Bovis Homes to beat profit forecasts
Published: 17 January, 2011
LONGFIELD: Bovis Homes has restored its dividend after delivering a profit surprise, but warned that the housing market continues to suffer from low mortgage availability.
Savings in build-cost and a 4% rise in average sales price to £160,700 increased operating profit margins to at least 7% from 6.2% in 2009.
At the height of the housing boom in 2006 and 2007, Bovis enjoyed margins of 27%, compared with an industry average of 18%. Those heady days are unlikely to return any time soon but David Ritchie, the chief executive is hopeful of rebuilding margins "into the teens".
Like other house builders, the company is buying more land in the south and building bigger homes to benefit from higher prices - houses with three to four bedrooms rather than two to three. Some 80% of plots bought last year are in the south of England.
"The sector is building fewer apartments and turning to houses," Mr Ritchie said.
Bovis expects to beat City forecasts by posting a pre-tax profit of £16.3m for 2010. It completed 1901 homes last year, up 5% from 2009, including 1592 private homes and 309 social homes.
Bovis, like other house builders, warned of "subdued" trading this year. The problem is that less than 50,000 mortgages are approved by banks every month, half the number seen in 2007. "This is a major constraint on the market and will not cure itself overnight," said Mr Ritchie.