Given the slowdown in private house price growth, Bovis Homes’ (BVS) decision to take another shot at acquiring Galliford Try’s (GFRD) housebuilding operations is understandable. The sweetened deal – which values Linden Homes and partnerships and regeneration at £1.08bn – would not only enhance Bovis’s scale, but accelerate its push into the affordable homes sector. Shareholders in the target would receive 0.57406 Bovis Homes shares per Galliford share, while the company would get £300m in cash and offload £100m of its 10-year debt.
Bovis managed an increase in the operating margin to 16 per cent during the first half thanks to internal efficiency initiatives, as meagre house price inflation continued to be outstripped by a 6 per cent rise in construction costs per square foot. The use of part exchange – a process where builders take a buyer’s existing property as part-payment for a new-build home – also rose to 9 per cent of completions. Affordable homes comprised 37 per cent of legal completions, up from 35 per cent in the prior year, which helped improve the return on capital employed. Management said it was on track to increase this figure to 25 per cent by 2022.
Analysts at Canaccord Genuity forecast adjusted pre-tax profits of £185m and EPS of 110p for 2019, up from £168m and 100p in the prior year.
| BOVIS HOMES (BVS) | ||||
| ORD PRICE: | 1,013p | MARKET VALUE: | £1.37bn | |
| TOUCH: | 1,012-1,014p | 12-MONTH HIGH: | 1,183p | LOW: 819p |
| DIVIDEND YIELD: | 5.8% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 796p | NET CASH: | £102m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p)* |
| 2018 | 432 | 60.2 | 36.1 | 19.0 |
| 2019 | 472 | 72.5 | 43.7 | 20.5 |
| % change | +9 | +20 | +21 | +8 |
| Ex-div: | 26 Sep | |||
| Payment: | 22 Nov | |||
| *Not including special dividend of 45p a share paid in Nov 2018 | ||||
