Bovis building strongly

Chief executive David Ritchie reckons that the housing market is still in the recovery stage, and the company is therefore investing heavily to build its land bank. But Mr Ritchie has given considerable thought to how to manage the peak in the current cycle when it does arrive. He aims to limit or halt altogether investment in new land well before the housing market peaks. The most immediate benefit would be a significant cash surplus.

As the company works through its legacy land bank, the uplift on margins from building on cheaper, more recently acquired land will diminish. But Bovis intends to drive profits ahead by increasing its number of active sales sites. These are expected to rise from 100 now to 120 by the end of the year, and to between 140 and 160 by the end of 2017.

At the operating level, labour and raw material costs - which account for about half the selling price - were up 5 per cent from a year earlier. But this increase was more than covered by an 11 per cent increase in average selling prices to £210,000. For private sales, the increase was even greater, with prices rising 20 per cent to £239,500.

Analysts at broker Panmure Gordon expect full-year pre-tax profit of £131.7m and EPS of 76.3p (from £78.7m and 44.8p in 2013).