Bovis Homes is the latest firm to get in on the housebuilders’ party in Thursday business, the FTSE 250 play following the likes of MJ Gleeson and Persimmon this week in pumping out positive trading details.
The stock was last 1% higher from the midweek close after hitting fresh 13-month peaks around 990p per share earlier in the session.
Bovis declared today that “the demand for new homes continues to be robust across all regions and customer interest in our homes remains strong.” And the embattled company said that it remains on track to meet full-year expectations.
Legacy Issues
The Kent business said that completions clocked in at 1,512 during January-June, down from 1,601 completions in the corresponding 2016 period but still in line with target. Meanwhile its sales rate of 0.48 net private reservations per site per week was down from 0.62 a year earlier.
Bovis warned in February that completions will fall between 10% and 15% this year as it slows production, the business taking steps to remedy the culture which saw it previously pay customers to move into its homes before completion.
Bovis added that it has set aside an additional £3.5m to deal with complaints over the quality of its homes, taking the total to some £10.5m. It said that “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.”
Turnaround On Track
In other news Bovis advised that average selling prices rose 9% in the first half, to £277,000, the company putting the improvement down to “changes in mix and a modest increase in average underlying prices.”
And the company added 2,337 plots to its landbank during January-June, it noted.
Those stock pickers seeking immediate earnings growth will no doubt find Bovis somewhat unappealing, City analysts expecting a 17% fall in 2017 as the aforementioned production cooldown bites.
Still, the huge supply and demand imbalance in the British housing market is predicted to push the builder back into growth from next year. Indeed, a 15% rebound is currently predicted by the Square Mile for 2018.
Current forecasts leave Bovis changing hands on an exceptional forward earnings multiple of 13.2 times. And there is also a lot for dividend seekers to get their chops around, too.
A 45p per share payment is predicted for this year, matching 2016’s dividend but still yielding a handsome 4.6%. And the news is even better for 2018, an anticipated 46.1p reward nudging the yield to a handsome 4.7%.
With the worst of its legacy headaches behind it, I reckon Bovis should prove a lucrative pick for both growth and income investors in the years to come as Britain's housing shortage lingers on.
