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Bovis Homes Group (BVS)

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Friday 09 July, 2010

Bovis Homes Group

Trading Statement

Trading Statement

Bovis Homes Group PLC

Bovis Homes Group PLC

Trading update

Friday 9 July 2010

The Group is today providing a trading update covering the six month period ended 30 June 2010 ahead of reporting its interim results on Monday 23 August 2010.

Overview

  • Solid half year in terms of legal completion volumes and trading result
  • Consented land acquisition strategy progressing well with c1,900 consented plots added to land bank this year and terms agreed to acquire a further c2,500 plots
  • Strong £79 million net cash position at half year
  • Intention to resume dividends

Trading

The new homes market remains subdued with ongoing liquidity issues in the first time buyer market limiting the number of transactions and moderating sales price improvements. Against this market backdrop, the Group has been operating successfully, delivering solid weekly private sales rates and achieving sales prices ahead of the Group’s internal expectations.

For the six months ended 30 June 2010, the Group legally completed 803 homes, as compared to 754 homes in the comparable period, an increase of 6%. For private homes, the Group achieved an average net sales price of £163,500, as compared to £160,400 in the first six months of 2009, reflecting an improved pricing position generally on a smaller average size of home legally completed. Overall, including the increased mix of social and partnership homes, the average sales price achieved by the Group for the six months ended 30 June 2010 was £158,500 compared with £159,700 in the first half of 2009.

The recent launch of the Group’s ‘The Perfect 10’ mortgage product in partnership with Barclays will provide Bovis Homes’ customers the ability to secure a 90% Loan To Value mortgage at a fixed interest rate of 4.99% for two years. The first reservation using ‘The Perfect 10’ product was achieved prior to the end of June. This new mortgage product is only available to Bovis Homes customers and will assist the Group to achieve its expected level of new homes sales in the second half of 2010.

Land acquisitions

The Group is pleased to report good progress with its near term strategy of acquiring land with residential planning consent. This strategy will enable the Group to grow its output capacity over the coming years and deliver increased levels of revenue and improved profit margins, thereby generating shareholder value. The Group has been active in the consented land market since its equity share placing in September 2009, using its considerable cash resources to agree land purchases which are expected to generate returns in line with the Group’s hurdle rates for land investment. The Group has added c1,900 consented plots to its consented land bank since the start of 2010, 80% of which are located in the south of England, at a land cost of approximately £107 million. In addition, the Group has agreed terms to acquire a further c2,500 plots. New land has been acquired on deferred terms where appropriate, although the Group has taken advantage of opportunities where more cost effective land deals are achievable when supported by up front cash consideration.

The Group believes its strategy of acquiring consented land at this point in the housing market cycle will add significant value to the medium term prospects of the Group for a number of reasons: strong demand for new homes given the ongoing shortage of homes being built in England and Wales; good development land supply for the Group during a challenging period for achieving residential planning consents in the near term as the Government’s localism agenda is debated and implemented; and the current surplus of land vendors over land buyers which is keeping land prices attractive.

Cash flow

Notwithstanding the considerable investment in consented land during the first half of 2010, as at 30 June 2010, the Group held net cash of £79 million. The Group’s current trading is significantly cash generative given the limited cash commitments on land and infrastructure entered into prior to the housing market downturn. In addition, the committed loan facilities of £150 million which were agreed in January 2010 and mature in September 2013 provide the Group with substantial financial headroom.

Outlook

Looking towards the full year, the Group has achieved cumulative sales at 30 June 2010 for 2010 legal completion of 1,474 homes as compared to 1,364 homes at the same point last year. Within these totals, private sales stood at 1,150 homes in 2010 compared to 1,086 homes in 2009, reflecting a 6% increase. In the year to date, the Group has achieved a net private sales rate per site per week of 0.42 reservations, ahead of the comparable net private sales rate achieved in the first half of 2009 of 0.39 reservations. The Group is selling homes in line with its targeted weekly sale rate and a continuation of this will allow the Group to achieve its volume expectations for 2010.

Given the confidence the Board has in the medium term prospects of the Group arising from its investment in new land opportunities and the Group’s strong net cash position, the Board intends to resume dividends at the end of the current financial year, assuming the continuation of current market conditions in the new homes market.

Enquiries:     David Ritchie, Chief Executive
Bovis Homes Group PLC
Tel: 07773 012 971
Andrew Best / Peter Edsinger
Shared Value Limited
Tel: 07798 576 378 / 07773 012 971
 

Conference Call for Analysts and Investors

David Ritchie, Chief Executive of Bovis Homes will host a conference call at 9:00am today, Friday 9 July 2010, to discuss the interim trading update.

To access the call please dial 020 7806 1964 and quote passcode: 9598641. 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 July 2010 on 020 7111 1244, accessible with the same passcode.

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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.