Bovis home

Bovis Homes has underlined its credentials as the UK’s fastest growing housebuilder by posting a near 50 per cent rise in annual profits.

The Kent-based developer, which completed on more than 2,800 private and social houses last year, says it now plans to almost double volumes in the next two years to between 4,000 and 5,000 units – offering some evidence that the sector is finally responding to calls for a greater supply of new homes.

Help to Buy, the high-profile government equity loan scheme that has been widely credited with boosting housebuilders’ performance, contributed to a 63 per cent rise in the sales Bovis made through shared-equity products.

David Ritchie, chief executive, said the scheme was “not the be-all and end-all”. “In the end, this is a gap product and that gap product will have to be removed,” he said.

The sales surge continued into 2014, as Bovis registered 468 private reservations in the first seven weeks of 2014, an increase of about two-thirds on the same period of last year. The developer has plans to complete 3,400-3,600 homes this year.

To support its growth plans, the FTSE 250 housebuilder has continued its land buying, with the “consented” land bank – that is, plots carrying detailed planning permission – rising by more than 3,700 plots to about 14,600.

“The big challenge for us is not buying land but knowing when to stop buying land,” said Mr Ritchie.

Gavin Jago, analyst at Shore Capital, pointed out that more than 70 per cent of this land was in the southeast – which is feeling the ripple effects of London’s house price inflation – with a bias towards larger, traditional family homes that are less reliant on first-time buyers.

“As and when the government stimulus is removed, this gives them some downside protection,” he said.

Almost two-thirds of that consented land has also been picked up since the downturn, and therefore more cheaply, meaning that – combined with a rise in the average selling price – Bovis expects operating margins to rise to about 17 per cent this year, compared with 14.9 per cent in 2013.

One cloud on the horizon was labour costs, with increased market activity prompting subcontractors to renegotiate higher rates.

Pre-tax profit rose 48 per cent compared with 2012 to £78.8m on revenues up by a third to £556m. Operating profit came in at £82m, as expected, a 46 per cent rise on the prior year. The group proposed a final dividend of 9.5p a share, making for a full-year payout of 13.5p – up 50 per cent on 2012.

Bovis shares, which are up more than a third in the year to date, were up 2.3 per cent at 921p in Monday afternoon trading.

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