We don’t support this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

Bovis - A more confident outlook

George Salmon | 12 January 2018 | A A A
Bovis - A more confident outlook

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Vistry Group Plc Ordinary 50p

Sell: 1,103.00 | Buy: 1,104.00 | Change 24.00 (2.22%)
Chart View factsheet

Market closed | Prices delayed by at least 15 minutes | Switch to live prices

Bovis has released a trading statement ahead of full year results on 1 March 2018.

The group says underlying pre-tax profit is in-line with management expectations. It expects to pay a final dividend of 32.5p, bringing the full year payment to 47.5p (2016: 45.0p). Reflecting its confident outlook, the group hopes to increase this by 20% next year, and intends to distribute a special dividend towards the end of the year.

The shares rose 3.2% on the news.

View the latest share price and how to deal

Our View

While other builders have been flying high, boosted by a combination of low interest rates and supportive policies such as Help to Buy, Bovis has struggled. Hot on the heels of seemingly constant grapples with build cost inflation was a drop in completions and a notable deterioration in build quality.

After losing its CEO in January 2017, a couple of opportunistic bids from Redrow and Galliford Try were rejected, and industry veteran Greg Fitzgerald was appointed to lead the turnaround. At the time we felt this was a good appointment, but his in-tray would have been rather full when he sat down at his new desk.

We like his strategy of scaling back the grander ambitions from yesteryear and prioritising Bovis' core operations. The fact his plans to slim down the group have the potential to yield some chunky special dividends is a useful bonus.

Bovis continues to lag competitors, but early signs are good. Customer satisfaction and pricing have improved. Efforts to strengthen the balance sheet are also showing early signs of success. Mostly as a result of disposals, the group expects to finish the year with almost four times as much net cash as in 2016.

The shares still trade on a lower price to book ratio than plenty of its sector rivals, and offer a high prospective yield of 8.5%. So there's clearly some upside available. However, the recent strong run shows much of the immediate recovery potential has been recognised by the wider market.

Given these favourable conditions won't last forever, the new CEO's plan to instil a culture of 'getting it right first time' is especially important.

Register for updates on Bovis

Trading details

While the average selling price rose 7% to £272,000, as anticipated, completions fell 8% to 3,645 as the group focuses on delivering 'in a controlled and disciplined manner' following the recent build quality problems. These issues contributed to previously announced exceptional costs of £10.3m, but customer satisfaction has been improving recently.

0.48 average net private reservations per active outlet per week is down on the prior year's 0.58, however Bovis say this reflects a 'production led programme' this year. It expects this to trend towards a more normal sales rate next year. Forward sales on 2,656 houses have been agreed, with a value of £518m.

The group has made progress towards its goal of bringing in an extra £180m of cash flow into the business by December 2018. Significant inflows include £30.5m from land sales and the disposal of the group's shared equity portfolio for £27.6m.

Find out more about Bovis Homes shares including how to invest

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.