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Bovis cautiously confident as sales and margins improve

Increased sales and profit margins have Bovis Homes quietly confident for its 2011 outlook, the firm said today.

In a trading update to the stock exchange the housebuilder expects to complete 1,900 homes this year – 1,600 private, 300 social – up from 1,800 last year.

And with increasing average prices and reduced construction costs, the company expects to exceed its 2009 operating margin of 6.2 per cent.

The firm said it was confident it could improve its performance for 2011, despite ongoing tough conditions.

It said:  “Looking ahead, it is expected that market conditions will remain challenging over the coming months. However, the group is confident, based on these market conditions, that with an increase in active sales outlets it can increase its output capacity and sell a greater number of new homes in 2011. Whilst there remains uncertainty concerning the near term direction of house prices, the fundamental demand and supply drivers of the housing market remain positive which should support volume and prices in the medium term.”

The group already has 250 forward sales for legal completion in 2011. On average the company had 66 active sales outlets during 2010, achieving 0.42 sales per week.

This compares to the 85 sales outlets in 2009, which achieved a weekly average of 0.37 house sales. Average sales prices were up 3 per cent to £160,000, compared to £154,600 last year.

The group has continued to target land with residential planning consent and has capitalised on reports from the Department for Communities and Local Government, suggesting that residential land with planning consent has stabilised at a value 40 per cent lower than the late 2007 peak.

A further 1,381 consented plots have been added to the company’s land bank, joining the 1,874 plots acquired in the first half of the year. Around 92 per cent of these are in the south of England.

The combined cost of the 3,255 consented plots comes to £182 million.

In addition, the group has agreed terms to acquire a further c2,500 plots with many now at an advanced stage in the acquisition process.

The statement added:  “The strategy executed by the group this year has prepared it well to take advantage of such an environment with a strong balance sheet and enhanced consented land bank delivering an increased number of sites on which to trade.”