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Bovis Homes
Bovis Homes reported strong full year results to December 2004. Units sold have grown by 8.7% to 2,700, the average sales price 7.15% to £197,900 and the average size of unit increased by 0.5% to 1,146 square feet. Operating margins were broadly stable at 26.7% (2003: 27%). Bovis achieved an operating profit of £149.3m, up 15.6% over the previous year.
Bovis Homes Group is a housebuilder. Its property portfolio consists of apartments, retired homes, small cottages and luxury family houses. The company also undertakes design and building works for housing associations. In addition, the company is engaged, to a more limited degree, in mixed schemes involving the commercial, retail and leisure sectors.
Land sales generated a net profit of £9.4m (2003: £2.9m), £5.5m of the profits arising from sale of commercial land without residential planning consent. Costs are under control, administrative expenses (including all sales and marketing costs), were 8.1% of turnover compared with 8.5% in 2003.
Costs of sale increased in line with sales, gross margins were marginally weaker at 34.8% (2003:35.5%) but operating margins were broadly stable at 26.7% (2003:27%) due to slower growth in administrative expenses.
Total land holdings declined by 1.7% (from June 2004) to 34,005 plots. The proportion of properties without planning consent dropped marginally to 67.1% but is still relatively high-something that could cause the company problems if property prices crash. Property without planning consent is harder to sell and prices for these may decline faster in the event of a crash. Total value of land holdings as at Dec 2004 is £507.6m, (Dec 03: £468.7m, June 03:£422.1m)
Bovis’s cashflow has improved from a marginal level last year, cash generated from operations was £100.6m (2003: £7.8m).
Bovis reports that the housing market in the second half of the year was adversely affected by increased interest rates and negative comments relating to the housing market made by both the media and the Bank of England. The company also reports that the movement in interest rates from 3.75% in February 2004 to 4.75% in August 2004 was sufficient to cool both consumer spending and house price increases. The outlook for next year is not very promising and although the company plans to launch a range of low priced units aimed at first time buyers volumes are likely to slow.
The stock is currently trading at 693p on a PE of 8.13× with a yield of 2.8%.
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