book for 2011 delivery of 420 homes. The forward sales position at the start of 2010 was 643 homes, including a non recurring sale of 215 homes sold to a joint venture in which the Group holds a 50% stake.  Excluding this from the comparative, the 2011 forward sales position was consistent with the prior year notwithstanding the lower number of active outlets: 66 on average during 2010 versus 85 on average during 2009.  The significant investments made in consented land during 2010 are anticipated to provide a growth of around 15% in the number of active outlets with an estimated average for 2011 of 76 active outlets.

The Group has achieved its target of substantially matching production with legal completion volumes in 2010.  As at 31 December 2010, the Group held housing work in progress equivalent to 1,093 homes (2009: 986 homes). This will facilitate the early legal completion of homes reserved in the first half of 2011 and will support the overall growth aspirations of the Group for the year.

Strong balance sheet; land acquisitions to fuel growth

The cash position of the Group as at 31 December 2010 remained strong, with net cash of £52 million, having started 2010 with £113 million of net cash. The overall cash outflow was contributed to by payments during the year of c.£138 million relating to land investment, with strong operating cash inflows pre-land expenditure of c.£93 million.

The Group has outlined its growth strategy to acquire good quality residential land which will provide an increase in sales outlets to support volume growth, and based on current market conditions will deliver growth in profits and improved financial returns.  The Group has been successful in 2010 in acquiring consented land, adding c.3,700 plots to the land bank at a cost of £203 million and with a gross profit potential of £181 million.  This land has been purchased based on acquisition appraisals using current day sales prices and costs and which generate financial returns in line with the Group's investment 'hurdle' rates.  The land acquired has been geographically focused with 80% of the plots in the South of England.  Furthermore, the Group has terms agreed for the acquisition of an additional c.2,500 plots.

Return to dividend

The Group has delivered early success with its growth strategy and the Board is confident in its further delivery, based on current market conditions.  Given this confidence, the Board has decided to recommence the payment of dividends to shareholders.  Based on the anticipated 2010 profits and the Group's robust balance sheet position, the Group will declare a dividend for 2010, subject to approval by shareholders at the 2011 Annual General Meeting, which will be paid in May 2011.

Market conditions

The Group continues to expect trading conditions in 2011 to be subdued relative to historical levels, with ongoing economic uncertainty.  Mortgage approval volumes remain weak, with mortgage providers requiring high levels of deposit, particularly from first time buyers.  This all said, the long term imbalance between the demand and supply of housing remains positive for the housebuilding sector.  With the strong investments made during 2010 and the ability to continue land investment at attractive rates of return into 2011, the Group is confident of its ability to deliver on its growth strategy, which will add significantly to future shareholder value. 

Near the end of 2010, the Group reviewed its arrangements with advisors and is delighted to announce the appointment of Moelis & Co as its financial advisor and MHP Communications as its financial PR advisor.  Deutsche Bank and RBS Hoare Govett will continue as joint brokers to the Group.

Commenting on the progress achieved in 2010, David Ritchie, Chief Executive of Bovis Homes, said:

"We are pleased with the positive Group performance in 2010 and remain confident of our growth strategy through the acquisition of good quality residential land at attractive rates, which will provide an increase in sales outlets to support volume growth.  Based on current market conditions this will deliver growth in profits and improved financial returns which will add significantly to future shareholder value."

1: Reuters mean consensus of pre tax profit (pre exceptional) for 2010 financial year at 13 January 2011 of £16.3 million.

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 14 January 2011, to discuss the trading update.

To access the call please dial 020 3140 0668 and enter pincode 192105# 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 10 February 2011.  To access the playback facility, please dial 020 3140 0698 and enter conference reference 375671# 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, Group Finance Director

                Bovis Homes Group PLC

                Tel: [phone]

                Andrew Jaques, James White, Giles Robinson

                MHP Communications

                Tel: [phone]

 

END

 

 

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