Bovis Homes Group PLC Trading Update (2570K)

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RNS Number : 2570K

Bovis Homes Group PLC

06 July 2017

6 July 2017

BOVIS HOMES GROUP PLC

First half trading in-line with expectations

Bovis Homes Group PLC (the 'Group') is issuing a trading update for the six month period ended 30 June 2017 ahead of reporting its half year results and the outcome of its strategic review on 7 September 2017.

Greg Fitzgerald, Group CEO said

"The trading performance in the first half of our financial year is in-line with management expectations. In the past 11 weeks I have spent a good amount of time with each of our operating regions, visited 85 sites and met the vast majority of our people. We continue to identify and implement operational improvements and I am very confident we can deliver a successful turnaround, returning Bovis Homes to being a leading UK housebuilder. I look forward to providing an update on the Group's strategy with the presentation of our half year results in September."

Current trading

Trading in the first half has been in-line with our expectations. As announced in February, we have slowed our rate of production for 2017 and we continue to expect to deliver completion volumes for the full year c. 10% to 15% below the 2016 level. In the first half we delivered 1,512 (2016: 1,601) completions of which 1,140 (2016: 1,212) were private units.

The Group's sales rate of 0.48 (2016: 0.62) net private reservations per site per week in the half is in-line with our 2017 production plans and reflects a controlled sales release across a number of our developments and our priority focus on customer service.

We have opened 15 new sites in the period and operated from an average of 96 (2016: 100) active sales outlets.

We continue to see an improvement in our average selling price, increasing by c. 9% in the first half, to c. GBP277,000 (2016: GBP255,000). This increase has been driven by changes in mix and a modest increase in average underlying prices.

As previously noted, the Group's first half profitability has been impacted by increased build costs within our cost base brought into the year and an increased level of investment across the business in the period to address legacy issues. This includes a higher level of investment in our site presentation bringing all of our developments up to the high standard we and our customers expect.

Customer service

Transforming our customer service is a key priority with a target of progressively returning our HBF rating to the top quartile of listed housebuilders. In the first half we delivered customer service training to the majority of all of our employees and strengthened our customer service function. The delivery of our completions in the first half has been a controlled process and the homes have been finished to the high standard expected.

We have made good progress addressing a high level of customer issues in the first half. Following the CEO's review of the business, the Group has taken a further GBP3.5m of provision in the first half, taking the total one-off costs related to these legacy issues to GBP10.5m, of which GBP7.0m was provided for in 2016. This further provision will ensure we are fully resourced to complete the works identified as swiftly as possible whilst at the same time delivering the appropriate high level of service to our new customers. We are confident that all legacy issues are now identified and that where possible these issues will be fully dealt with and the related costs incurred during this financial year.

Land

We continue to see good opportunities in the land market that exceed our required returns and in the first half added 2,337 plots to our consented landbank, including 821 plots at our site in Wellingborough. Excluding Wellingborough, 62% of the additions in the first half have been sourced from our strategic landbank. We aim to operate with an underlying consented landbank of around 4 years.

We are in a strong position for our 2018 delivery with all our required land owned of which 87% already has reserved matters planning consent.

Balance sheet

The Group has a strong balance sheet with net debt as at 30 June 2017 of only c. GBP33m (30 June 2016: net debt GBP7.6m).

Driving cash back into the business and managing our balance sheet is a key priority, with our focus on working capital management, the disposal of low returning assets and optimising the structure of our land bank.

Outlook

This is the year we re-set the business and led by our new CEO we are making good progress tackling our operational priorities alongside our strategic and structural review.

The demand for new homes continues to be robust across all regions and customer interest in our homes remains strong.

We remain clear in our goal of enhancing shareholder value through maximising returns from the Group's valuable landbank and returning Bovis Homes to being a leading UK housebuilder.

We will provide a full update on the Group's strategic review with the presentation of our half year results on 7 September 2017.

Certain statements in this press release are forward looking statements. Forward looking statements involve evaluating a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends, results or activities should not be taken as a representative on that such trends, results or activities will continue in the future. Undue reliance should not be placed on forward looking statements.

For further information please contact:

 
Bovis Homes Group PLC          01474 876219 
 Earl Sibley, Group Finance 
  Director                      07811 988617 
 Susie Bell, Interim Head 
  of IR 
Maitland 
 Neil Bennett 
 James McFarlane                020 7379 5151 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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July 06, 2017 02:00 ET (06:00 GMT)