TIDMBVS
RNS Number : 6774B
Bovis Homes Group PLC
12 January 2018
BOVIS HOMES GROUP PLC
Trading update
Bovis Homes Group PLC (the 'Group') is today issuing a trading
update for the year ended 31 December 2017 ahead of the publication
of its annual results on 1 March 2018.
Highlights
-- Significant improvement in customer satisfaction
-- Total completions of 3,645 delivered in a controlled and disciplined manner
-- Profit before tax, exceptional and one-off items in-line with management expectations
-- Excellent progress with balance sheet restructuring resulting
in a GBP145m year end net cash balance
-- Strong forward sales position to support controlled growth in 2018
-- Operational restructuring and cost reduction initiatives
completed, placing Group on track to deliver target of overheads at
a maximum of 5% of revenue in 2018
Greg Fitzgerald, Chief Executive commented:
"The Group had a very disciplined year end and delivered against
all of its financial and operational targets for 2017. There has
been a step change in the quality of our homes delivered on
completion and I'm pleased to see this reflected in our level of
customer satisfaction which continues to improve. We've made
excellent progress with our balance sheet restructuring resulting
in a year end cash position significantly ahead of expectations.
Our forward order position is strong, and with robust industry
fundamentals, we expect the Group to deliver a significant
improvement in profitability in 2018."
Trading update
During 2017 we have been committed to improving our production
processes and consistently delivering high quality new homes to our
customers.
In the year, we delivered 3,645 (2016: 3,977) completions in a
controlled and disciplined manner. Private homes in the year
totalled 2,573 (2016: 2,903) units with affordable housing
totalling 1,072 (2016: 1,074) units, representing 29% (2016: 27%)
of total completions.
Overall average selling price on completions in the year
increased by c. 7% to c. GBP272k (2016: GBP254.9k) with our private
average selling price increasing by c. 9% to c. GBP334k (2016:
GBP306.0k). The increase largely reflects changes in mix with a
modest increase in underlying selling prices in the year.
Consistent with our plans to re-set the business, we have driven
sales from our older, lower margin sites and significantly reduced
our levels of both stock and part-exchange properties. Whilst the
business is already benefitting significantly from investments in
process change and customer service these initiatives, as
previously reported, have adversely impacted the Group's operating
margin in the year.
Furthermore, as previously disclosed, exceptional and one-off
items in the year totalled GBP10.3m comprising a GBP3.5m customer
care cost, GBP2.8m advisory fees and GBP4m restructuring
charge.
Profit before tax, one-off and exceptional items is anticipated
to be in-line with management expectations.
Our sales rate during the year reflects our production led
programme for 2017, with average net private reservations per
active outlet per week of 0.48 (2016: 0.58) for the year. As we
begin 2018 we expect to trend towards a more normal sales rate.
We start the year with an excellent forward sales position, with
total forward sales of 2,656 units and a value of GBP518m as at 31
December 2017. Of this GBP417m is for delivery in 2018 representing
c. 40% of the consensus 2018 revenue forecast for the group.
Private forward sales total 926 units and include c.275 homes
across our operating areas sold to an investor with returns from
the sale in line with our forecast expectations.
The Group operated from an average of 92 (2016: 99) active sites
in the year. The reduction in site numbers during the year reflects
our controlled start on new sites and the drive to sell through and
complete older sites. We expect average site numbers to remain at a
similar level in 2018.
Operational progress
At the start of 2017, we commenced a programme of actions to
transform our customer service. We have made excellent progress and
are pleased with the continued improvement in our HBF scores.
The development of our new housing range is progressing well and
will provide us with 26 attractive new house types which we expect
to be margin enhancing. The range is to be launched across the
Group in the first half of 2018 with completions delivered from
2019 onwards.
Within the GBP4m exceptional restructuring charge which we have
taken during the year, we have implemented initiatives to simplify
and streamline our operating structure, to reduce our costs, and to
make us more agile. We are targeting overheads at a maximum of 5%
of revenue and are on track to deliver this from FY 2018
onwards.
Given our medium term target of 4,000 completions and a 3.5 to
4.0 year owned land bank, we have slowed our rate of land
acquisition. During the year we acquired 2,550 (2016: 3,047) plots
across 11 (2016: 27) sites at an average gross margin in excess of
26%. Of this, 1,850 plots across 6 sites were sourced from our
strategic landbank. As at 31 December 2017, the Group had c. 17,400
(2016: 18,704) plots in its consented land bank. We have excellent
forward visibility with 98% of our land for 2018 having detailed
planning consent and are already active on site, and 92% of our
land for FY19 already secured.
Balance sheet restructuring
We have set out a clearly defined programme of balance sheet
optimisation targeting a minimum of GBP180 million additional cash
flow into the business by December 2018. We have made very good
progress towards this in the year.
We concluded the disposal of the Group's shared equity portfolio
in the year, generating total cash receipts of GBP27.6m. We have
also reduced our level of part exchange properties by c. GBP30m in
the year and reduced our stock properties by over a third and c.
GBP10m.
We made five land sales in the year realising proceeds of
GBP30.5 million and will continue to review our land bank, with a
particular focus on our larger owned sites, as we progress towards
our target of reducing to 3.5 to 4.0 years of owned land (14,000 -
16,000 plots).
We also completed the disposal of three owned offices realising
cash proceeds of c. GBP9m.
This balance sheet optimisation and the underlying profit
delivery resulted in a net cash position of c. GBP145m as at 31
December 2017.
Outlook
The industry fundamentals remain strong with customer demand for
new homes supported by attractive mortgage finance and government
initiatives, in particular Help to Buy.
In 2018, the Group is committed to building upon the operational
progress made in 2017 and is confident of delivering a significant
improvement in financial performance and profitability, making good
progress towards achieving its 2020 medium term targets.
The Board intends to recommend a final Ordinary dividend of
32.5p (2016: 30.0p) bringing total Ordinary dividends in respect of
the 2017 financial year to 47.5p (2016: 45.0p). Reflecting the
strong outlook, it anticipates increasing this by 20% in 2018 and
making a first Special dividend payment towards the end of the
year.
Conference call for analysts and investors
Greg Fitzgerald, Chief Executive, and Earl Sibley, Group Finance
Director will be hosting a conference call at 08:30am today, Friday
12 January 2018, to discuss this Trading Update.
To access the conference call: Dial--in: +44 (0)333 300 0804,
Pin: 75852475#.
A replay facility will be available shortly after: Dial in: +44
(0)333 300 0819, Pin: 301216458#
For further information please contact:
Bovis Homes Group PLC 01474 876219
Earl Sibley, Group Finance Director 07811 988617
Susie Bell, Head of Investor Relations
Maitland
Neil Bennett
James McFarlane 020 7379 5151
This information is provided by RNS
The company news service from the London Stock Exchange
END
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