Double delight as Bovis profits rocket

Average selling prices rose by four per cent, to £160,700, as the company built more family homes to reduce its exposure to first-time buyers who are struggling to find mortgages.

The group’s pre-tax profits rose 147 per cent, to £18.5m, as profit margins increased after the group brought down the cost of building homes.

The number of homes sold increased by five per cent, to 1,900, which helped to drive a six per cent increase in revenues, to £298.6m.

But Bovis’s chief executive David Ritchie said the housebuilding sector is not out of the woods yet.

“It’s still reasonably tough out there,” he said.

“We are buying new assets and can grow the company from here. Our growth is not reliant on a housing market recovery.”

He added that prices are holding at their current levels.

The group has focused on buying sites in the South, where house prices are expected to recover more quickly than the North.

Despite this, Mr Ritchie said Yorkshire remains a key area for the group, where it has five per cent of its land bank and work ongoing.

Sites include a big development in Selby with more than 300 houses, a project outside Barnsley, plus new homes in Hull.

After what it described as a strong improvement in profit in 2010, the group is to pay a dividend of 3p to shareholders, the first for two-and-a-half years.

The group said that in future years it expects to grow dividends progressively as earnings per share increase.

Bovis said it has made an encouraging start to 2011, with reservations up 11 per cent in the first nine weeks of the year.

The number of people visiting sites increased by 28 per cent.

The company expects to launch 33 new sales outlets, which would be its “most significant site launch programme for many years”.

Bovis also reported that it has increased the amount of land it has bought for future development.

It added that it was now an “excellent time to invest” after prices have fallen from pre-recession peaks.

By the end of 2010, it had agreements to buy a further 2,500 plots of land, in addition to 13,800 plots with planning consent.

Bovis said mortgage availability will continue to restrain buyers in 2011 but expects prices to remain stable.

Rival housebuilders York-based Persimmon, Taylor Wimpey and Redrow have also reported improved profits in recent weeks as the sector recovers from the recession that caused sales and property prices to plummet.

Bovis’s bottom-line pre-tax profits increased by 286 per cent, to £18.5m.

Chris Millington, an analyst at Numis Securities, said the pre-tax profits were above his estimate of £17.7m and that the company’s strategy for growth appeared to be delivering results.

Economists are predicting a testing year for housebuilders and muted growth at best, as economic uncertainty and a struggle to access credit deter buyers from entering the market.

However, analysts have noted that the spring selling season has been better than expected so far.

Bovis’s shares closed up 2.9 per cent last night, a rise of 12.4p, to 442p.

Richard Curr, head of dealing at Prime Markets said: “Bovis shares have enjoyed a strong run since November 2010, and while there has been considerable uncertainty over prospects for the UK housing market to start the year, this statement will no doubt prompt the bears to rethink their strategy.

“The housebuilder has invested heavily in new land plots, which is a clear sign of confidence, but it is perhaps the reintroduction of the dividend that draws the line in the sand and moves the recovery from tentative to solid.”

Analysts at RBS said: “Bovis’s full-year 2010 results are slightly ahead of expectations; 2011 appears to have started well, with the group highlighting usefully higher reservation rates and ongoing land market investment.”

Jumpstart for first-time buyers

Bovis has launched a new scheme called Jumpstart to help first-time buyers with little deposit to purchase their own home.

Jumpstart is a shared equity scheme for people keen to get a foot on the property ladder.

The scheme reduces the amount of money buyers have to pay upfront.

Buyers pay 85 per cent upfront for their new home and Bovis provides the remaining 15 per cent although the buyers still own 100 per cent.

Buyers have 10 years to repay the balance. For the first five years there is no rent or interest to pay on the 15 per cent stake, and for the second five years there is an interest rate fixed at three per cent.