House builder Bovis Homes had a strong first half to 2012, in line with expectations, with net private reservations sharply higher while prices are set to be much better in the second half.
For the six months ended 30 June 2012, the group legally completed 944 homes, compared to 801 homes in the same period in 2011, an increase of 18%. Bovis's average sales price increased by 1% year-on-year to £164,400, and would have increased by more had it not been for an increased proportion of legal completions from sites in the Midlands and up north, where prices tend to be lower.
The group expects to report a housing gross margin for the half year of around 21%, up from 20.1% in the first half of 2011, while the operating profit is expected to crank up a couple of percentage points or more to around 10%, from 7.5% in 2011, helped by a profit of £3.9m from land sales.
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Net private reservations in the first six months shot up 24% to 993 from 802 in the corresponding period of last year, with the net private sales rate per site per week moving up to 0.47 from 0.45 a year earlier, from an average of 82 active sales outlets, compared to 68 in the same period in 2011. Sales prices achieved to date are ahead of the group's expectations.
The average sales price on private reservations expected to legally complete in the second half of 2012 is in excess of £200,000, compared to £175,000 achieved on private legal completions in the first half of 2012. Additionally, the housing gross margin on this forward order book is stronger than that achieved in the first half of 2012.
Bovis has noticed that home buyers are taking longer to make their purchase decision, however, and continue to face a challenging mortgage process. In keeping with summer seasonality, reservation rates have slowed, with a notable effect on sales rates around the time of the Queen's Diamond Jubilee.
Net cash at the end of June stood at £23m.
"The compound positive effect of greater volume, increasing average sales price and improving housing profit margin provides good visibility that, based on current market conditions continuing, return on capital employed can be improved in 2012 to a rate approaching 7.5% (2011: 5%)," Bovis said.
JH
