TIDMBVS
RNS Number : 4582Z
Bovis Homes Group PLC
14 January 2011
14 January 2011
Bovis Homes Group PLC
("The Group")
Trading update: 2010 profits ahead of consensus
Overview
Bovis Homes Group PLC is today issuing the following trading
update ahead of reporting its preliminary results for the year
ended 31 December 2010 on Monday 14 March 2011.
The Group has achieved a significant improvement in profits in
2010 and has made strong progress in implementing its land
investment strategy.
Sales and profits growth
In line with management expectations, the Group legally
completed 1,901 homes in 2010 (2009: 1,803 homes), an increase of
5%, of which 1,592 were private homes (2009: 1,527 homes) and 309
were social homes (2009: 276 social homes). The Group's average
sales price in 2010 was GBP160 700, 4% higher than the equivalent
of GBP154,600 in 2009. This increase was driven by growth in the
Group's average private sales price in 2010 to GBP172,400 from
GBP165,500 in 2009. Improved sales prices during the year combined
with the benefit of build cost savings primarily on second half
legal completions have increased the gross margin. With overheads
in line with expectations, the Group expects the operating profit
margin for 2010 to be at least 7%. Given the Group's strong
performance, it is anticipated that the profit for 2010 will be
ahead of consensus1 expectations as at the date of this trading
update.
At 1 January 2011, the Group held a forward sales order book for
2011 delivery of 420 homes. The forward sales position at the start
of 2010 was 643 homes, including a non recurring sale of 215 homes
sold to a joint venture in which the Group holds a 50% stake.
Excluding this from the comparative, the 2011 forward sales
position was consistent with the prior year notwithstanding the
lower number of active outlets: 66 on average during 2010 versus 85
on average during 2009. The significant investments made in
consented land during 2010 are anticipated to provide a growth of
around 15% in the number of active outlets with an estimated
average for 2011 of 76 active outlets.
The Group has achieved its target of substantially matching
production with legal completion volumes in 2010. As at 31 December
2010, the Group held housing work in progress equivalent to 1,093
homes (2009: 986 homes). This will facilitate the early legal
completion of homes reserved in the first half of 2011 and will
support the overall growth aspirations of the Group for the
year.
Strong balance sheet; land acquisitions to fuel growth
The cash position of the Group as at 31 December 2010 remained
strong, with net cash of GBP52 million, having started 2010 with
GBP113 million of net cash. The overall cash outflow was
contributed to by payments during the year of c.GBP138 million
relating to land investment, with strong operating cash inflows
pre-land expenditure of c.GBP93 million.
The Group has outlined its growth strategy to acquire good
quality residential land which will provide an increase in sales
outlets to support volume growth, and based on current market
conditions will deliver growth in profits and improved financial
returns. The Group has been successful in 2010 in acquiring
consented land, adding c.3,700 plots to the land bank at a cost of
GBP203 million and with a gross profit potential of GBP181 million.
This land has been purchased based on acquisition appraisals using
current day sales prices and costs and which generate financial
returns in line with the Group's investment 'hurdle' rates. The
land acquired has been geographically focused with 80% of the plots
in the South of England. Furthermore, the Group has terms agreed
for the acquisition of an additional c.2,500 plots.
Return to dividend
The Group has delivered early success with its growth strategy
and the Board is confident in its further delivery, based on
current market conditions. Given this confidence, the Board has
decided to recommence the payment of dividends to shareholders.
Based on the anticipated 2010 profits and the Group's robust
balance sheet position, the Group will declare a dividend for 2010,
subject to approval by shareholders at the 2011 Annual General
Meeting, which will be paid in May 2011.
Market conditions
The Group continues to expect trading conditions in 2011 to be
subdued relative to historical levels, with ongoing economic
uncertainty. Mortgage approval volumes remain weak, with mortgage
providers requiring high levels of deposit, particularly from first
time buyers. This all said, the long term imbalance between the
demand and supply of housing remains positive for the housebuilding
sector. With the strong investments made during 2010 and the
ability to continue land investment at attractive rates of return
into 2011, the Group is confident of its ability to deliver on its
growth strategy, which will add significantly to future shareholder
value.
Near the end of 2010, the Group reviewed its arrangements with
advisors and is delighted to announce the appointment of Moelis
& Co as its financial advisor and MHP Communications as its
financial PR advisor. Deutsche Bank and RBS Hoare Govett will
continue as joint brokers to the Group.
Commenting on the progress achieved in 2010, David Ritchie,
Chief Executive of Bovis Homes, said:
"We are pleased with the positive Group performance in 2010 and
remain confident of our growth strategy through the acquisition of
good quality residential land at attractive rates, which will
provide an increase in sales outlets to support volume growth.
Based on current market conditions this will deliver growth in
profits and improved financial returns which will add significantly
to future shareholder value."
1: Reuters mean consensus of pre tax profit (pre exceptional)
for 2010 financial year at 13 January 2011 of GBP16.3 million.
Conference call for analysts and investors
David Ritchie, Chief Executive and Jonathan Hill, Group Finance
Director of Bovis Homes will host a conference call at 08:30am
today, Friday 14 January 2011, to discuss the trading update.
To access the call please dial 020 3140 0668 and enter pincode
192105# when prompted. Please dial in five 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 Friday 10 February 2011. To access the playback facility, please
dial 020 3140 0698 and enter conference reference 375671# when
prompted.
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.
-ENDS-
Enquiries: David Ritchie, Chief Executive
Jonathan Hill, Group Finance Director
Bovis Homes Group PLC
Tel: 01474 876200
Andrew Jaques, James White, Giles Robinson
MHP Communications
Tel: +44 (0)20 3128 8100
This information is provided by RNS
The company news service from the London Stock Exchange
END
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