Bovis Homes : Trading update July 2016

7 July 2016

Bovis Homes Group PLC

Trading Update

The Group is today issuing a trading update for the six month period ended 30 June 2016 ahead of reporting its half year results due to be announced on Monday, 15 August 2016.

Highlights

• Solid growth in legal completions to 1,601 new homes (H1 2015: 1,525)
• Average sales price on legal completions increased by 15% to £255,000 (H1 2015: £222,000)
• Sales delivery on track with weekly private sales rate to date of 0.62, in line with the prior year
• Land investment carefully managed with 1,267 plots of consented land acquired in first half year across 11 new sites
• Prudent balance sheet with modest net debt of £8 million at 30 June

Half year trading

We have traded in line with our expectations in the first half of 2016 and delivered a record half year volume of 1,601 new homes, a 5% increase on the prior year. Reflecting the continuing improving mix towards family homes in the south of England, the Group's average sales price increased to £255,000, 15% ahead of the comparative of £222,000 in H1 2015.

The Group has achieved a similar number of private net reservations to the prior year with a weekly sales rate of 0.62 (H1 2015: 0.63) delivered from a stable average number of sales outlets at 100 (H1 2015: 100). After a strong period of selling during the spring, sales rates have followed a normal seasonal reduction as we have moved into the summer period. We continue to see a healthy level of interest on our active sites.

The Group has launched 21 new sales outlets in the first half year. A quicker rate of sale on some sites has accelerated our closure rate leading to the average number of active sales outlets being stable in the year to date. The Group has a pipeline of new sales outlets planned to be launched in the second half year which will continue to replace the anticipated sales outlet closures and will support sales outlet growth going forward.

An important component of volumes going forward is the increasing proportion of social housing in the mix. Our strategy of investing in more southern locations brings with it higher social housing requirements. The Group currently has approximately 1,100 social reservations targeted for delivery in 2016, which represents an expected increase close to 30% compared to 2015.

As reported previously, we are continuing to make operating improvements across the business which are providing opportunities for higher profit margins in the future. Sales prices achieved to date have been modestly ahead of target and the level of cost inflation has moderated compared to our experience in 2015.

Land

The Group has continued to acquire high quality land at above hurdle rate margins and returns, with a focus on traditional housing sites mainly in the south of England (outside London). We have carefully managed the land investment in the first half of 2016, with 1,267 consented plots added to the land bank across 11 sites. At 30 June 2016, the Group owned circa 19,500 consented land plots which represents a strong land supply of between four and five years. We will maintain our disciplined approach to investing in land going forward as we continue to assess the impact of the EU referendum on the UK housing market.

Balance sheet

The Group has maintained its prudently positioned balance sheet. At 30 June 2016, the Group held net debt of approximately £8 million (31 December 2015: net cash of £5 million, 30 June 2015: net debt of £59 million) with land creditors standing at around £320 million (31 December 2015: £323 million, 30 June 2015: £264 million).

Outlook

The housing market fundamentals remain strong with high demand from home buyers, good availability of affordable mortgages, good land supply and cross party political support to build more homes in the UK. Our geographic spread, targeted product range and agile management structure ensures we can be proactive in the market both demonstrating the appropriate degree of restraint in the short term but also well positioned to take further advantage of a fundamentally positive land market at the right time.

We have traded in line with our expectations for the first six months of the year. At this time it is too early to assess the impact of the EU referendum on the UK housing market. We have demonstrated good discipline in carefully managing investment and driving growth in revenue and profit. This discipline will be maintained into the second half year as we target the delivery of sustainable build and sales rates from our sites.

We are confident that the Group's strategy of investing in land, in the south of England, where we can build our high quality traditional homes provides the ongoing opportunity to attract home buyers who can secure affordable mortgage finance to acquire a new home.

Certain statements may be 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 representation that such trends, results or activities will continue in the future. Undue reliance should not be placed on forward looking statements.

-ENDS-

Enquiries:

David Ritchie, Chief Executive
Earl Sibley, Group Finance Director
Bovis Homes Group PLC
Tel: 07584 515 937

Reg Hoare / James White / Giles Robinson
MHP Communications
Tel: 0203 3128 8100