Bovis Homes: H1 results

8:57 a.m. Mon 12 Sep 2005

Housebuilder Bovis reported pre tax profits of £45.1m, for the half year to June 2005, down from £66.8m in the same period last year, as the company was hit by the slowing housing market.

Despite doubling land sales and other income (to £18.8m from £9.9m last year), turnover declined to £214.5m (1H 2004: £271.7m). The number of houses sold fell to 1,089 compared with 1,302 the previous year, while the average price per unit fell to £179,700 from £201,100, as buyers moved to cheaper and smaller houses.

The average size of a house decreased by 9.2% to 1,060 square feet compared with 1,167 square feet in the equivalent period of 2004. The average sales price per square foot decreased by 1.6% but construction costs per square foot increased by 4.2% compared with the first half of 2004, resulting in gross margins dropping to 33.3% from 34.7%.

Forward orders declined by 3% to 2,038 units from 2,102 units at the same time in 2004.

The housing market in the UK remains weak but the company is hoping that a recent rate cut (of 0.25% in August) by the Bank of England will stimulate the market. The focus on smaller cheaper houses should ensure a reasonable second half but medium term prospects do not look particularly good and are dependent on a recovery in the market as a whole.

The share trades at 605p, on a prospective PE (2005 earnings) of 7.46x, in line with the sector with a yield of 4%.