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Bovis margin to hit 13pc as completions grow

Bovis Homes expects operating margin to climb to 13 per cent as it also boosts completions and average selling prices, it said today.

An increasing proportion of homes sold on post-downturn sites, combined with improved overhead efficiency, mean operating margin for 2012 will be “significantly ahead of 2011’s operating margin of 10 per cent”. 

Providing a statement to the City for the period from July 1, the firm said: “With the significant increase in private average sales prices due to improving mix, the group remains on track to deliver a strong increase in revenue in 2012.

“Subject to stable market conditions continuing, the group is confident that it can deliver further growth in revenue with strong increases in profit margins.” 

It expects to legally complete 2,350 homes in 2012. Net private reservations in the 45 weeks to 9 November 2012 were 1,669 (2011: 1,517).

The average number of active sales outlets rose by 12 per cent. It is operating from 83 active sales outlets and expects the number at the year end to approach 90.

Average sales price rose to £190,000, compared with £180,100 in 2011, reflecting an improvement in the sales mix by location and size of home.

The company acquired 2,331 consented plots on 16 sites during 2012, mainly for family homes located in the south of England.

Net debt was £65m, but “given the phasing of housing revenues relative to land and construction cost cash flows, the group expects to move towards a net cash position at the year end”.

Chris Millington, analyst at Numis Securities, said he expects Bovis’ share price to make up some lost ground from earlier in the year, but that “the issue of its structurally low capital turn is likely to restrict ROCE [return on capital employed] for several more years”.

ROCE is approaching 7.5 per cent for 2012, up from 5 per cent in 2011.

He added: “Overall, we feel that the housing sector is likely to stall in the short term – after a year of exceptional share price performance – given much of the margin recovery has now fed through and comparatives in Q1 2013 are likely to be tough.”

Bovis’ share price edged up to 517 pence today.

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