Bovis Homes talks up focus on cost optimisation

Bovis Homes Group investors were told of how total sales for the year were in line with the board’s expectations at its annual general meeting on Wednesday, with pricing said to be “strong”.

The FTSE 250 housebuilder said its average private sales rate per site per week for the year-to-date was up 6% to 0.52, with that rate excluding the sale of 275 units to Heylo Housing Association to be completed in 2018.

It opened 12 new developments in the year, and was operating from an average of 84 active sites.

As planned, Bovis had 11 new sites launching in the coming months, and expected its average active sites number to increase in the second half.

“We are making good progress with our four major margin initiatives covering price optimisation, specification review, cost reduction and the launch of our new housing range,” the board said in its statement.

“In particular, our focus on driving prices across all our product whilst delivering high levels of customer service, has seen positive movements in pricing for the year to date.”

Bovis launched its new housing range for both private and affordable homes, The Phoenix Collection, in late April.

The board said the “market leading” range would deliver “exciting”, high quality new homes as well as drive further price optimisation and a reduction in costs.

It said it had already identified more than 50% of the private units in its owned land bank to be replanned, and expected its first completions from the new range from spring 2019.

The company said its discussions regarding joint ventures, and the reduction of its investment at larger sites at Sherford near Plymouth, and Wellingborough, were progressing “well”, and the board said it was on track to deliver a total of at least £180m of additional cash into the business by December.

Subject to shareholder approval at the AGM, a final dividend of 32.5p per share would be paid on 25 May, giving a total dividend for 2017 of 47.5p per share, up from 45.0p in 2016.

Looking ahead, Bovis’ board said market fundamentals remained “strong”, and it was continuing to see good levels of demand for new homes across all its operating regions with underlying pricing remaining firm.

The group said it was making clear progress towards its medium term targets including a 23.5% gross margin and 25% return on capital employed.

In the first five months it said it saw positive results from its margin initiatives, which represented further margin potential for the firm in the medium term.

“Market conditions remain robust and we are on track to deliver another controlled period end,” said chief executive Greg Fitzgerald.

“Our HBF customer satisfaction score continues to trend well above 80% and with our exciting new housing range launched in April, we are well placed to meet our customers' needs and increase output, whilst optimising price and driving profitability.”