Vistry flags forecast-beating profits for Bovis Homes
Vistry Group updated the market on trading in its Bovis Homes operation for the year ended 31 December on Wednesday, reporting that it expected to deliver another record year of profits, slightly ahead of market consensus.
The FTSE 250 company said it completed a total of 3,867 new homes in the year, including 58 joint venture completions, which overall was an increase of 3% year-on-year.
Private homes totalled 2,678 units, up from 2,567, with 1,189 affordable housing units being completed, falling from 1,192..
Total average selling price on completions in the year was £279k, up from £273.2k, with the firm’s private average selling price standing at £341k, rising from £337.4k.
As it had previously reported, Vistry said market uncertainty surrounding Brexit and the general election led to some increased pressure on pricing in the second half, resulting in a reduction in underlying sales prices for that period of between 1% and 2%.
That was, in part, offset by a combination of the group's own build cost savings and a lack of cost inflation, the board claimed.
As a result, the group said it expected to deliver a further improvement in operating margin for 2019, with pre-exceptional profit before tax for the year expected to be slightly ahead of market consensus.
The group also said it expected to report exceptional costs relating to the acquisition of Linden Homes and Vistry Partnerships totalling around £15m for the year.
Vistry said the “significant step-up” in its sales rate was maintained in the year, with an average sales rate per outlet per week of 0.58, up from 0.5 in 2018.
It said it was continuing to see a “strong” level of demand for private units from housing associations, and added that it operated from an average of 88 active sites during 2019, up from 87 in the prior year.
The company said customer satisfaction remained its “key priority”, explaining it was “very pleased” to have seen a further improvement in its HBF customer satisfaction rating, which was reported at above 90% for the third quarter, equivalent to a five-star rating.
It said it was continuing to utilise part exchange in a “disciplined and well-controlled” way, with its year-end balance sheet value standing at £16m, down from £16.3m at the end of 2018, with no units owned and unsold for more than three months.
The group added that it made “good progress” with its partnerships business during the year, entering into four new land-led partnerships with housing associations in the second half.
That included the formation of a joint venture with Metropolitan Thames Valley in respect of its “strategically sourced” land at Cambourne.
On the land front, Vistry said it continued to see good opportunities in the land market, and acquired a total of 4,351 plots across 16 developments in the year, rising from 4,164 plots and down from 19 developments year-on-year.
Its strategic land bank remained a valuable source of land for the group, with it converting 1,986 plots from it during the year, up from 1,958.
On average, the land acquired was expected to deliver at least a 26% gross margin and a 25% return on capital employed.
Vistry said it expected to have a net cash balance at 31 December of £362m, up from £126.8m year-on-year, which included net proceeds of £150m from the placing completed on 7 November to raise funds for the acquisition of Linden Homes and Vistry Partnerships.
As it had previously announced, the expected special dividend of £60m was returned to shareholders by way of a bonus issue of shares to shareholders of Bovis Homes on the register as at 2 January.
On the basis of the Bovis Homes closing share price on that date, the bonus issue totalled around £75m.
The group also previously said that instead of paying the Bovis Homes 2019 final dividend, it would pay a second interim cash dividend of 41p per share on 29 May to shareholders on the register as at 27 December.
Looking ahead, the board said it was “delighted” to have completed the “transformational” acquisition of the Linden Homes and Vistry Partnerships businesses at the start of the year.
It said its focus was on successfully integrating those businesses and delivering the “clear and significant” benefits from the combination as rapidly as it could.
The board added that, while it was early in the year to comment on 2020 trading, it had a “strong” forward sales position with trading to date described as “very positive”, and consumer confidence returning while industry fundamentals reportedly remained strong.
It added that it was “excited” about the prospects for the enlarged business, and expected to report “much progress” in the year ahead.
“The group has made further operational progress over the past 12 months and for 2019 expects to deliver another year of record profit,” said chief executive Greg Fitzgerald.
“Building high quality new homes for our customers has been, and remains our priority, and I am confident we will finish the year as an HBF five-star housebuilder.
“We completed the transformational acquisition of the Linden Homes and the renamed Vistry Partnerships at the start of this year; integration is well under way and we are fully focused on delivering the clear and significant benefits from this exciting combination as quickly as possible.”
Vistry Group said it would publish its full year results for the 12 months ended 31 December on 27 February.