A muscular first half performance from Bovis Homes (BVS) takes shares in the housebuilder 7.1% higher to 858p. Strong figures across a whole range of metrics and an upbeat outlook statement suggest full year 2014 promises to be a highpoint in terms of shareholder returns.
Bovis is also outlining aggressive dividend ambitions, hiking the interim payout by 200% to 12p per share, putting its 35p anticipated full year dividend in perspective.
For the six months to 30 June, group profit before tax increased by 166% to £49.4 million with earnings per share (EPS) up 167% to 28.8p. This has been driven by 75% increase in revenues to £322.1 million which translates to a 150% hike in operating profit jumps to £51.2 million.
So far 2014 is proving something of an annus mirabilis for the £1.08 billion cap. Record completions are, according to chief executive David Ritchie, the 'result of the compound positive effect of increased volumes, improved average sale price and stronger profit margins.'
Crucially for a business looking to leverage growth in the UK housing market going forward, Bovis also reported its most successful half year of land investment to date. Around 4,600 high-quality consented plots across 23 sites have been added to the portfolio.
'This will support further sales outlet growth into 2015 and beyond, which is expected to lead to further strong improvements in return on capital employed,' says Ritchie.
The strategic plan set out by the builder focuses on building traditional family housing sites primarily in the south-east of England (but excluding London). The group has targeted an optimal output which it sees at 5,000 to 6,000 homes, and by 2016 it expects to report return on capital employed (ROCE) of at least 20% (currently 16%).
Despite a steady stream positive newsflow since the beginning of the year (most recently on 08 July) the share price has been stubbornly sluggish, reflecting wider concerns about the housing market's effervescence and the new mortgages regulation. The shares have drifted from 940p lows in March.
This is illustrated by recent technical analysis (Chartist 24 July). 'Rallies were short-lived and the shares made lower lows,' explained Shares charts expert David Jones. 'A couple of rallies in May and early June failed to break the 800p level.'
That notwithstanding, towards the end of June that 800p resistance level cracked and the share price pushed out to 824p suggesting that the downtrend for Bovis may well be at an end.
Panmure Gordon's Rachael Applegate flags Bovis as the broker's key pick in the housebuilding space and maintains a 'buy' recommendation with a 953p target.