Bovis Homes on track for FY but warns over Brexit uncertainty
Bovis Homes said on Thursday that it continues to target record profits for this year, but warned that uncertainty about Brexit has put off discretionary homebuyers.
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In an update for the period from 1 July to 11 November, the housebuilder said it was fully sold for its targeted FY 2018, while the sale rate per outlet per week for the year was 0.51, in line with the previous year and the group's expectations.
"Whilst we have maintained our rate of sale, the uncertainty surrounding Brexit has impacted discretionary buyers," Bovis said.
The company said it was "pleased" with the government's plans to extend the Help to Buy scheme to March 2013, as it remains important, particularly for first time buyers. "The restrictions to the scheme from March 2021 are not unexpected, and we do not expect any significant reduction in the use of the scheme for our new homes as a result," it added.
The housebuilder said it has increased its use of part exchange, which is running at around 15% of reservations in the second half.
Bovis said it was seeing good opportunities in the land market and continue to make acquisitions with an average expected gross margin of at least 26% and return on capital employed of 25%. In the second half to date, it has secured 1,988 plots across nine developments, four of which have been converted from its strategic land bank.
In addition, the company has agreed terms for around 1,000 plots across eight developments that it expects to convert into its land bank in the balance of 2018 or the first quarter of 2019.
"We are making good progress against our medium term targets and on track to achieve a number of them as early as this December.
"We expect 2018 completions to be in line with our expectations and with progress on our margin initiatives and improved operating performance, the group continues to target profits for the year to be at a record level, in-line with the board's expectations."
George Salmon, equity analyst at Hargreaves Lansdown, said: "Bovis typifies how the UK housebuilders are dividing opinion in the markets.
"Greg Fitzgerald has done a sterling job of improving the group’s operating performance and balance sheet, and the shares offer an attractive yield of 10%. All the while, supportive government policies like Help to Buy are providing a tailwind.
"However, Brexit is proving to be a fly in the ointment. The housing market is already slowing, and the worry is it grinds to a halt in the event of a disorderly Brexit - which would clearly be bad news for the builders. A weak secondary market means around 15% of Bovis’ transactions now rely on part-exchange, hardly reassuring. Overall, the sector looks something of a binary bet at the moment."
At 0915 GMT, the shares were down 4.4% to 995.20p.