Housebuilder Bovis has reported a 92 per cent rebound in private reservations at its half-year results, although it cautioned that there may be more pain to come in the housing market. The company's reported loss reflects a £8.9m write-down on its land bank in the period, and analysts at broker Panmure Gordon expect a further £81m of similar write-downs in the next few years.
The builder continues to work its way through nearly 1,000 completed but unsold stock units it had accumulated at the beginning of the year, using a variety of incentives to secure sales. Now, there are just 450 left, having legally completed 754 homes in the first half (851 in 2008). Average sales prices of private homes fell 19 per cent in the period, although Bovis obtained peak pricing in the first half of 2008, rather than the last half of 2007, which explains why this drop seems large compared with other builders.
Nevertheless, net cash inflows of £94m, combined with cost savings that have reduced overheads by 48 per cent, has enabled Bovis to get its half -year net debt down from £108m to £14m. Since the period end, this has improved further to a net cash position of £7m, and Bovis is keen to get back into the land market.
| BOVIS (BVS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 546p | MARKET VALUE: | £661m | |
| TOUCH: | 545-546p | 12-MONTH HIGH: | 558p | LOW: 267p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 515p | NET DEBT: | 2% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 149 | 9.50 | 5.7 | 5 |
| 2009 | 123 | -8.61 | -5.5 | nil |
| % change | -17 | - | - | -100 |
More analysis of company results
"The short-term opportunity is to buy consented land where the price reflects the position of the vendor, and the reduced number of buyers in the market," says chief executive David Ritchie. He confirms that Bovis will be starting a number of new sites in the second half of the year, but retains a realistic stance on the housing market. "There's still frustration around valuations," he admits. "We understand [mortgage valuers] are there to do an independent job, but clearly they're taking a pessimistic view. Most banks are not supporting first-time buyers at the moment, who aren't able to provide the level of deposits required."
However, if confidence improves Mr Ritchie fears there could be a flood of properties released onto the resale market. "If people felt able to undertake a transaction, the increase of supply could have the potential to put downward pressure on pricing," he says.
Broker Panmure Gordon forecasts full-year pre-tax profits of £6.5m with EPS of 3.9pp (9.21p in 2008), rebounding to 6.39p in 2010.
