Shares in house-builder Bovis Homes (BVS) fall 3.5% to 806.2p as investors appear unconvinced at management’s upbeat outlook in a post-Brexit housing market.

Sales, prices and profits all increased in the six months to 30 June, while a strong second half is expected with around 90% of full-year target sales already achieved or reserved.

Management point to demand for new housing in its markets in the South of England outside of London remaining ‘robust’, but weekly sales rates per site have fallen since the referendum.

The level was 0.5% early in the second half, down from 0.58% a year ago.

Web - Bovis Homes - 15 August 2016

‘The first few weeks of July were more difficult for us,’ admits chief executive David Ritchie. ‘Sales rates were a little lower and cancellation rates were higher. That has adjusted itself in the past few weeks to a normal summer sales rate.’

It is still too early to say how the housing market will react to the UK leaving the European Union longer term and this uncertainty could be making investors nervous on trading in 2017.

Numis has left its estimates unchanged. ‘In our view Bovis’ results commentary is consistent with other recent updates in the sector and it highlights the more robust nature of the new build market, versus the second hand market - in a large part due to the Help to Buy scheme,’ it said in a note.

A clear plus is Bovis’ £8 million net debt, down from £59 million in 12 months. This is partly the result of selling more houses for a higher price, while spending less on land in the run up to the referendum also helped.

Management decided to wait for the outcome of the referendum before completing on land deals. Once the result was clear it took a risk-adjusted view of each deal, which led to setting higher hurdle rates for investment and buying land on new terms.

Pre-tax profits improved 15% to £61.7 million in the first half, where it built 5% more homes to 1,601, while the average price was 14% higher in 12 months to £254,500.

Issue Date: 15 Aug 2016