Bovis Homes share price down as H1 results fail to impress

Shares of British housebuilder Bovis Homes Group Plc fell off 7-year highs on Monday as the companys in-line first-half results failed to impress the market at times of a continued shortage of housing supply.

The strong UK housing market helped Bovis generate a pre-tax profit of £53.8 million in the six months ended June, 9% higher than the same period a year earlier, on the back of a 9% jump in revenue to £350.7 million. Operating profit was up 6% at £54.3 million.

The company said it achieved a record number of legal completions at 1 525 homes during the period, up from 1 487 during the first half of 2014, with the average sales price of its homes rising 10% to £264 200 from £239 500 a year earlier.

Bovis has stepped up its land purchases with planning permissions for 19 081 homes at 135 sites, up 5.6% from 18 062 homes at 128 sites during the same period last year. It added that it is on track to deliver the expected volume of new homes for the full year and intends to pay a dividend of 40 pence per share, up from 35 pence a year earlier.

“Significant land opportunities continue to be available at higher returns meaning disciplined investment in consented land should underpin future growth in shareholder returns,” said Chief Executive David Ritchie. “The combination of strong revenue growth and higher profit margins with improved capital efficiency will drive higher capital turn and return on capital employed.”

Mr Ritchie said recently relaxed planning laws had helped the industry to get hold of land, but that it faced a challenge in finding builders. A survey by the Royal Institution of Chartered Surveyors showed last week that the number of homes for sale had sunk to a record low, which would likely result in significant price gains, and accused the government of stimulating demand through its housing initiatives while failing to address the issue of supply.

Shares were 3.93% lower at GBX 1 153.85 at 09:41 GMT in London, marking a year-on-year increase of 43.96%. The builder is valued at £1.61 billion. According to the Financial Times, the 12 analysts offering 12-month price targets for Bovis Homes Group Plc have a median target of GBX 1 162, with a high estimate of GBX 1 450 and a low estimate of GBX 880.00. The median estimate represents a 3.25% decrease from the previous close of GBX 1 201.