Trading update

RNS Number : 2240G

Bovis Homes Group PLC

19 November 2015

 

19 November 2015

Bovis Homes Group PLC

Trading update

Bovis Homes Group PLC is today issuing a trading update ahead of its financial year end on 31 December 2015.

Current trading

The Group's sales rate has strengthened in the autumn sales period. Since the beginning of September, we have achieved a weekly private sales rate 20% ahead of the prior year (excluding PRS) at 0.62 reservations per site. We have sufficient reservations to deliver the planned volume growth of over 8% in 2015, which would represent a record volume of homes for the Group, and construction activity to complete homes targeted for this year is on track.  Sales prices have continued to be robust and we expect the average sales price for 2015 to be circa 7% ahead of the prior year.  As a result of this good progress, the Group is set to deliver an increase in capital turn to over one times and a further improvement in return on capital employed for the full year. 

Following planning delays on a number of new high profit margin sites, the overall mix of homes for 2015 is more weighted to existing sites than previously anticipated. In the short term, subcontract labour availability remains the key constraint on delivering increased production which has driven cost inflation although this is showing signs of moderating.  Accordingly, whilst sales prices continue to move ahead, we now expect the aforementioned mix effect combined with the impact of higher cost increases to lead to an operating profit margin in 2015 only marginally ahead of the prior year (2014: 17%).

The Group continues to deliver strong profit from targeted land sales, mainly related to long term strategic sites, in line with the overall land strategy and focus on capital efficiency.

We have made good progress with reservations for 2016, which stand at around 1,650 homes, 18% higher than at the same point last year.  In recent weeks we have been active on 107 sales outlets and have been trading from an average of 103 sales outlets in the year to date. 

Structure

We announced the launch of two new regions in the second half of 2015 to support the growth of the business over the next few years.  Our new West Midlands and East Midlands regions have been created by splitting our existing Central region.  The recently launched Thames Valley region is gearing up to deliver its first new homes having secured planning on its first three sites.  This new structure will provide improved operational focus in our regional businesses and will support effective management of our growth strategy.

Land

During 2015 to date, we have added 25 consented sites and circa 4,000 plots.  The average return on capital employed of the land acquired in 2015 based on investment appraisal at the time of acquisition is circa 28%.

Our growth strategy continues to be focused on investment in high quality land in the Group's targeted areas. A large pipeline of terms agreed land opportunities is in place, which when combined with expected strategic land successes provides confidence in the Group's ability to deliver our planned future growth.  The consented land market continues to be disciplined with land values reacting sensibly to changes in housing market conditions.

We continue to make good progress with our valuable strategic land assets. Since the half year, planning consent has been achieved for 750 units at Tavistock and 690 units at Wokingham. We are also progressing 386 units at Edwalton, 257 units at Witney and 201 units at Gravesend where planning has been confirmed subject to finalisation of S106 agreements. During October, a resolution to grant planning consent was achieved for circa 1,700 units at North Whiteley and last week, a resolution to grant planning was secured for circa 1,000 units at Bexhill.  All of these sites are controlled through call options which will allow the Group to acquire the sites at a discount to the agreed market value. Some of these sites are able to be acquired on tranche drawdown or using deferred payment terms which will enable the Group to manage the capital related to these sites. Development partners are also being identified for the larger sites as appropriate.

In summary, David Ritchie, Chief Executive, commented:

"Bovis Homes is taking another step forward with its growth strategy in 2015. We continue to trade well supported by a strong market backdrop and have in place the required pipeline of sales to deliver our planned volume growth for the full year.

"The growth in volume and increase in sales prices are expected to deliver strong revenue growth and a capital turn in excess of one. Whilst our operating profit margin is now expected to be only marginally ahead of the prior year, the Group remains on track to deliver a further increase in return on capital employed in 2015.

"We continue to invest in high quality land, including the successful conversion of our valuable strategic land assets, and remain confident of delivering our strategy of growth in volumes and returns."

Enquiries:              David Ritchie, Chief Executive

Earl Sibley, 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 Earl Sibley, Group Finance Director, of Bovis Homes will host a conference call at 09:30 today, Thursday 19 November 2015, to discuss the Trading Update.

To access the call please dial [phone] and quote conference ID: 82804076. 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 16 December 2015 on [phone], accessible with the conference ID: 82804076.

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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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