Bovis Homes on track to meet FY profit expectations amid 'robust' demand

FTSE 250 housebuilder Bovis Homes said on Tuesday that it is on track to meet its expectations for FY2017 and to deliver “significant improvements” in profits for FY18.

In a trading update for the period from 1 July to 10 November, the company said it is fully sold for its targeted FY17 completions, with an average sales rate of 0.52 versus 0.48. In addition, pricing remains robust and Bovis said it expects to deliver an increase in the average selling price for FY17, largely driven by changes in mix with a modest increase in underlying prices.

Chief executive officer Greg Fitzgerald - who is currently in the process of trying to turn the business around - said: "We are making encouraging progress towards all of our medium term performance targets with continued improvement in customer satisfaction and excellent progress in optimising the balance sheet and bringing additional cash into the business. We expect to have a net cash position of at least £100m as at 31 December 2017. Trading is in line with expectations, the market remains strong, and we are on track to deliver another disciplined period end."

Bovis said initiatives to simplify and streamline its operating structure to reduce costs and make the group more agile, are progressing well and it is on course to deliver its target of overheads being a maximum of 5% of revenue from FY18 onwards. As previously announced, it expects to take an exceptional restructuring charge of around £4m in the second half of the year.

The housebuilder said demand for new homes continues to be robust across all of its regions and customer interest remains good.

“The industry fundamentals are strong given the government's housing policy, in particular Help to Buy, the low interest rate environment, and the competitive mortgage market,” it said.

“We set out our clear operational priorities for 2017 to transform and re-set the business and have made positive progress against these. We are confident of delivering profit, pre one-off and exceptional costs, in-line with the board's expectations for FY 2017 and a significant improvement in profits for FY 2018.”

Numis reiterated its 'buy' recommendation on the stock and said: "In our view this is a solid statement and it is clear that management is making good headway in improving the operational performance of the business and extracting cash
from the balance sheet - which is ahead of our estimates. This should give a good underpinning to our dividend forecast of circa £130m in 2018 and potentially provide upside from here."

At 0915 GMT, the shares were up 1.3% to 1,119p.