Bovis Homes on course for record profits

Bovis Homes, the UK housebuilder, on Tuesday said it was on course to make record profits this year after reporting that completions were up 9 per cent.

The company, which builds homes across England and South Wales, said 2004 pre-tax profits before exceptionals would be “broadly in line” with consensus forecasts of £144m ($274m), up from £123m last year.

In November, Malcom Harris, chief executive, warned the group might miss targets after saying sales had slowed between July and October in response to interest rate rises.

But on Tuesday Mr Harris was more upbeat: “We have seen good sales through November. We launched a number of new developments and the products have sold well.”

After a series of interest rate rises by the Bank of England, Bovis took the decision to build more smaller units as demand for higher priced properties slowed. Last year it built 1,550 of these units, priced under £200,000, and intends to increase the number to 2,000 this year.

In total, Bovis said it expects to increase the number of homes sold this year by 10 per cent and the average house price to increase by 2 per cent.

The upbeat assessment from Bovis is in contrast to rival Taylor Woodrow which, on Monday, warned profits would be at the lower end of expectations because of falling sales and increased customer caution.

Kent-based Bovis said completions, including those built on third party land, had risen 9 per cent compared to last year to 2,700 units.

The average selling price rose 7 per cent to £198,000 compared to the previous year, it added. This compares to the national average house price which stood at £180,226 in November, down from £180,444 in October, according to the latest figures from the Office of the Deputy Prime Minister.

Bovis said a number of strategic land purchases had increased the size of its land bank or plots which do not yet have planning permission. This adds to Bovis’s existing reputation as one of the strongest land-bank managers in the sector. Gearing fell to 3 per cent at year end.

However, Tessa Stamner, at Seymour Pierce, said she believed the advantage Bovis has built-up over sector rivals in land bank management may be coming to an end.

“Bovis will not see the same kind of uplift from strategic land as in the past, given that large sites now require significant infrastructure investment and large high margin green field sites are becoming a thing of the past,” said Ms Stamner.

Bovis shares, which have risen more than 25 per cent in the last 12 months, were 2.3 per cent higher at 584p in mid-morning trade.

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