Bovis Homes Group plc (LON:BVS) has issued a trading update for the six month period ended 30 June 2019 ahead of reporting its half year results on 10 September 2019.
Greg Fitzgerald, Chief Executive commented:
“I am very pleased to report an excellent first half performance across the Group and in particular, a significant improvement in profitability, a strong cash position and a step up in our sales rate compared to the same period last year. We have had another controlled period, focused on delivering high quality homes and we are currently trending at a 5-star HBF customer satisfaction rating. We start the second half with a strong forward sales position and expect to deliver an improved performance in 2019.”
First half performance
We are pleased to report a 15% increase in our average private sales rate per site per week in the period to 0.6 (2018: 0.52), reflecting a step change in the Group’s performance and stable market demand.
The Group delivered a total of 1,647 (2018: 1,580) completions in the half year, a 4% increase on the prior year. Of this 1,031 (2018: 1,030) were private units and 616 (2018: 550) affordable. Whilst we saw an increase in the percentage of affordable homes in the half, our expectation for the full year is that affordable will remain a similar proportion of total completions as in 2018.
The Group’s private average selling price in the period increased to c. £342,000 (2018: £334,700), driven by an improved geographical spread of sales outlets with overall underlying pricing remaining broadly flat. Total average selling price increased by c. 3% to c. £270,000 (2018: £262,700).
We opened 10 new developments in the half and operated from an average of 88 active sites. We expect to open a further 13 new sites this year, with our average active sites for 2019 at a similar level to the prior year (2018: 87).
We have made good progress with the roll-out of our new Phoenix housing range and have completed the majority of replanning on existing sites. We saw the first legal completions from our new housing range during June and with excellent customer feedback, remain confident our new house types will deliver an enhanced sales proposition for our customers, improved build efficiency and a reduction in build costs.
Our overall improved cost control continues and alongside our margin initiatives, this is offsetting the impact of flat pricing and build cost inflation. Whilst cost inflation was running around 3% to 4% in the early part of the year we have seen reducing pressure more recently.
Quality and customer service
We are pleased to report another controlled and disciplined period end with our focus firmly on delivering high quality new homes and excellent customer service. Following our award of a 4-star HBF Customer Satisfaction rating in March, we continue to see improvement in the Group’s score which is trending at above 90%, a 5-star rating for the new HBF year from 1 October 2018, with the majority of responses submitted.
We also continue to see an improvement in all our on site quality metrics and are delighted that six of our site managers and their teams have been awarded NHBC Pride in the Job Quality Awards this year.
Land
We have excellent visibility on our land supply with all of the units for 2020 secured. We continue to see good opportunities in the land market that at least meet our minimum hurdle rates and have acquired 1,164 plots across 9 sites in the year to date. We have good momentum on strategic land and in the year to date pulled through 403 plots on 3 sites from our strategic land bank. We continue to invest in our future strategic land supply and have entered into 3 new option agreements in the year to date for a total of c. 265 plots, with a strong pipeline for the second half.
Partnerships
In February, we announced the development of our Partnerships Housing division with a land led strategy, reflecting the quality of our strategic landbank. We continue to strengthen our relationships with housing associations and in April were delighted to have completed our joint venture at Stanton Cross, Wellingborough, with Riverside Housing Association. Building on our strong relationships, we concluded land led deals in the period with Vivid Housing Association at our development at North Whiteley, and with Orbit Housing Association at our development in Gravesend. We have seen an increase in our level of private sales to housing associations in the period. These are units that are well advanced in production and are typically for shared ownership.
In addition, early July saw the conclusion of a further land led partnership in respect of our development in Exeter, to jointly develop around 700 new homes with Live West Housing Association.
Balance sheet
The Group balance sheet has further strengthened in the period with a net cash position as at 30 June 2019 of c. £103m (30 June 2018: £42.8m). Following completion of the joint venture at Stanton Cross, Wellingborough, the Group has achieved in excess of £250m from its initiatives set out in 2017 to optimise its balance sheet, significantly exceeding the original £180m target.
Outlook
Market fundamentals remain stable and despite the ongoing uncertainty surrounding Brexit, we continue to see good demand for our new homes across all our operating regions. We start the second half of the year with a strong forward sales position and are confident of delivering completions in line with our expectations for the year.
The Group continues to make significant progress and expects to deliver an improved operational and financial performance in this full year.
Certain statements in this press release are forward looking statements. Forward looking statements involve evaluating a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends, results or activities should not be taken as a representative on that such trends, results or activities will continue in the future. Undue reliance should not be placed on forward looking statements.
