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Bovis predicts profit boost as cost control builds margins

Housebuilder Bovis expects to post profits ahead of expectations after tight cost control and higher selling prices helped widen operating profit margins to at least seven per cent.

In a stock market update ahead of preliminary full year results on 14 March 2011, the company said it had legally completed on 1,901 homes in the year to 31 December 2010, a five per cent increase on 2009.

Average sales prices were up 4 per cent to £160,000, driven by a boost in private sales prices at £172,400 from £165,500 in 2009.

Its forward sales order book of 420 compares to 643 last year, with an average of 66 active outlets in 2010 compared to 85 during 2009.

However with a 215 home JV removed from the comparative the company maintains the forward sales position is consistent with last year.

And it predicts its “significant investments made in consented land” during 2010 will provide a growth of around 15 per cent in the number of active outlets with an estimated average for 2011 of 76.

Bovis chief executive David Ritchie told CN he was upbeat despite the fact that the autumn spending review and freezing December had stalled sales in the final quarter of last year.

“There were fewer people looking to buy and the last quarter was lower - that is a fact.  But it didn’t significantly affect our ability to deliver our year end; it just took the edge off our forward position.

“And I think we are in a good position for the spring.  We have 33 sites to open during this year and 20 sites will close.  Of those 26 will open in the first half and many will be open for spring.  Those that close don’t close until the second half so whatever spring brings we have an increase in sites to trade from.”

The board is sufficiently confident in its growth strategy that it has decided to recommence the payment of dividends to shareholders, subject to approval at the AGM.

The cash position of the group is now at £52m down from £113m at the start of 2010.

Mr Ritchie said he expected the company to continue its aggressive land acquisitions strategy, arguing time would show 2010 was a “low point for land prices”.

“Based on our current view and cash holding we see this as another year of significant investment in land over and above what we actually use.  Last year was probably the biggest for over a decade and relative to our size our policy was probably the most aggressive in the sector.  2011 will be more of the same but we will keep a wary eye on what is in front of us.”

In 2010 Bovis added c.3,700 plots to the land bank at a cost of £203m and with a gross profit potential of £181m. 

Around 80 per cent of the land acquired was in the south of England.

It has also agreed terms on an additional 2,500 plots.

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