Bovis Homes H1 profit up 41%, on track for record year of profits

Bovis Homes posted a 41% jump in first-half pre-tax profit on Thursday as completions rose and the housebuilder said it was targeting a record year of profits, at the top end of its expectations following a robust summer.

In the six months to 30 June, pre-tax profit increased to £60.2m from £42.7m - ahead of the group's expectations - as completions ticked up 4% to 1,580 and revenue nudged up 1% to £432.2m.

The private average selling price was stable at £334,700, with underlying prices remaining firm and some positive momentum from Bovis' price optimisation initiative launched in January. This was offset by changes in mix and a lower proportion of completions from higher priced product in the period compared to the previous year.

The total average selling price, meanwhile, fell to £262,700 from £277,400, reflecting the higher percentage of affordable completions in the period.

The interim dividend was lifted by 27% to 19p a share and the company announced a first special dividend of 45p per share to be paid with the interim in November.

Market fundamentals remain strong and the group said it continues to see good levels of demand for new homes across all of its regions.

"Interest rates continue to be at historic lows with good competition in the mortgage lending market. The government remains committed to increasing the supply of new homes in the UK reflected in its policy on housing and planning and commitment to Help to Buy."

Bovis said it is on track to deliver completions in line with its expectations for FY18, with 96% of expected 2018 completions secured.

Chief executive Greg Fitzgerald said: "We delivered a strong performance in the half with a more than 40% increase in profits. This reflects the excellent progress made across all business areas over the past 18 months and a step change in the quality of the homes we are building and level of service we are providing our customers. We are confident in the outlook for the business and are targeting a record year of profits in 2018, at the top end of the board's expectations."

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "You’ve got to hand it to Greg FitzGerald, he hasn’t half done a good job at Bovis.

"The pace of progress means full year profits are now expected to be at the top of management’s expectations - not bad less than two years after a major profit warning caused the previous CEO to walk and left Bovis fending off opportunistic takeover bids from rivals.

"Of course conditions in the wider housing market aren’t all rosy, with rising interest rates, flagging real wages and Brexit uncertainty all potential headwinds. Probably the biggest threat on the horizon is the potential end of Help to Buy. The scheme supports 36% of Bovis’ reservations, and the withdrawal of government largesse would undoubtedly hit sales. It’s due to run until 2021, but its future beyond then is worth watching out for in the Autumn budget."

At 0855 BST, the shares were up 4.1% to 1,178p.