VTY Vistry Group Plc

    


Bovis Homes Group PLC



                              Bovis Homes Group PLC

                                 Trading Update

                                   9 July 2008

Overview

The Group is today providing a trading update covering the six month period
ended 30 June 2008 ahead of reporting its interim results on Tuesday 26 August
2008.

Against the worst market backdrop that the Group has seen for many years, the
Group has achieved a good quality of profit on those private homes it has sold
but has achieved significantly lower volumes of legal completions, largely
arising through a severe reduction in mortgage availability caused by the
'credit crunch'. As previously advised, half year profit will be adversely
impacted by this sharp reduction in volume.

Sales & margins

For the six months ended 30 June 2008, the Group has legally completed the sale
of 851 homes, as compared to 1,256 homes legally completed in the comparable
period, a reduction of 32%. Within these totals, around 27% of homes legally
completed were social and partnership homes as compared to the first six months
of 2007 in which 13% were social and partnership homes.

For private homes, the Group has achieved an average net sales price of
�196,500, as compared to �204,500 in the first six months of 2007, principally
due to a shift in the private selling mix towards smaller properties in the
first half of 2008. Overall, including social and partnership homes, the average
sales price achieved by the Group for the six months ended 30 June 2008 was
�167,500 compared with �189,600 in the first half of 2007.

In line with the Group's aim to sustain good quality profits on those homes
sold, the Group's underlying housing gross margins on private home legal
completions held up well in the first half of 2008, only decreasing by
approximately 2% compared to the first half of 2007.

However, the overall dilution in the Group's housing gross margin will be
greater, reflecting the higher proportion of social and partnership homes in the
mix together with a number of other factors: these include the impact of
increased planning fees expensed on progression of strategic land opportunities,
which the Group continues to charge to housing profit as incurred, appropriate
provisioning in respect of semi-fixed site management costs incurred during a
period of lower build and sales activity in the first half of 2008, and
impairment provisions in respect of unsold part exchange properties. As a
result, the Group is expecting to deliver an overall gross housing profit margin
of approximately 26% for the half year, a decline of some 6% against the
comparable period.

Whilst the Group continues to work towards generating land sales profit during
2008, it acknowledges that there are fewer organisations actively buying in the
current land market. During the first half year, the Group expects a
contribution of approximately �2 million from land sales, net of option costs.

Balance Sheet

As at 30 June 2008, the Group had net debt of �94 million, with gearing
anticipated to be approximately 13% at the half year end. Average net debt for
the first half of 2008 was approximately �81 million, and the Group now
anticipates that average net debt for the year as a whole will be in the range
�110 million to �120 million. The Group has bilateral committed loan facilities
of �220 million which do not mature until 2010.

The Group has previously indicated that it is taking steps to manage its cash
flows including, in particular, careful control of its investment in housing
work in progress. It has been successful in the first half of 2008 in converting
strategic land, having obtained outline planning consent for both Wellingborough
and Filton during 2008. It anticipates holding around 14,000 plots of consented
land at 30 June 2008, of which approximately 58% has been converted from the
strategic land bank. Within this total will be 2,200 plots at Filton and 900
plots at Wellingborough. The balance of the plots with consent at Wellingborough
(2,200 plots) remain controlled under a call option which can be exercised by
the Group in the future. The pace of significant investment in these major and
important projects remains under the control of the Group and is being adjusted
in light of market conditions. With regard to land opportunities, the Group will
evaluate these as they arise, but will exercise significant caution in this area
for at least the remainder of 2008, as it has done in the recent past, with only
11% of the plots in the half year land bank purchased in the consented land
market since the start of 2007.

Having regard both to its carrying cost of inventory, and to reliable estimates
at the balance sheet date of sales prices given prevailing market conditions,
the Board does not presently anticipate making any material inventory provisions
or write-downs at this half year. This position will be reviewed prior to
publication of the Group's interim accounts, and again prior to the end of the
trading year.

Cost reduction measures

Further to the Group's comment in its interim management statement of 6 May 2008
regarding actions taken to manage its overhead costs, the Group is closing its
Eastern regional office, transferring control of its operation in this area to
its existing Central and South East offices. It is also amalgamating a number of
key functions of its Northern region with its Central region. These, together
with other cost saving measures, will be largely in place from the end of July
2008. The Group has carefully assessed its actions in these areas to ensure that
it is not unduly compromising its capacity to grow when market conditions
improve. The new structure will retain a good geographic coverage with regional
offices in the South East, South West, Midlands and North West of England.
Notwithstanding these changes, the Group is maintaining capability to identify
and appraise strategic land in all of its existing areas of operations.

The Group expects total staff numbers, both office and site-based, to be reduced
by around 40% compared to those employed at the start of the year and
anticipates the annualised saving from these actions plus other cost saving
initiatives to be around 20% of its general overhead cost base. The Group will
be charging a one-off restructuring charge of around �2 million in its first
half year results as a result of these actions.

Outlook and dividends

Looking forward to the full year, the Group's reservation levels since its
previous statement on 6 May 2008 have continued to be notably lower than the
previous year. Cumulative sales achieved to 30 June 2008 for 2008 legal
completion stood at 1,482 homes as compared to 2,282 homes at the same point
last year, a 35% decline year over year. The Group anticipates private home
sales volumes to continue at prevailing levels for the balance of the selling
period for 2008, and is continuing to seek further opportunities in social
housing.

The Group continues to assess its pricing strategy very carefully and in the
light of house price indices showing falls in house prices, and a general
backdrop of adverse media speculation, the Group is being pragmatic in the
application of its pricing strategies at present, dealing assertively where
appropriate to maintain a competitive net pricing stance. Given the speed of
emerging trends in the market at present, it is difficult to estimate with any
certainty the likely net pricing of the Group over the second half of 2008, but
any further market falls would likely reduce both the Group's achievable net
pricing and gross margins.

In setting out its dividend policy, the Board has consistently made clear that
the payment of anticipated dividends would be dependent on the prevailing
business environment. Given the lack of liquidity in financial markets and
fragile consumer confidence, which have created a high degree of uncertainty in
the housing market, the Board considers a reduction in dividend at this time to
be a balanced position to take for long term shareholder value. It therefore
intends to declare an interim dividend for 2008 of 5p per share which the Board
recognises to be a substantial reduction from the 20p per share previously
anticipated to be paid at this stage. In line with recent practice, the final
dividend is anticipated to be at the same level as the interim dividend, but a
final decision on this will be made in early 2009.

The Group has been investing on a long term basis for many years and in doing so
has been able to purchase a large proportion of its residential land through
conversion of its strategic land investments. Allied to this, the Group has a
well designed product range targeted towards mid market housing and has
developed good expertise in the social and partnership housing sector. Having
taken action this year through restructuring and cost control to mitigate the
impact from current housing market conditions, the Group will be able to exploit
its strong asset base as and when the housing market returns to more normal
conditions.

Conference Call for Analysts and Investors

David Ritchie, Chief Executive and Neil Cooper, Group Finance Director of Bovis
Homes will host a conference call at 11:00am today, Wednesday 9 July 2008, to
discuss the interim trading update.

To access the call, please dial 020 7190 1595. 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 16th July 2008,
accessible on 020 7190 5901, passcode: 139925#.

Enquiries: Bovis Homes Group PLC
           David Ritchie, Chief Executive
           Neil Cooper, Group Finance Director
           Tel: 01474 876200 - after 9am
           Shared Value Limited
           Emily Bruning
           Tel: 0207 321 5027

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