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Record sales for Bovis

Sales rose to an all time high in 2015, but construction costs continue to rise.
February 23, 2016

It's hard not to be impressed with the progress made by Bovis Homes (BVS). Since 2011 the dividend payout has increased eightfold and profits over fivefold. Completions in the 2015 calendar year reached a record 3,934, up 8 per cent, and average selling prices were 7 per cent higher at £231,600.

IC TIP: Hold at 895.5p

Overheads including sales and marketing costs grew by 15 per cent as the group invested in accelerating the deployment of its land bank. However, thanks to increased sales, the overheads to revenue ratio improved slightly to 7.3 per cent. Material costs remained benign, as did the cost of land, but labour costs continued to rise, pushing construction costs up by 8 per cent per square foot. These were offset by sales price gains of 4 per cent (costs make up roughly half the sale price), which left gross margins flat at 24.4 per cent.

To replenish the land bank, Bovis spent £343m on 6,058 consented plots, taking the number of consented plots up to 19,814, with an estimated gross profit potential of £440m. In addition, the strategic land bank was boosted by the addition of 3,827 plots to 23,083.

Analysts at Peel Hunt are forecasting adjusted pre-tax profits for the year to December 2016 of £186m and EPS of 110.6p (from £159m/94.5p in 2015).

BOVIS HOMES (BVS)
ORD PRICE:895.5pMARKET VALUE:£1.2bn
TOUCH:893.5-897p12-MONTH HIGH:1,206pLOW: 814p
DIVIDEND YIELD:4.5%PE RATIO:9
NET ASSET VALUE:714pNET CASH:£32m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20113653217.55
20124265430.79
20135567944.913.5
201480913378.635
201594716095.440
% change+17+20+21+14

Ex-div: 28 Mar

Payment: 20 May