Bovis targets higher volumes

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Bovis Homes will target two new sales regions in July to shore up volumes in the face of slowing house price inflation.

The Kent-based housebuilder, which yesterday reported an 18 per cent rise in full-year pre-tax profit, said its strategy of increased coverage of England and Wales was the best way to expand.

As well as the two regions to be targeted in the summer - which will increase output by up to 40 per cent - Bovis said it would expand into further regions where it already holds large strategic land holdings. At least one region will be opened in 2006.

Malcolm Harris, chief executive, said: "We believe that with margins being flat, the key way to increase shareholder value is to increase volume."

The company also plans to sell more smaller homes to first-time buyers and further homes for social housing.

In 2004, Bovis built nearly all of its output on strategic land - land bought at a discount without planning permission, which the company puts through the planning system.

Mr Harris said that, as the company was confident about cash and profit generation because of its large strategic land bank, it would double the dividend during the next four years.

In the year to the end of December, turnover increased to ?559.5m (?478.4m), operating profit rose to ?149.3m (?129.2m), and pre-tax profit climbed to ?145.2m (?123m).

Earnings per share rose to 87p (74.2p) and the final dividend increased to 13.6p making a total of 20p (16.4p).


Chasing volume - for housebuilders that strategy is like a Class A drug. It is dangerous, addictive and a number of them are in rehab after the last downturn in the housing cycle. Bovis believes it can handle it. With the highest margins in the sector - at 27 per cent - the company can afford to see a percentage point or two fall as volume increases, a luxury that some of its peers cannot afford. The only danger for Bovis is that its excellent profits growth from strategic land draws the attention of the Treasury and a much feared development land tax. Next year, Bridgewell Securities are looking for pre-tax profit of ?160m and earnings of 95.4p, putting the company on a price earnings ratio of 7.3 - above the rest perhaps with more to go.

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