Profits in line at Bovis Homes

FTSE 250 house builder Bovis Homes says it expects pre-tax profits for the year ended 31 December 2011 to be in line with market consensus and says that it is well positioned to improve returns further in 2012 and beyond.

However, the firm warned that given continuing economic and employment uncertainty, trading conditions next year are expected to be "challenging".

Home completions totalled 2,045 last year, an 8% increase on the 1,901 the year before. Meanwhile, average sales price rose from £160,700 to £162,400.

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The 2011 housing gross margin should be at least 20%, the group said, up from 17.9% in 2010, "as a result of the full year effect of build cost savings and the initial contribution from legal completions on stronger profit margin sites acquired since the housing market downturn." The operating margin has improved from 7.3% to 10%, as the return on capital employed will approach 5%.

The firm's net cash position nudged lower to £51m at the end of 2011, from £52m at the start of the year.

Bovis's confident outlook for 2012 is underpinned by its forward sales, which have jumped 35% year-on-year to 568 homes. Meanwhile, volumes, sales prices and the profit margin are all expected to show an improvement next year.

According to Chief Executive David Ritchie, "Based on current market conditions continuing, the Group can deliver significantly increased profit and, coupled with improving efficiency of capital employed, a stronger return on capital employed in 2012 and beyond."

The group said it is looking forward to the launch of the government-backed mortgage indemnity scheme, which is expected to work in a similar way to its existing 'Perfect 10' product.