18th Aug 2014 11:00
LONDON (Alliance News) - Bovis Homes Group PLC Monday raised its dividend threefold, after pretax profit more than doubled in the first-half, as the UK housing market continues to perform "robustly."
The Kent-based company increased its interim dividend to 12.0 pence from 4.0 pence, as pretax profit rose to GBP49.4 million for the six months ended June 30, from GBP18.6 million a year earlier. Revenue jumped 75% to GBP322.1 million from GBP184.4 million a year earlier.
FTSE 250-listed Bovis Homes is targeting a total dividend of 35 pence per share for the full-year 2014 which would be a significant increase from the 13.5 pence it shelled out at the end of 2013.
Chief Executive David Ritchie said a number of factors had contributed to the company's improved position. ?The company has been talking for a number of years, as it has invested in new sites, about growing the business. Its been talking about three positive effects on its earnings numbers."
The company has been talking about strong volume growth, added Ritchie, "We had 54% growth in the first-half in terms of the volume of houses that we've handed over to customers. We've talked about mixed benefits coming through the product we are selling in the South of England and that?s given us an 11% increase in price and then we talked about margin growing. Margins have increased by almost five percentage points from 11% to just under 16% this year.?
?If you add the three of these together, you get this overall profit growth that we are talking about. So it is about what we have been doing over the last five years to put the business into a position to drive those three very positive influences,? said Ritchie.
The strength of the UK housing market has also played a part in the company's fortunes said the CEO. All of the UK's major housebuilders have reported an accelerating recovery in the UK housing market through 2013 and into this year, particularly in the southeast of England where Bovis Homes has high exposure. The builders virtually halted new construction in the wake of the financial crisis as banks pulled mortgage financing and the ensuing economic crisis put off house buyers. The companies instead focused on paying down debt.
?I think we have to acknowledge that the market is clearly helping and the market is currently better than what it was in 2013. That is helping to fuel the business' growth in addition to the strategy that we have been deploying. It is fair to say we are now confident enough in where we are going in the business, that we can start to increase the cash return to shareholders. The increase in the interim dividend this year is the first step towards increasing the cash return to our shareholders,? Ritchie added.
The company ramped up legal completions during the first-half, with 1,487 homes built compared with 963 homes a year earlier. In turn, the average sales price on private legal completions came in 20% higher at GBP239,500 compared with GBP200,200 a year earlier.
Bovis Homes said revenue from legal completions rose 72% to GBP312.2 million, from GBP181.6 million, with housing revenue up to GBP315.1 million from GBP183.2 million a year earlier.
The company, which has not operated in London since the late 1980s, said social homes made-up 18% of total legal completions during the half-year, compared with 13% a year earlier. A total of 274 social homes were built during the period, up from 124 a year earlier.
Bovis Homes said its consented land bank has grown to 17,702 plots from 14,638 plots at the end of December. However, strategic land plots dipped to 19,608 from 20,108 at the end of 2013.
With land investment decisions being a key driver, Ritchie said the group believes that in a stable market it can invest in around 40 new sites a year. As these assets become active sales outlets, the group predicts that it could deliver around 5,000 to 6,000 new homes annually - a significant increase to the 2,813 homes it handed over in 2013.
?We bought 23 new sites in the first-half of the year and we are well on the way to acquiring 40 new sites in the full-year. If you do that each year you start to run a business model that would have around 140 to 160 outlets/ site open for business,? Ritchie said.
?If you run normal sales rates off the back of that number of sites and then you apply a logical assumption on social housing you get between 5,000 and 6,000 units. So for us it is about demonstrating that we have the ability as a business to invest in that number of sites per annum. We also have the structure in place in terms of the geographical presence to allow us to continue to do that,? he added.
Overall, the company said in the first-half of the year the UK housing market continued to perform "robustly with increased housing transaction activity." It said home buyers have good access to mortgages and are confident about buying a home.
Looking ahead, Bovis Homes said it is now almost completely sold for the current financial year and is confident that it will deliver its targeted volume of around 3,650 new homes for 2014.
Additionally, with an increasing proportion of legal completions expected from sites acquired since the housing market downturn and with a greater number of active sales outlets, the group expects that, based on stable market conditions, volumes, average sales price and profit margins will continue to increase in 2015.
The stock was trading up 5.6% at 846.00 pence Monday, making it the biggest gainer on the FTSE 250.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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