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Bovis Homes bouncing back

The housebuilder declared a 45p special dividend, as the first in a series until 2020
September 6, 2018

The benefits of last year’s restructuring are now clearly visible at Bovis Homes (BVS), and strong cash generation means that shareholders are being rewarded with a special dividend of 45p a share, which along with an increased half-year dividend pushes the dividend yield upwards of 8 per cent. And the housebuilder also intends to return a total of 134p a share in special dividends in the three years to 2020.

IC TIP: Buy at 1,174.5p

The overall improvements to make the building process more efficient can be seen from the fact that, despite a 4 per cent rise in material and labour costs and unchanged average selling prices on private homes, gross margins rose from 18.1 per cent to 20.9 per cent, with a medium-term target of 23.5 per cent by 2020.  And while turnover was flat, profits were up by 41 per cent.

As part of its drive for greater efficiency, Bovis has modified its land acquisition strategy to focus on fewer but larger units. In the six months to June, it acquired 828 plots across five sites, and in July it secured a further 243 plots on two developments, with terms agreed on another eight sites. The land acquired so far this year is expected to deliver a gross margin of at least 26 per cent. A new housing range, branded as the Phoenix Collection, was introduced in April embracing all the recent steps to reduce production costs, and first completions are expected to coincide with the all-important spring 2019 season. The overall sales position remains strong, with 96 per cent of sales for 2018 already secured.

Legal completions in the first half edged up to 1,580 from 1,512, of which 1,030 were private homes. Affordable units rose from 372 to 550, which meant that the overall average selling price came down from £277,400 to £262,700.

Further efficiency measures include reducing administrative expenses, already down from £28.8m to £27.3m. This represented 6.3 per cent of group revenue, and the target is to reduce this to 5 per cent by the year-end. 

Analysts at Peel Hunt are forecasting adjusted pre-tax profits for the year to December 2018 of £159m and EPS of 95.8p (from £126m and 75.6p in 2017).

BOVIS HOMES (BVS)    
ORD PRICE:1,174.5pMARKET VALUE:£1.58bn
TOUCH:1,172.5-1,174.5p12-MONTH HIGH:1,312pLOW: 1,010p
DIVIDEND YIELD:4.4%PE RATIO:15
NET ASSET VALUE:787pNET CASH:£42.8m
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)*
201742842.725.715
201843260.236.119
% change+1+41+40+27
Ex-div:27 Sep   
Payment:23 Nov   
*Not including special dividend of 45p a share