Bovis Homes sees FY profits 'slightly ahead' of market consensus

FTSE 250 housebuilder Bovis Homes said on Wednesday that profits for 2018 are expected to be "slightly ahead" of market consensus following a "significant" improvement in its operational performance.

In an update for the year to 31 December 2018, the group said it delivered a total of 3,759 new homes, up 3% on the previous year and in line with expectations. Meanwhile, private homes totalled 2,567 units compared to 2,573 the year before, with 1,192 affordable housing units versus 1,072.

Total average selling price on completion nudged up to around £273,000 from £272,400 and the private average selling price came in at £338,000 versus £334,500. Bovis said underlying pricing remains robust and in line with its expectations.

Chief executive Greg Fitzgerald said: "The significant improvement in operational performance across all areas of the business is expected to deliver a record year of profits for the group.

"Customer satisfaction is a key priority and the group's return to 4 star housebuilder status along with another controlled and disciplined period end reflect this. We are looking forward to delivering the first homes from our new housing range in 2019 and continuing to make further operational and financial progress."

The group said it expects to deliver a "significant" step up in operating margin for 2018 following the successful implementation of operational improvements, with profits for the year seen "slightly ahead" of market consensus.

Bovis said that while it's too early to comment on this year, early signs are encouraging.

"As reported in November, we saw Brexit uncertainty driving a slowdown in discretionary buyers of our larger homes," the company said. "Building on our much improved relationships with housing associations, we have increased our level of private sales to housing associations and see further opportunities in this area. In addition, our stronger operating model and margin initiatives will support the business."

Bovis said it started the year with a strong forward sales position of 2,681 units versus 2,656 the year before, with a value of £521m compared to £518m.

At 0940 GMT, the shares were up 4.5% to 968.20p.

Canaccord Genuity said this was a good update, which confirmed that the group essentially delivered what it promised in 2018.

"Clearly, macro risks are elevated with the political events of last night likely to overshadow corporate news-flow today. For what it is worth at this early stage, management commented that trading for the first two weeks has been encouraging. Consensus for 2018 is likely to move up by circa +1-2% with no material changes to views on 2019 expected, with the 2019 consensus range widening significantly recently as varying macro views are factored in.

"The shares no longer sit at a premium to close peers and with more self-help to come arguably look attractive value relative to the sector in our view; macro and political visibility remains poor for the sector as a whole given the events of last night, however."