Bovis Homes Group PLC (BVS.LN) said Friday that for the the six
months ended June 30, the housing market has shown signs of
stabilisation during the first half of 2009, with external house
price indices indicating that the rate of price decline has
lessened over this period and the number of mortgage approvals for
home purchase has increased, albeit from a low base.
MAIN FACTS:
-Notwithstanding this, transaction volumes remain at
historically low levels and pricing is substantially below the peak
levels of late 2007.
-The Group has achieved 901 net private reservations in the six
months since January 1; an increase of 92% over that achieved in
the first six months of 2008, reflecting the Group's plan to drive
volume more assertively during 2009.
-The lower volume of social housing available for delivery in
2009 has led to a combined net reservation total in the first six
months of 939 homes as compared to 666 homes in the comparable
period in 2008.
-During this period the Group has continued to focus on strong
cash generation, with a net cash inflow of GBP94 million in the
half year, resulting in net debt of only GBP14 million at 30 June
2009.
-For the six months ended June 30, the Group legally completed
754 homes, as compared to 851 homes in the comparable period, a
reduction of 11%.
-The contribution from social housing in the first half of 2009
was significantly lower with only 16 social housing legal
completions as compared to 227 social homes in the first half of
2008.
-The Group achieved 738 private legal completions, an 18%
increase over the comparable period in 2008.
-The Group has not sold any development land during the first
half of 2009.
-For private homes, the Group has achieved an average net sales
price of GBP160,400, as compared to GBP196,700 in the first six
months of 2008 and GBP164,700 in the second half of 2008,
reflecting house price reductions in the market.
-Overall, including social and partnership homes, the average
sales price achieved by the Group for the six months ended June 30
was GBP159,700 compared with GBP167,600 in the first half of
2008.
-As the Group has been selling, in the main, advanced build
stock, the Income Statement benefit from reductions in construction
costs has to date been limited.
-Overheads in the first six months of 2009 are anticipated to be
circa GBP13 million, some 45% lower than the overhead in the first
half of 2008.
-Group is confident it will achieve a pre-exceptional profit
before interest and tax for the first half of 2009 despite the
lower gross profit generated on legal completions.
-Average net debt for the first half of 2009 was GBP69 million.
On this basis, the Group's first half year net finance charge
including amortisation of fees is anticipated to be circa GBP6
million.
-The Group currently has substantial financial headroom with
committed loan facilities of GBP220 million which were negotiated
in December 2008, reduce to GBP160 million in September 2010, and
mature in March 2011.
-The Group now anticipates achieving a net cash positive
position during the second half of 2009, as the Group continues to
release cash from inventory.
-This assumes that the Group does not make significant cash
expenditure on new land opportunities during the second half of
2009, beyond its previous guidance, the Group's view being that any
such land expenditure commitments are more likely to fall due from
2010 onwards.
-A specific focus of the Group during 2009 has been to reduce
the working capital invested in finished goods stock.
-Having started the year with circa 1,000 unsold stock homes,
the Group has sold circa 550 of these stock homes. After taking
account of home production in the first half of 2009, the Group's
unsold finished stock now stands at circa 480 homes.
-This focus on reducing stock has been a key factor in the
generation of GBP94 million of net cash inflow during the first
half year, and it will continue to be a priority for the remainder
of the year.
-Based on current estimates of achievable prices in the market,
there would only be a small number of specific sites where a
write-down might be required at the half year.
-2009 will be a year of delivering strong positive cash flow,
repositioning the Group's balance sheet with lower work in progress
and anticipated net cash in hand at the year end.
-This should provide the Group with the opportunity to invest in
the residential land market at what it anticipates will be
attractive values.
-Cumulative sales achieved to June 30 for 2009 legal completion
stood at 1,364 homes as compared to 1,482 homes at the same point
last year.
-Within these totals, private sales stood at 1,086 homes in 2009
compared to 888 homes in 2008, reflecting the improved private
sales performance.
-The total cumulative sales also reflect the significantly lower
volume of social homes sold for 2009 at 278 homes versus 594 homes
in the prior period.
-This cumulative position includes the reservations held at 1
January 2009 which stood at 425 homes compared to 816 homes at
January 1, 2008.
-Looking to the full year, the Group's sales performance to date
provides support for the Group's existing guidance on volumes
anticipated for 2009 of circa 1,800 legal completions.
-The Group continues to anticipate legally completing only circa
300 social homes in 2009 compared to circa 600 social homes in
2008.
-This suggests a private legal completion volume of circa 1,500
homes, some 25% ahead of the circa 1,200 private legal completions
achieved in 2008.
-This guidance continues to assume weekly sales activity at or
around current levels, accepting that the summer sales period will
show its typical seasonal slowdown before improving in the
autumn.
-The short term outlook for the housing market is a continuation
of low levels of activity constrained by ongoing illiquidity in the
mortgage market.
-The Group has good visibility on reaching a debt free balance
sheet during 2009 given its very low net debt at June 30.
-The Group is operating with a sustainable and reduced overhead
base which allows the achievement of trading profits from
relatively low levels of revenue.
-These positive attributes position Bovis Homes well in the
housebuilding sector when considering relative capabilities to
invest in cost effective residential land. With improved home
affordability and growing consumer confidence, homebuyer activity
will in time increase creating an improvement in demand for the
Group's homes.
-By London Bureau, Dow Jones Newswires; Contact Ian Walker; +44 (0)20 7842 9296; ian.walker@dowjones.com
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