Bovis: H1 2006 trading statement

6:42 a.m. Fri 14 Jul 2006

Bovis is the latest house builder to issue a positive trading update on the first half of 2006.

The company said it experienced a “steadyâ€? housing market in H1, with “modestâ€? increases in house prices. The company’s legal completions, the number of houses completed and legally transferred to new owners, rose 16% to 1,262 units. Surprisingly, sales of low cost units have actually fallen; the growth has been in standard priced houses.

Sales of low cost housing (which the company calls ‘social housing’) fell to 141 units from 246 in the first half of last year. The company expects a greater proportion of low cost houses to be sold in H2, which may be an indication that the drop in H1 sales is due to buyers postponing their decisions.

Naturally, with a change is sales mix (with lower numbers of cheap houses being sold) average selling prices rose 5% to £188,700. The company said gross margins were similar to last year, thanks to the higher selling prices.

The company said it was cautious in adding to its landbank and was focusing more on converting its existing strategic land bank. At the half year the company’s land bank stood at approximately 12,500 plots.

The forward order book was up 11% to 2,273.

Overall, house builders look set to report reasonable half year performances. Given the improved order books, performance for the full year should also be respectable. Nevertheless, the long term outlook will be determined how the broader housing market turns out and there is as yet no clear sense of direction in this respect and the sector is probably bets left for investors with a healthy appetite for risk.

The share trades at 793.5p, on a prospective PE (2007 earnings) of 9.5x within the sector range but somewhat higher than some of its peers including Wilson Bowden and Wimpey. The yield is a reasonable 4.4%.