Bovis banking on land

A year ago, the builder was faced with an overhang of unsold stock. Today's results show reservations have increased 82 per cent, with 1,801 homes reserved in the period. Importantly, this matches annual completions (which remained flat for 2009 at 1,803 homes) signalling the end of the glut. In the first nine weeks of trading in 2010, sales of homes set to complete this year have reached 969 homes, up 25 per cent on the same period a year ago.

Having strengthened its balance sheet, partly through a £59m placing in September, the challenge now is to acquire cheap land, open more sites and boost margins. It has already re-entered the land market, acquiring four consented sites in the last quarter of 2009, with 15 more deals now agreed in principle. Bovis also followed Persimmons' lead and "wrote-back" £11.6m to its landbank in the second half of the year as market conditions improved. This cancelled out the £8.9m writedown it made in the first half, but exceptional charges stand at £2.7m (though a fraction of last year's figure of £93.1m).

However, the number of active sites is expected to fall from 85 to 70 outlets in 2010 as schemes are finished. And despite slashing costs by 45 per cent since the start of 2008, operating margins of 6.2 per cent remain lower than last year's 7.5 per cent, impacted by a 9 per cent decline in average selling prices for private homes during the period.

Broker KBC Peel Hunt forecasts adjusted pre-tax profits of £10.7m and EPS of 5.8p this year (from £6.5m and 3.4p in 2009).

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