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Bovis Homes expects 2018 profits to be slightly ahead of market consensus, early signs on 2019 trading encouraging

The FTSE 250-listed housebuilder said it delivered a total of 3,759 new homes in the year, an increase of 3% on the prior year’s 3,645 figure and in-line with expectations
Bovis Homes
Bovis said its total average selling price on completions in the year was around £273,000 versus £272,400 a year earlier, with a private average selling price of circa £338,00 versus £334.5,000

Bovis Homes PLC (LON:BVS) saw its shares rise on Wednesday after the housebuilder said it expects its full-year 2018 profits to be slightly ahead of market consensus and that the early signs on 2019 trading are encouraging, although it noted that a Brexit uncertainty is driving a slowdown in buyers of larger homes. 

In a trading update for the year ended 31 December 2018, the FTSE 250-listed housebuilder said it delivered a total of 3,759 new homes in the year, an increase of 3% on the prior year’s 3,645 figure and in-line with expectations.

READ: Bovis Homes is seeing more part-exchange deals as Brexit uncertainty bites

It added that private homes delivered totalled 2,567 units, up from 2,573 units in 2017, with 1,192 affordable housing units, up from 1,072 a year earlier.

The company said its total average selling price on completions in the year was around £273,000 versus £272,400 a year earlier, with a private average selling price of circa £338,00 versus £334.5,000.  It noted that underlying pricing remains robust and in-line with its expectations.

The group said it expects to deliver “a significant step-up in operating margin for 2018, with profits for the year expected to be slightly ahead of market consensus.”

Industry fundamentals remain strong

Bovis said it started the new year with a strong forward sales position totalling 2,681 units, versus 2,656 in 2017, with a value of £521mln against £518mln.

The firm added: “The industry fundamentals remain strong with customer demand for new homes supported by attractive mortgage finance and government initiatives, in particular, Help to Buy. Whilst it is too early in the year to comment on 2019 trading, early signs are encouraging.” 

Greg Fitzgerald, Bovis Homes’ chief executive commented: "The significant improvement in operational performance across all areas of the business is expected to deliver a record year of profits for the Group.”

He added: “We are looking forward to delivering the first homes from our new housing range in 2019 and continuing to make further operational and financial progress."

The group said it expects to have a year-end net cash balance of around £127mln versus £145mln at the same stage of 2017, reflecting its ongoing capital management.

It added that it intends to recommend payment of a final ordinary dividend of 38.0p per share, up from 32.5p in 2017, giving a total for the 2018 financial year of 57.0p per share, up from 47.5p, or 102p per share, including the special dividend of 45.0p paid in November 2018.

In late morning trading, Bovis Homes shares were 4.8% higher at 970.80p, topping the FTSE 250 leader board, pulling other housebuilders higher in their wake.

Brexit cloud still looms large

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown commented: “Bovis has been putting some serious work in, and it’s encouraging to see sales, and more importantly, margins moving in the right direction.”

She added: “It needs to be careful about how far it pushes cost savings however - saving money makes business sense, but the group had trouble in the past when the quality of its homes came under very public fire.

“Bovis is being careful not to scrimp on standards again – but it will need to keep it that way if it’s to avoid another expensive mistake.”

The analysts concluded: “Conditions are about as good as they can be for housebuilders, with government schemes like Help to Buy boosting demand among first-time buyers, and low-interest rates making mortgages easier to come by.

“That said, the Brexit cloud still looms large, and a sharp downturn in house prices or demand could blow a hole in Bovis’ otherwise steady ship.”

 -- Adds share price, analyst comment --

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Article
February 28 2019

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