A bit of self-help pays off for Bovis

HOUSEBUILDER Bovis Homes expects its 2012 profits to beat forecasts, helped by buying cheap land, selling more homes and cutting costs.

Bovis reported 15 per cent more sales in 2012 at 2,355 completions. Its average prices increased five per cent to £170,700, helped by shifting its mix to more family homes.

This helped operating margins climb to about 13.5 per cent from 10 per cent a year earlier.

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The builder echoed stronger trading from a number of its listed peers, including Persimmon, Barratt Developments and Taylor Wimpey.

Bigger housebuilders have been buoyed by building on land acquired cheaply during the downturn, as well as Government stimulus schemes.

“The market is not bailing the housebuilders out,” said Bovis chief executive David Ritchie.

“Everything that’s happening with the listed housebuilders is by virtue of what we have done in the last few years.

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“Every housebuilder should be showing strong improvements in profitability. That’s not because houses are getting more expensive.

“That’s because we are trading through old land and replacing it with shiny new land.”

Asked if the housing market is turning bullish again, Mr Ritchie replied “absolutely not”.

The Kent-based builder has sites across Yorkshire but is increasingly shifting its focus south, where house prices have held up better.

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In West Yorkshire, it is working through sites in Hemsworth, Mirfield and Walsden, while it also has developments in Hook, near Goole and Selby.

Around three quarters of its plots are in the south, and Mr Ritchie said he expects this to increase to about 80/20.

The group bought 3,500 plots of consented land on 24 sites during the year.

It also sold £18m of land to make £5m profit.

It ended the year with net cash of £19m.

“I don’t think anyone has the appetite for gearing businesses up to the extent they were,” said Mr Ritchie.

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“Our ambition is to continue to be wholly in control of our own destiny.”

It has 13 per cent more active outlets at 90, and expects this number to grow in 2013.

Mr Ritchie said Government stimulus schemes contributed a “limited” amount to its strong 2012 performance.

NewBuy, where builders and the State pay into an indemnity pot to cover some of the lender’s risk, was used in five to 10 per cent of its completion.

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“Whilst it’s a Government scheme it’s overwhelmingly funded by the housebuilders,” he said. “That feels like self-help.”

Mr Ritchie added it is “early days” with Funding for Lending, the Bank of England scheme which incentivises banks and building societies to lend more.

“It has the potential for making more mortgage finance available,” he said.

Bovis started 2012 with forward sales of 778 homes, up 37 per cent on a year earlier.

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“This strategy will be further progressed in 2013, which, subject to stable market conditions, should deliver strong improvements in the group’s returns in 2013 and beyond,” it said.