Bovis Homes this week released a positive interim report, with statements that profits are up and cash flow performance is strong.
Developers were hit hard by the downturn in the economy but despite subdued forecasts from some areas of the industry, Bovis has performed above expections so far for 2010. Bovis announced a total of 803 legal completions so far this year and a net cash in hand figure of £79 million. The company has added to its land portfolio to the tune of £107 million comprising 1,874 separate plots with a value of £373 million. Another 3000 plots are earmarked for acquisition “in the near future”.
Good progress is reported on savings on new build costs with a 13% saving on new builds since October 2009. Bovis expects the costs savings to show in figures for the second half of 2010 and into 2011 and these will initially contribute to land write ups improving net assets rather than profit margins, according to the management committee. Bovis also reports a high level of build quality, as measured by the NHBC scheme, and has been the top performer on RIs in six of the last twelve months. Health and safety performance has been good and customer satisfaction improved.
Innovations in 2010 include the stock JV deal and “The Perfect 10” mortgage product. This is a joint venture with Barclays Bank which provides a 90% LTV mortgage including free protection insurance to clients with a 10% deposit.
The company also launched “sales hubs”, with the sales force available 7 days a week. Improvements in the website help market the products by allowing customers to access Bovis Homes more effectively and the “customer journey” was also launched, to provide clear guidance on legal completion dates and service standards. Pre tax profit more than doubled the 2009 figures at £3.5 million with earnings per share up to 1.8p from 0.4p.
Bovis blames frustrated first time buyers for whom lack of mortgage finance is still an issue, and lack of confidence and liquidity in the market for the current gloomy market forecasts and low housing prices. The company also points the finger at the General Election and the coalition Budget. It has seen prime locations in the South show an improvement but further decline in Northern and Midlands sites are still having an overall negative effect on the market. In the second half of this year Bovis expects 1,600 further legal completions, acquisition of current “terms agreed” land and 1000 more units in production. Bovis claims that it is not reliant on a recovery in the market to support further profitability and forecasts further mortgage liquidity problems and low consumer confidence for the housing market.