Bovis Homes back on track for weekly sales rate

The sales rate for the year to date has reached 0.65 reservations per site per week, having been down at 0.6 earlier in the year.

"Housing market conditions remain positive with strong demand from home buyers who are benefitting from good access to mortgage finance," the FTSE 250 company said, in a statement ahead of its annual shareholder meeting.

As with last year, first-half margins are likely to be weaker than those in the second as the rate of completions should be weighted to the second half of the year while increased costs will be evenly spread over the year.

"We have been trading well with positive market conditions supporting activity levels and we are on track to deliver our planned growth for 2016," said chief executive David Ritchie.

"We continue to drive improvements in our operations across the enlarged business with strong investment in our people and focus on delivering value across the group."

Countering much consternation in financial commentary, the company added that the forthcoming UK referendum on European Union membership "has had no discernible impact on our business with strong demand across all our operating areas".

These improvement are expected to increase margins through, which should also be helped as cost inflation is seen to be easing off compared to 2015.

The land investment pipeline remains strong, with terms either agreed or progressing through strategic conversion to deliver the targeted level of new site acquisitions during 2016.

Analysts at Peel Hunt perceived a "slight warning" on the number of sites.

They noted Bovis is the cheapest housebuilder in terms of the ratio of share price to net asset value (P/NAV) - on 1.12 times for calendar 2016 versus the 1.85 average, but pointed out that the company's 15.0% post tax ROE is circa 28% adrift of the sector average.

Robin Hardy at Shore Capital maintained his negative stance on the company because of the higher risk he perceives in execution, with south-east focused Bovis' sales rate short of nationally-focused Taylor Wimpey's 0.8.

"The relatively weak sales rates relative to the national builders reflects long-held concerns that Bovis is less strong in sales than its peers. Bovis has also already had, in effect, two profit warnings due to excessive cost inflation and greater planning delays than those experienced by the peer group. It seems to be able to find problems or be impacted by market issues in ways that the peer group is able to avoid."

Numis said the update highlighted that Bovis is trading in line with expectations. "Given the ungeared balance sheet, the low valuation and longer term potential for improved returns we think that Bovis offers a good risk reward balance for the investor."

Shares in Bovis were up 9p, or 1%, to 892.5p by 0830 BST on Tuesday.