For the first time this week a trading update from the housebuilding sector is getting the thumbs up from the market as Bovis Homes (BVS) begins to realise its recovery potential.
The announcement also reveals a very healthy balance sheet which underpins analyst forecasts for a 9% yield including special dividends. The shares are up 3.3% to £11.87.
The housebuilder endured problems which led to two profit warnings just over a year ago, the departure of chief executive David Ritchie in January 2017, and a £7m compensation payment to customers for defects in their new homes. It also rebuffed takeover approaches from rivals Galliford Try (GFRD) and Redrow (RDW) early in 2017.
Under new chief executive and industry veteran Greg Fitzgerald the company’s issues are being addressed and it is starting to benefit from the very favourable conditions the sector currently enjoys.
Probably the most notable element of today’s update is the cash performance with a better-than-expected year-end cash balance of £145m. The volume of homes it builds has gone down as it pursues a ‘quality over quantity’ approach. Average selling prices were up 7% to £272,000, with profit guided to be in line with expectations and revenue slightly ahead.
Cannacord Genuity analyst Aynsley Lammin reiterates ‘hold’ advice and a £12.35 price target, commenting: ‘Clearly, it will take time to see the full benefits of the restructuring and changes come through, but the group appears to be making good progress.
‘Dividend expectations looks secure also, with special dividends expected to come through this year - which implies a c.9% dividend return in 2018 on our estimates.’