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Affordable sales keep Bovis Homes on track as private market flattens

All the improvement came in affordable homes, where completions rose to 616 from 550,
Private sale prices rose by 2%

Increased sales by its affordable housing arm kept Bovis Homes PLC (LON:BVS) moving forward in its latest half-year.

Completed sales rose by 4% to 1,647 units, though the private side was flat at 1,031.

All the improvement came in affordable homes, where completions rose to 616 from 550, although Bovis expects the mix to balance out over the full year.

Private sale prices rose 2% to £342,000 with prices overall 3% higher on average at £270,000.

Greg Fitzgerald, Bovis chief executive, described the result as excellent and said the housebuilder had seen a significant improvement in profitability and a step up in the sales rate compared to a year ago.

Cost pressures had also started to ease, he said, having been running at between 3%-4% at the start of the year.

The housing market was stable while forward sales in the second half so far put it on track to meet this year’s completions target. Net cash at the half-year rose to £103mln.

Not an entirely pretty picture

George Salmon, Equity Analyst at Hargreaves Lansdown: “Greg Fitzgerald’s turnaround is delivering impressive results. Revenue and reservation rates are improving and the cost base is being tightly controlled, helping to offset niggling build cost inflation. As a result, profits are expected to rise again this year.

“Perhaps the most impressive achievement is the rise in build quality and customer satisfaction. Bovis is on course to hit top marks in the annual HBF surveys, just three short years after getting the unwanted distinction of being the only builder in the 2016/17 report to be awarded 2 out of 5 stars.”

“However,” the analysts added, “the uncertainty around the UK’s impending exit from the EU means it’s not an entirely pretty picture, and probably explains why the shares offer a 10% dividend yield. 

“Heightened operating efficiency, a stronger balance sheet and quality improvements will help insulate the group against the challenges a disorderly Brexit could bring, but only to a degree. So until we know more about the terms of the UK’s departure, the uncertainty will likely continue to hold the shares back.”

In afternoon trading, however found gains earlier, Bovis shares drifted back to be 0.3% lower at 1,011p.

 -- Adds analyst comment, share price --

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Bovis Homes Timeline

February 28 2019

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